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Stansfield Corporation had the following activities in 2017.

1. Payment of accounts payable \(770,000.

4. Collection of note receivable \)100,000.

2. Issuance of common stock \(250,000.

5. Issuance of bonds payable \)510,000.

3. Payment of dividends \(350,000.

6. Purchase of treasury stock \)46,000.

Compute the amount Stansfield should report as net cash provided (used) by financing activities in its 2017 statement of cash flows.

Short Answer

Expert verified

Net cash under financing activities:$364,000

Step by step solution

01

Definition of Financing Activities

All activities that involve inflow and outflow of cash about the issue and redemption of the securities, either debt or equity, are included in the financing activities of the business entity.

02

Net cash provided (used) by financing activities

Particular

Amount $

Issuance of common stock

$250,000

Payment of dividends

($350,000)

Issuance of bonds payable

$510,000

Purchase of treasury stock

($46,000)

Cash provided by financing activities

$364,000

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Most popular questions from this chapter

Question: You have completed the field work in connection with your audit of Alexander Corporation for the year ended December 31, 2017. The balance sheet accounts at the beginning and end of the year are shown below.

Dec 31, 2017

Dec 31, 2016

Increase or (decrease)

Cash

\(277,900

\)298,000

(\(20,100)

Accounts receivable

469,424

353,000

116,424

Inventory

741,700

610,000

131,700

Prepaid expenses

12,000

8,000

4,000

Investment in subsidiary

110,500

0

110,500

Cash surrender value of life insurance

2,304

1,800

504

Machinery

207,000

190,000

17,000

Buildings

535,200

407,900

127,300

Land

52,500

52,500

0

Patents

69,000

64,000

5,000

Copyrights

40,000

50,000

(10,000)

Bond discount and issue costs

4,502

0

4,502

Total

\)2,522,030

\(2,035,200

\)486,830

Income tax payable

\(90,250

\)79,600

\(10,650

Account payable

299,280

280,000

19,280

Dividend payable

70,000

0

70,000

Bond payable โ€“ 8%

125,000

0

125,000

Bond payable โ€“ 12%

0

100,000

(100,000)

Allowance for doubtful accounts

35,300

40,000

(4,700)

Accumulated depreciation โ€“ building

424,000

400,000

24,000

Accumulated depreciation โ€“ machinery

173,000

130,000

43,000

Premium on bond payable

0

2,400

(2,400)

Common stock โ€“ no par

1,176,200

1,453,200

(277,000)

Paid-in-capital in excess of par โ€“ common stock

109,000

0

109,000

Retained earnings โ€“ unappropriated

20,000

(450,000)

470,000

Total

\)2,522,030

\(2,035,200

\)486,830

STATEMENT OF RETAINED EARNINGS

FOR THE YEAR ENDED DECEMBER 31, 2017


January 1, 2017

Balance (deficit)

(\(450,000)

March 31, 2017

Net income for first quarter of 2017

25,000

April 1, 2017

Transfer from paid-in capital

425,000

Balance

0

December 31, 2017

Net income for last three quarters of 2017

90,000

Dividend declaredโ€”payable January 21, 2018

(70,000)

Balance

\)20,000

Your working papers from the audit contain the following information:

1. On April 1, 2017, the existing deficit was written off against paid-in capital created by reducing the stated value of the nopar stock.

2. On November 1, 2017, 29,600 shares of no-par stock were sold for \(257,000. The board of directors voted to regard \)5 per share as stated capital.

3. A patent was purchased for \(15,000.

4. During the year, machinery that had a cost basis of \)16,400 and on which there was accumulated depreciation of \(5,200 was sold for \)9,000. No other plant assets were sold during the year.

5. The 12%, 20-year bonds were dated and issued on January 2, 2005. Interest was payable on June 30 and December 31. They were sold originally at 106. These bonds were redeemed at 100.9 plus accrued interest on March 31, 2017.

6. The 8%, 40-year bonds were dated January 1, 2017, and were sold on March 31 at 97 plus accrued interest. Interest is payable semiannually on June 30 and December 31. Expense of issuance was \(839.

7. Alexander Corporation acquired 70% control in Crimson Company on January 2, 2017, for \)100,000. The income statement of Crimson Company for 2017 shows a net income of \(15,000.

8. Major repairs to buildings of \)7,200 were charged to Accumulated Depreciationโ€”Buildings. 9. Interest paid in 2017 was \(10,500 and income taxes paid were \)34,000.

Instructions

From the information given, prepare a statement of cash flows using the indirect method. A worksheet is not necessary, but the principal computations should be supported by schedules or general ledger accounts. The company uses straight-line amortization for bond interest.

Question: Michaels Company had available at the end of 2017 the following information.

MICHAELS COMPANY COMPARATIVE

BALANCE SHEETS

AS OF DECEMBER 31, 2017 AND 2016


2017

2016

Cash

\(10,000

\)4,000

Accounts receivable

20,500

12,950

Short-term investments

22,000

30,000

Inventory

42,000

35,000

Prepaid rent

3,000

12,000

Prepaid insurance

2,100

900

Supplies

1,000

750

Land

125,000

175,000

Building

350,000

350,000

Accumulated depreciation โ€“ building

(105,000)

(87,500)

Equipment

525,000

400,000

Accumulated depreciation โ€“ equipment

(130,000)

(112,000)

Patents

45,000

50,000

Total assets

\(910,600

\)871,100

Account payable

\(22,000

\)32,000

Income tax payable

5,000

4,000

Salaries and wages payable

5,000

3,000

Short-term note payable

10,000

10,000

Long-term note payable

60,000

70,000

Bond payable

400,000

400,000

Premium on bond payable

20,303

25,853

Common stock

240,000

220,000

Paid-in-capital in excess of par โ€“ common stock

25,000

17,500

Retained earnings

123,297

88,747

Total liabilities and stockholders equity

\(910,600

\)871,100

MICHAELS COMPANY

INCOME STATEMENT AND DIVIDEND INFORMATION

FOR THE YEAR ENDED DECEMBER 31, 2017


Sales revenue

\(1,160,000

Cost of goods sold

748,000

Gross margin

412,000

Operating expenses

Selling expenses

\)79,200

Administrative expenses

156,700

Depreciation/Amortization expenses

40,500

Total operating expenses

276,400

Income from operations

135,600

Other revenue/expenses

Gain on sale of land

8,000

Gain on sale of short-term investment

4,000

Dividend revenue

2,400

Interest expenses

(51,750)

(37,350)

Income before tax

98,250

Income tax expenses

39,400

Net income

58,850

Dividend to common stockholders

(24,300)

To Retained earnings

$34,550

Instructions

Prepare a statement of cash flows for Michaels Company using the direct method accompanied by a reconciliation schedule. Assume the short-term investments are debt securities, classified as available-for-sale

Unlike the other major financial statements, the statement of cash flows is not prepared from the adjusted trial balance. From what sources does the information to prepare this statement come, and what information does each source provide?

In 2017, Leppard Inc. issued 1,000 shares of \(10 par value common stock for land worth \)40,000.

(a) Prepare Leppardโ€™s journal entry to record the transaction.

(b) Indicate the effect the transaction has on cash.

(c) Indicate how the transaction is reported on the statement of cash flows.

Question: The net income for Fallon Company for 2017 was \(320,000. During 2017, depreciation on plant assets was \)124,000, amortization of patent was \(40,000, and the company incurred a loss on sale of plant assets of \)21,000. Compute net cash flow from operating activities.

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