Question

Question 01. McKnight Exercise Equipment, Inc., reported the following financial statements for 2018:

                                                                                                Income Statement

Sales		$714,000
Cost of Goods sold	$ 347,000
Depreciation	$52,000
Other expenses	$205,000
Total Expenses		$604,000
Net Income		$110,000

Comparative Balance Sheet

Assets	2018	2017	Liabilities	2018	2017
Current Assets:			Current Liabilities:
Cash	19000	18000	A/C Payable	73000	72000
A/C Receivables	54000	49000	Salary payable	2000	5000
Inventory	81000	89000	Long term bonds	59000	66000
Long term investment	95000	77000	Equity:
Plant assets(net)	221,000	183,000	Shares	47000	34000
			Retained Earnings	289000	239000
	470,000	416,000		470,000	416,000

From the information above make a statement of cash flows for McKnight using the indirect method.

Answer 1

Mcknight Exercise Equipment Inc. Cash Flow Statement For 2018 Particulars Amount($) 110,000.00 52,000.00 Cash Flow from Operating Activities Net Income for the year Adjustments to reconcile Net Income to net cash provided by Operating Activities: Depreciation Changes in Assets and Liabilities: Alc Receivables Inventory Alc Payable Salary Payable (5,000.00) 8,000.00 1,000.00 (3,000.00 Cash generated from operations(A) 163,000.00 Cash Flow from Investing Activities Payment for Long Term Investment Purchase of Plant Assets (refer working note:1) (18,000.00) (90,000.00) Net cash from/(used in ) Investing Activities(B) (108,000.00) Cash flow from Financing Activities Redemption of Long term Bonds Proceeds from issue of equity shares Payment of Dividend(refer working note:2) (7,000.00) 13,000.00 (60,000.00 Net cash used in Financing Activities( C) (54,000.00) Net increase/(decrease) in Cash (A+B+C) Cash at the beginning of the year Cash at the end of the year 1,000.00 18,000.00 19,000.00 Working Note 1: Calculation of Purchase Value of Plant Opening Balance of Plant Add:Purchase of New Plant Assets(balancing figure) Less:Depreciation for the year(as per Income Statement) Closing Balance of Plant 183,000.00 90,000.00 (52,000.00) 221,000.00 Working Note 2: Calculation of Dividend Payment value Opening Balance of Retained Earnings Add: Net Income for the year(as per Income Statement) Less:Dividend declared during the year(balancing figure) Closing Balance of Retained Earnings 239,000.00 110,000.00 (60,000.00) 289,000.00