Accountants for Smithson, Inc. have assembled the following data for the year ended
December 31, 2016:
Prepare Smithson’s statement of cash flows using the indirect method. Include an accompanying schedule of non-cash investing and financing activities.
SOLUTION
| Cash Flows from Operating Activities: | ||
|---|---|---|
| Net Income | $ 69,500 | |
| Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | ||
| Depreciation Expense | $ 25,000 | |
| Gain on Sale of Building | (4,000) | |
| Decrease in Accounts Receivable | 6,000 | |
| Increase in Merchandise Inventory | (5,000) | |
| Increase in Accounts Payable | 1,900 | |
| Decrease in Income Tax Payable | (2,600) | 21,300 |
| Net Cash Provided by Operating Activities | 90,800 | |
| Cash Flows from Investing Activities: | ||
| Acquisition of Equipment for Cash | (73,000) | |
| Cash Receipt from Sale of Building | 57,000 | |
| Net Cash Used for Investing Activities | (16,000) | |
| Cash Flows from Financing Activities: | ||
| Cash Receipt from Issuance of Common Stock | 42,000 | |
| Cash Receipt from Issuance of Notes Payable | 60,000 | |
| Cash Payment of Notes Payable | (42,100) | |
| Cash Payment of Dividends | (52,000) | |
| Net Cash Provided by Financing Activities | 7,900 | |
| Net Increase (Decrease) in Cash | 82,700 | |
| Cash Balance, December 31, 2015 | 20,000 | |
| Cash Balance, December 31, 2016 | $ 102,700 | |
| Non-cash Investing and Financing Activities: | ||
| Acquisition of Land by issuing Long-term Notes Payable | $ 118,000 | |
| Total Non-cash Investing and Financing Activities | $ 118,000 | |
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