Question

Use the following information about the cash flows of Ferron Company to prepare a complete statement of cash flows (direct method) for the year ended December 31, 2017. Use a note disclosure for any noncash investing and financing activities.

Cash and cash equivalent balance, December 31, 2016	$40,000
Cash and cash equivalent balance, December 31, 2017	148,000
Cash received as interest	3,500
Cash paid for salaries	76,500
Bonds payable retired by issuing common stock (no gains or loss on retirement)	185,500
Cash paid to retire long-term note payable	100,000
Cash received from sale of equipment	60,250
Cash received in exchange of six month note payable	35,000
Land purchased by issuing long-term note payable	105,250
Cash paid for store equipment	24,750
Cash dividend paid	10,000
Cash paid for other expenses	20,000
Cash received from customers	495,000
Cash paid for inventory	254,500

Short answer

Net changes in cash balance due to various cash activities are$108,000.

Step-by-step solution

Definition of Statement of Cash flow

Statement of cash flow can be defined as the process of reporting the summaries of all the cash inflows and outflows. Such a statement is divided into three sections one is for operating activities, the second is for financing activities, and the last is for investing activities.

Statement of cash flow

Particular	Amount ($)	Amount ($)
Cash flow from operations:
Cash received from customers	$495,000
Cash paid for inventory	(254,500)
Cash paid for other expenses	(20,000)
Cash paid for salaries	(76,500)	$144,000
Cash flow from investing activities:
Cash received from sale of equipment	$60,250
Cash paid for store equipment	(24,750)
Cash received as interest	3,500	$39,000
Cash flow from financing activities:
Cash dividend paid	(10,000)
Cash received in exchange of six month note payable	35,000
Cash paid for retirement of long-term note payable	(100,000)	($75,000)
Net change in cash		108,000
Add: Cash and cash equivalent balance, December 31, 2016		$40,000
Cash and cash equivalent balance, December 31, 2017		$148,000

Note disclosure for non-cash activities:

1. When the bond payable is retired by issuing the common stock, it will not include any outflow or inflow of cash.
2. Fixed asset purchases by issuing long-term notes payable will not affect the cash balance.