Question

Problem 17-09A

Condensed financial data of Cheng Inc. follow.

CHENG INC. Comparative Balance Sheets December 31
Assets		2020			2019
Cash		$101,200			$48,300
Accounts receivable		92,700			32,200
Inventory		111,400			102,100
Prepaid expenses		29,600			25,900
Investments		140,800			113,400
Equipment		264,300			243,000
Accumulated depreciation-equipment		(47,200	)		(51,800	)
Total		$692,800			$513,100
Liabilities and Stockholders’ Equity
Accounts payable		$111,400			$68,000
Accrued expenses payable		16,100			17,400
Bonds payable		110,500			149,400
Common stock		219,400			174,200
Retained earnings		235,400			104,100
Total		$692,800			$513,100

CHENG INC. Income Statement For the Year Ended December 31, 2020
Sales revenue				$392,600
Less:
Cost of goods sold		$134,500
Operating expenses, excluding depreciation		11,400
Depreciation expense		34,200
Income tax expense		27,700
Interest expense		4,300
Loss on disposal of plant assets		7,500		219,600
Net income				$173,000

Additional information:

1.		New equipment costing $80,500 was purchased for cash during the year.
2.		Old equipment having an original cost of $59,200 was sold for $12,900 cash.
3.		Bonds matured and were paid off at face value for cash.
4.		A cash dividend of $41,700 was declared and paid during the year.

Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

CHENG INC
Statement of Cash flows
For the Year Ended December 31, 2020
Cash flows from operating activities
Net Income		$ 173,000
Adjustments to reconcile net income to ;
Depreciation expense	$   34,200
Loss on disposal of plant asset	$      7,500
Increase in accounts receivable	$ (60,500)
Increase in inventory	$   (9,300)
Increase in prepaid expense	$   (3,700)
Increase in accounts payable	$   43,400
Decrease in accrued expense payable	$   (1,300)
		$    10,300
Net cash provided by operating activities		$ 183,300
Cash flows from investing activities
Cash received from sale of equipment	$   12,900
Cash paid for purchase of equipment	$ (80,500)
Cash paid for purchase of investment	$ (27,400)
Net cash used by investing activities		$ (95,000)
Cash flows from financing activities
Cash dividends paid	$ (41,700)
Cash paid to retire bonds	$ (38,900)
Cash received from issuance of common stock	$   45,200
Net cash used by financing activities		$ (35,400)
Net Increase in cash and cash equivalents		$    52,900
Cash and cash equivalents at beginning of period		$    48,300
Cash and cash equivalents at end of period		$ 101,200

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