Question:(SCF—Indirect Method) The following are Sullivan Corp.’s comparative balance sheet accounts at December 31, 2017 and 2016, with a column showing the increase (decrease) from 2016 to 2017.
Comparative Balance Sheet
|
| 2017 | 2016 | Increase (Decrease) |
Cash | \(815,000 | \)700,000 | \(115,000 |
Accounts receivable | 1,128,000 | 1,168,000 | (40,000) |
Inventory | 1,850,000 | 1,715,000 | 135,000 |
Property, plant and equipment | 3,307,000 | 2,967,000 | 340,000 |
Accumulated depreciation | (1,165,000) | (1,040,000) | (125,000) |
Investment in Myers Co | 310,000 | 275,000 | 35,000 |
Loan receivable | 250,000 | - | 250,000 |
Total assets | \)6,495,000 | \(5,785,000 | \)710,000 |
| | | |
Account payable | \(1,015,000 | \)955,000 | \(60,000 |
Income taxes payable | 30,000 | 50,000 | (20,000) |
Dividend payable | 800,000 | 100,000 | (20,000) |
Lease liability | 400,000 | - | 400,000 |
Common stock, \) 1 par value | 500,000 | 500,000 | 0 |
Paid-in-capital in excess of par – common stock | 1,500,000 | 1,500,000 | 0 |
Retained earnings | 2,970,000 | 2,680,000 | 290,000 |
Total liabilities and stockholders equity | \(6,495,000 | \)5,785,000 | \(710,000 |
Additional information:
1. On December 31, 2016, Sullivan acquired 25% of Myers Co.’s common stock for \)275,000. On that date, the carrying value of Myers’s assets and liabilities, which approximated their fair values, was \(1,100,000. Myers reported income of \)140,000 for the year ended December 31, 2017. No dividend was paid on Myers’s common stock during the year.
2. During 2017, Sullivan loaned \(300,000 to TLC Co., an unrelated company. TLC made the first semi-annual principal repayment of \)50,000, plus interest at 10%, on December 31, 2017.
3. On January 2, 2017, Sullivan sold equipment costing \(60,000, with a carrying amount of \)38,000, for \(40,000 cash.
4. On December 31, 2017, Sullivan entered into a capital lease for an office building. The present value of the annual rental payments is \)400,000, which equals the fair value of the building. Sullivan made the first rental payment of \(60,000 when due on January 2, 2018.
5. Net income for 2017 was \)370,000.
6. Sullivan declared and paid the following cash dividends for 2017 and 2016.
| 2017 | 2016 |
Declared | December 15, 2017 | December 15, 2016 |
Paid | February 28, 2018 | February 28, 2018 |
Amount | \(80,000 | \)100,000 |
Instructions
Prepare a statement of cash flows for Sullivan Corp. for the year ended December 31, 2017, using the indirect method.
