The comparative balance sheets for Blue Corporation show the following information. December 31,...


The comparative balance sheets for Blue Corporation show the following information.

December 31, 2017 December 31, 2016
Cash $33,300 $12,900
Accounts receivable 12,200 10,000
Inventory 11,900 9,000
Available-for-sale debt investments -0- 2,900
Buildings -0- 29,800
Equipment 44,900 20,100
Patents 5,000 6,300
$107,300 $91,000
Allowance for doubtful accounts $3,000 $4,500
Accumulated depreciation-equipment 2,000 4,400
Accumulated depreciation-building -0- 6,000
Accounts payable 5,000 2,900
Dividends payable -0- 4,900
Notes payable, short-term (nontrade) 3,000 4,000
Long-term notes payable 31,000 25,000
Common stock 43,000 33,000
Retained earnings 20,300 6,300
$107,300 $91,000

Additional data related to 2017 are as follows.

1. Equipment that had cost $10,900 and was 40% depreciated at time of disposal was sold for $2,600.

2. $10,000 of the long-term note payable was paid by issuing common stock.

3. Cash dividends paid were $4,900.

4. On January 1, 2017, the building was completely destroyed by a flood. Insurance proceeds on the building were $29,900 (net of $2,100 taxes).

5. Investments (available-for-sale) were sold at $1,700 above their cost. The company has made similar sales and investments in the past.

6. Cash was paid for the acquisition of equipment.

7. A long-term note for $16,000 was issued for the acquisition of equipment.

8. Interest of $2,100 and income taxes of $6,500 were paid in cash.

Prepare a statement of cash flows using the indirect method. Flood damage is unusual and infrequent in that part of the country.

Statement of Cash Flow

A statement of cash flow organizes the balance sheet and income statement operations to determine the changes to cash balances over two periods. The statements group operations into three segments; operating activities, investing activities, and financing activities.

Answer and Explanation:

To prepare a statement of cash flow it must be understood that debits to balance sheet accounts other than cash in addition to expenses are uses of cash and credits to balance sheet accounts in addition to sales are sources of cash. The operating activities section includes the operations of the income statement and the working capital aspects of the balance sheet. The investing activities account for changes in non-current assets. The financing activities sections include changes in non-current liabilities and equity sections of the balance sheet.

Blue Corporation

Statement of Cash Flow

For the year ending December 31, 2017

Cash flows from operating activities
Cash flows from operating activities
Profit 18,900
Adjustments for:
Depreciation Expense 0
Amortization of patent 1,300
Working capital changes:
(Increase) / Decrease in trade and other receivables -3,700
(Increase) / Decrease in inventories -2,900
Increase / (Decrease) in trade payables 2,100
Increase / (Decrease) in Dividends Payable -4,900
Net cash generated (used) from operating activities 10,800
Cash flows from investing activities
Purchase of property, plant, and equipment -2,400
Sale (Acquisition) of portfolio investments 2,900
Net cash generated (used) from investing activities 500
Cash flows from financing activities
Proceeds (Repurchase) from the issue of share capital 10,000
Proceeds (payments) from Note Payable 4,000
Dividends -4,900
Net cash generated (used) from financing activities 9,100
Net increase in cash and cash equivalents 20,400
Cash and cash equivalents at beginning of period 12,900
Cash and cash equivalents at end of period 33,300

Learn more about this topic:

Using the Statement of Cash Flows for Decision Making

from Accounting 101: Financial Accounting

Chapter 12 / Lesson 5

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