Question

Question: (L01,4) (Classification of Transactions) Following are selected balance sheet accounts of Allman Bros. Corp. at December 31, 2017 and 2016, and the increases or decreases in each account from 2016 to 2017. Also presented is selected income statement information for the year ended December 31, 2017, and additional information.

	2017	2016	Increase (Decrease)
Selected balance sheet accounts
Assets
Accounts receivables	\(34,000	\)24,000	\(10,000
Property, plant and equipment	277,000	247,000	30,000
Accumulated depreciation – plant assets	(178,000)	(167,000)	(11,000)
Liabilities and stockholder’s equity
Bonds payable	\)49,000	\(46,000	\)3,000
Dividend payable	8,000	5,000	3,000
Common stock, \(1 par	22,000	19,000	3,000
Additional paid-in-capital	9,000	3,000	6,000
Retained earnings	104,000	91,000	13,000

Selected income statement information for the year ended December 31, 2017:

Sales revenue	\)155,000
Depreciation	33,000
Gain on sale of equipment	14,500
Net income	31,000

Additional information:

1. During 2017, equipment costing \(45,000 was sold for cash.

2. Accounts receivable relate to sales of merchandise.

3. During 2017, \)20,000 of bonds payable were issued in exchange for property, plant, and equipment. There was no amortization of bond discount or premium.

Instructions

Determine the category (operating, investing, or financing) and the amount that should be reported in the statement of cash flows for the following items.

(a) Payments for purchase of property, plant, and equipment.

(b) Proceeds from the sale of equipment.

(c) Cash dividends paid.

(d) Redemption of bonds payable.

Short answer

Answer

Item	Section	Amount
Payment for purchase of property, plant, and equipment	Investing activity	$55,000
Proceed from the sale of equipment	Investing activity	$37,500
Cash dividend paid	Operating activity	$0
Redemption of bonds payable	Financing activity	$17,000

Step-by-step solution

Definition of Statement of Cash Flow

The schedule prepared by the business entity for providing a summary of all the transactions, including cash payments and receipts, is known as the statement of cash flow.

Payment for purchase of property, plant, and equipment

Payment made for the purchase of property, plant, and equipment is an investing activity.

Particular	Amount $
Property plant and equipment at end of the year 2017	$277,000
Add: Sale of equipment	45,000
Less: property, plant, and equipment at the end of the year 2016	(247,000)
Less: Equipment purchased against bonds	(20,000)
Payment made	$55,000

Proceeds from the sale of equipment

Particular	Amount $
Gain on sale of equipment	$14,500
Cost of equipment Sold	$45,000
Less: Depreciation expenses	($22,000)
Proceed from sale of equipment	$37,500

Cash dividend paid

The balance of the dividend payable account has increased by $3,000, and no cash dividend is declared during the period, which means that there is no cash paid for the dividend.

Redemption of bonds payable

Particular	Amount $
Opening balance	$46,000
Add: issued for property, plant and equipment	20,000
Less: Closing balance	(49,000)
Redemption	$17,000