Q38PGA The 2018 comparative balance she... [FREE SOLUTION]

Chapter 14: Q38PGA (page 787)

The 2018 comparative balance sheet and income statement of Appleton Group, Inc. follow. Appleton disposed of a plant asset at book value during 2018
Prepare the spreadsheet for the 2018 statement of cash flows. Format cash flows from operating activities by the indirect method. A plant asset was disposed of for $0. The cost and accumulated depreciation of the disposed asset was $11,600. There were no sales of land, no retirement of common stock, and no treasury stock transactions. Assume plant asset and land acquisitions were for cash.

Short Answer

Expert verified

Net increase/(decrease) in cash is ($1,200).

Step by step solution

Statement of cash flows using indirect method

Appleton Group Inc. Spreadsheet for statement of cash flows Year ended December 31, 2018
Panel A-Balance Sheet	Balance 31/12/2017	Transaction Analysis		Balance 31/12/2018
		Debit	Credit
Cash	$15,900			$14,700
Account receivables	$43,900.00		$1,700.00	$42,200
Land	$17,000.00	$25,200.00		$42,200
Plant Assets	$110,750	$11,200		$121,950
Accumulated Depreciation	($16,450)		($3,800)	($20,250)
Merchandise Inventory	$93,900	$3,700		$97,600
Total Assets	$265,000			$298,400

Accounts Payable	$26,900	$1,000		$25,900
Accrued Liabilities	$22,700		$1,800	$24,500
Common stock	$130,700		$8,200	$138,900
Notes Payable (Long-Term)	$65,000	$14,000		$51,000
Retained Earnings	$19,700		$38,400	$58,100
Total Liabilities and Shareholder鈥檚 Equity	$265,000			$298,400

Panel B- Statement of Cash Flows
Cash Flows from Operating Activities
Net Income		$66,700
Adjustments to Reconcile Net Income to Net cash provided by Operating Activities:
Depreciation expense		$15,400
Decrease in account receivable		$1,700
Increase in merchandise inventory			$3,700
Increase in account payable			$1,000
Decrease in accrued liabilities		$1,800
Net cash provided/ (used) in Operating activities
Cash Flows from investing Activities:
Purchase of Plant			$22,800
Purchase of land			$25,200
Net cash provided/ (used) in investing activities
Cash Flows from Financing Activities:
Issuance of common stock		$8,200
Payment of notes payable			$14,000
Dividend Paid			$28,300
Net cash provided/ (used) in financing activities
Net increase/ (Decrease) in cash		$1,200
Total		$95,000	$95,000

Calculation of cash paid for the purchase of plant

$\begin{matrix} Cash paid = Closing balance + cost of disposed asset 鈥� opening balance \\ = $ 121, 950 + $ 11, 600 - $ 110, 750 \\ = $ 22, 800 \end{matrix}$

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

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Statement of cash flows using indirect method

Calculation of cash paid for the purchase of plant

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