Question

P23-6B (L02,3,4) (SCF—Indirect Method, and Net Cash Flow from Operating Activities, Direct Method) Comparative balance sheet accounts of Easton Inc. are presented below and on the next page.

EASTON INC. COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31, 2017 AND 2016 Cash Accounts receivable Inventory Investments (available-for-sale) Land Buidings Equipment Total debits December 31, 2017 $ 40,500 120,500 81,000 41,000 25,000 98,000 60.800 December 31, 2016 $ 33,600 96,000 85,600 65,000 25,000 76,000 41,000 $422,200 $466,800 Allowance for doubtful accounts Accumulated depreciation-buildings Accumulated depreciation-equipment Accounts payable Salaries and wages payable Long-term notes payable Common stock Paid-in capital in excess of par-common stock Retained earnings Total credits $ 3,600 26,800 19,300 63,000 6,000 45,000 11,000 201,000 91.100 $ 3,000 2200 12,700 70,000 11,600 60,000 10,000 164,500 67,200 $422.200 S166

Answer 1

Answer with working notes is given below

T accounts has been prepared to find out purchase of Equipment and Buildings

EASTON INC. Net cash flow from Operating Activities (Direct method) For the year ended December 31,2017 Cash flows from Operating Activities Cash received from customers $827,600 Less: Cash payments for Cash paid for merchandise purchased - $541,300 Cash paid for operating expense -$238,900 - $780,200 Net Cash provided by Operating Activities $47,400 Working notes: A Amount of cash received from Customers Sales Less: Increase in Accounts receivable Add: Increase in allowance for doubtful accounts Less: Bad debts expense Net cash received from customers $855,600 -$24,500 $600 -$4,100 $827,600 Cost of inventory purchased Cost of Goods sold Add: Decrease in inventory Merchandise purchase $538,900 -$4,600 $534,300 Amount of cash paid to suppliers of merchandise cost of purchase Add: Decrease in Accounts payable Cash paid for merchandise purchased $534,300 $7,000 $541,300 Amount of cash paid to Operating expense Operating expenses Add: Decrease in salaries and wages payable Net cash paid for operating expense $233,300 $5,600 $238,900 Working notes: opening balance Bank (balance paid) Profit on sale $3,600 $2,200 Equipment $41,000 Accumulated Dep $25,200 Bank $400 _closing balance $66,600 $60,800 $66,600 $12,700 $10,200 EASTON INC. Cash Flow Statement under Indirect method For the year ended December 31, 2017 Cash flows from Operating Activities Amount Net Income $71,400 Add: Adjustments to reconcile net income to cash Depreciation $13,800 Gain on sale of investments -$5,500 Gain on sale of machinery -$400 Changes in Working Capital Increase in Accounts Receivable -$24,500 Decrease in Inventory $4,600 Increase in allowance for doubtful debts $600 Decrease in Accounts payable -$7,000 Decrease in Salaries and wages payable -$5,600 Net Cash provided by Operating Activities $47,400 Cash flows from Investing Activities Sale of investments $29,500 Sale of Equipment $2,200 Purchase of Equipment -$25,200 Purchase of Building -$22,000 Net Cash used by Investing Activities -$15,500 Cash flows from Financing Activities Repayment of long term notes payable -$15,000 Dividend paid -$10,000 Net Cash provided by Financing Activities -$25,000 Net Cash inflow/(outflow) $6,900 Opening balance of cash $33,600 Closing balance of cash $40,500 Accumulated Depreciation- Equipment Equipment $3,600 Opening Balance (Dep on Equip sold) P and L Account Closing balance $19,300 (Depreciation during the year) $22,900 $22,900 opening balance Bank (balance paid) (Purchase) Buildings $76,000 $22,000 closing balance $98,000 $98,000 $98,000 $23,200 $3,600 Accumulated Depreciation- Buildings Opening Balance P and L Account Closing balance $26,800 (Depreciation during the year) $26,800 $26,800 Non Cash Financing Activity 10% stock dividend declared during the year