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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.

Founded in the early 1980s, the Vermont Teddy Bear Co. designs and manufactures American-made teddy bears and markets them primarily as gifts called Bear-Grams or Teddy Bear-Grams. Bear-Grams are personalized teddy bears delivered directly to the recipient for special occasions such as birthdays and anniversaries. The Shelburne, Vermont, companyโ€™s primary markets are New York, Boston, and Chicago. Sales have jumped dramatically in recent years. Such dramatic growth has significant implications for cash flows. Provided below are the cash flow statements for two recent years for the company.

Current Year

Prior Year

Cash flows from operating activities:

Net income

\( 17,523

\) 838,955

Adjustments to reconcile net income to net cash provided by operating activities

Deferred income taxes

(69,524)

(146,590)

Depreciation and amortization

316,416

181,348

Changes in assets and liabilities:

Accounts receivable, trade

(38,267)

(25,947)

Inventories

(1,599,014)

(1,289,293)

Prepaid and other current assets

(444,794)

(113,205)

Deposits and other assets

(24,240)

(83,044)

Accounts payable

2,017,059

(284,567)

Accrued expenses

61,321

170,755

Accrued interest payable, debentures

-

(58,219)

Other

-

(8,960)

Income taxes payable

-

117,810

Net cash provided by (used for) operating activities

236,480

(700,957)

Net cash used for investing activities

(2,102,892)

(4,422,953)

Net cash (used for) provided by financing activities

(315,353)

9,685,435

Net change in cash and cash equivalents

(2,181,765)

4,561,525

Other information:

Current liabilities

\( 4,055,465

\) 1,995,600

Total liabilities

4,620,085

2,184,386

Net sales

20,560,566

17,025,856

Instructions

  1. Note that net income in the current year was only \(17,523 compared to prior-year income of \)838,955, but net cash flow from operating activities was \(236,480 in the current year and a negative \)700,957 in the prior year. Explain the causes of this apparent paradox.
  2. Evaluate Vermont Teddy Bearโ€™s liquidity, solvency, and profitability for the current year using cash flow-based ratios.

Stan Conner and Mark Stein were discussing the statement of cash flows of Bombeck Co. In the notes to the statement of cash flows was a schedule entitled โ€œNon-cash investing and financing activities.โ€ Give three examples of significant non-cash transactions that would be reported in this schedule.

Under IFRS, significant non-cash transactions:

  1. are classified as operating, if they are related to income items.
  2. are excluded from the statement of cash flows and disclosed in a narrative form or summarized in a separate schedule.
  3. are classified as an investing or financing activity.
  4. are classified as an operating activity, unless they can be specifically identified with financing or investing activities.

Question: (SCFโ€”Indirect Method) Condensed financial data of Pat Metheny Company for 2017 and 2016 are presented below.

PAT METHENY COMPANY

COMPARATIVE BALANCE SHEET

AS OF DECEMBER 31, 2017 AND 2016


2017

2016

Cash

\(1,800

\)1,150

Receivables

1,750

1,300

Inventory

1,600

1,900

Plant assets

1,900

1,700

Accumulated depreciation

(1,200)

(1,170)

Long-term-investment (Held to maturity)

1,300

1,420

\(7,150

\)6,300

Account payable

\(1,200

\)900

Accrued liabilities

200

250

Bond payable

1,400

1,550

Common stock

1,900

1,700

Retained earnings

2,450

1,900

\(7,150

\)6,300

PAT METHENY COMPANY

INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 2017

Sales

\(6,900

Cost of goods sold

(4,700)

Gross margin

2,200

Selling and administrative expenses

930

Income from operations

1,270

Other revenue and gains

Gains on sale of investment

80

Income before tax

1,350

Income tax expenses

540

Net income

810

Cash dividend

260

Income retained in business

\)550

Additional information:

During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2017.

Instructions

Prepare a statement of cash flows using the indirect method.

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