Question

The comparative balance sheet for Majestic Travel Services, Inc., for December 31, 2017 and 2016, is as follows: (Click the icon to view the comparative balance sheet.) The following information is taken from the records of Majestic Travel Services, Inc. (Click the icon to view the transaction data.) Prepare the statement of cash flows (indirect method) for Majestic Travel Services, Inc., for 2017 Increase in wages payable Increase in interest payable 15,000 1,000 2,000 (10,400) Increase in income taxes payable Net cash provided by (used for) operating activities Investing Activities: $ 29,600 Net cash provided by used for) investing activities

Answer 1

Answer -

Majestic Travel Services, Inc.
Statement of Cash Flows
For the Year Ended December 31, 2017
Operating activities:
Net income		$40000
Adjustments to reconcile net income cash basis
Depreciation expense	$5000
Loss on sale of land	$3600
Decrease in accounts receivable	$7000
Increase in inventory	($38000)
Decrease in prepaid insurance	$2000
Decrease in accounts payable	($8000)
Increase in wages payable	$15000
Increase in interest payable	$1000
Increase in income tax payable	$2000	($10400)
Net cash provided by (used for) operating activities		$29600
Investing activities:
Proceeds from sale of land	$7400
Purchase of equipment	($28000)
Net cash provided by (used for) investing activities		($20600)
Financing activities:
Proceeds from long-term debt (Notes payable)	$9000
Issuance of common stock	$10000
Payment of dividend	($4000)
Net cash provided by (used for) financing activities		$15000
Net increase (decrease) in cash		$24000
Cash balance December 31, 2016		$19000
Cash balance December 31, 2017		$43000

Calculation:

1. Depreciation expense:

= Balance on Dec. 31, 2017 - Balance on Dec. 31, 2016

= $19000 - $14000

= $5000

2. Loss on sale of land:

Carrying value of land sold = Balance on Dec. 31, 2016 - Balance on Dec. 31, 2017

= $116000 - $105000

= $11000

Loss on sale of land = Carrying value of land sold - Sale value of land

= $11000 - $7400

= $3600

3. Decrease in accounts receivable:

= Balance on Dec. 31, 2016 - Balance on Dec. 31, 2017

= $82000 - $75000

= $7000

4. Increase in inventory:

= Balance on Dec. 31, 2017 - Balance on Dec. 31, 2016

= $60000 - $22000

= $38000

5. Decrease in Prepaid insurance:

= Balance on Dec. 31, 2016 - Balance on Dec. 31, 2017

= $17000 - $15000

= $2000

6. Decrease in accounts payable:

= Balance on Dec. 31, 2016 - Balance on Dec. 31, 2017

= $32000 - $24000

= $8000

7. Increase in wages payable:

= Balance on Dec. 31, 2017 - Balance on Dec. 31, 2016

= $33000 - $18000

= $15000

8. Increase in interest payable:

= Balance on Dec. 31, 2017 - Balance on Dec. 31, 2016

= $14000 - $13000

= $1000

9. Increase in income tax payable:

= Balance on Dec. 31, 2017 - Balance on Dec. 31, 2016

= $12000 - $10000

= $2000

10. Purchase of equipment:

= Balance on Dec. 31, 2017 - Balance on Dec. 31, 2016

= $81000 - $53000

= $28000

11. Proceeds from long-term debt (Notes payable):

= Balance on Dec. 31, 2017 - Balance on Dec. 31, 2016

= $101000 - $92000

= $9000

13. Issuance of common stock:

= Balance on Dec. 31, 2017 - Balance on Dec. 31, 2016

= $128000 - $118000

= $10000