Chapter 14: Q33PGA (page 783)

Preparing the statement of cash flows—indirect method
Accountants for Morganson, Inc. have assembled the following data for the year ended December 31, 2018:
2018 2017 Current Assets: Cash $ 99,400 $ 25,000 Accounts Receivable 64,100 69,700 Merchandise Inventory 83,000 75,000 Current Liabilities: Accounts Payable 57,600 55,200 Income Tax Payable 14,800 16,800
Transaction Data for 2018:
Issuance of common stock for cash $ 38,000
Payment of notes payable $ 46,100
Depreciation expense 24,000
Payment of cash dividends 50,000
Purchase of equipment with cash 74,000
Issuance of notes payable to borrow cash 62,000
Acquisition of land by issuing long-term notes payable 119,000
Gain on sale of building 4,500 Book value of building sold 54,000
Net income 68,500
Prepare Morganton'sstatement of cash flows using the indirect method. Include an accompanying schedule of non-cash investing and financing activities.

Expert verified

Answer

As per the cash flow statement, net change in the cash equals $74,400. And Total Non-cash Investing and financing activities equals $119,000

Step by step solution

Morganson Inc. Statement of Cash Flows For the year ended December 31, 2018
Cash Flows From Operating Activities:
Net Income	$68,500
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation expense	$24,000
Gain on sale of building	($4,500)
Decrease in account receivables	$5,600
Increase in merchandise inventory	($8,000)
Increase in account payable	$2,400
Decrease in tax payable	($2,000)
Net cash provided/ (used) in operating activities	$86,000
Cash Flows From Investing Activities:
Purchase of equipment	($74,000)
Sale of building	$58,500
Net cash provided/ (used) in investing activities	($15,500)
Cash Flows From Financing Activities:
Issuance of common stock	$38,000
Payment of notes payable	($46,100)
Issue of notes payable	$62,000
Dividend paid	($50,000)
Net cash provided/ (used) in financing activities	$3,900
Net increase/(Decrease) in cash	$74,400
Cash Balance, December 31, 2017	$25,000
Cash Balance, December 31, 2018	$99,400

Morganson Inc. Statement of Cash Flows (Partial) For the year ended December 31, 2018
Non-cash Investing and financing activities
Acquisition of land by issuing long-term notes payable	$119,000
Total Non-cash Investing and financing activities	$119,000

Unlock Step-by-Step Solutions & Ace Your Exams!

Over 30 million students worldwide already upgrade their learning with Vaia!

Recommended explanations on Business Studies Textbooks

View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

ROUSE EXERCISE EQUIPMENT, INC. Income statement Year ended December 31, 2018
Net sales revenue	\(713,000
Cost of goods sold	342,000
Gross Profit	371,000
Operating expense:
Depreciation expense	54,000
Other operatin expenses	210,000
Net Income	\)107,000

ROUSE EXERCISE EQUIPMENT, INC. Comparative Balance sheet December 31, 2018 and 2017
	2018	2017
Assets
Current assets:
Cash	17,000	16,000
Accounts receivable	57,000	46,000
Merchandise inventory	79,000	90,000
Long term assets:
Plant assets	260,500	216,400
Accumulated depreciation-Plant assets	(38,500)	(32,400)
Investments	96,000	73,000
Total assets	\(471,000	\)409,000

Liabilities
Current liabilities
Accounts payable	72,000	71,000
Salaries payable	3,000	5,000
Long-term liabilities
Notes payable	61,000	69,000
Total liabilities	136,000	145,000

Stockholder’s equity
Common stock, no par	45,000	34,000
Retained earnings	290,000	230,000
Total stockholder’s equity	335,000	264,000
Total liabilities and stockholder’s equity	\(471,000	\)409,000