Question

E5.17 (LO 2, 3) (Preparation of a Statement of Cash Flows and a Balance Sheet) Grant Wood Corporation's balance sheet at the end of 2019 included the following items. Current assets (Cash $82,000) $235,000 Current liabilities $150,000 Land 30,000 Bonds payable 100,000 Buildings 120,000 Common stock 180,000 Equipment 90,000 Retained earnings 44,000 Accum. depr.--buildings (30,000) Total $474,000 Accum. depr.-equipment (11,000) Patents 40,000 $474,000 The following information is available for 2020. 1. Net income was $55,000. 2. Equipment (cost $20,000 and accumulated depreciation $8,000) was sold for $10,000. 3. Depreciation expense was $4,000 on the building and $9,000 on equipment. 4. Patent amortization was $2,500. Total

Answer 1

(A)	GRANT WOOD CORPORATION
	STATEMENT OF CASH FLOWS
	FOR THE YEAR ENDED DECEMBER 31,2020
		AMOUNT($)	AMOUNT($ )
	CASH FLOWS FROM OPERATING ACTIVITIES :
	net income		$ 55,000
	adjustments to reconcile net income to net cash provided by operating activities)
	loss on sale of equipment ( see note 1 )	$ 2,000
	depreciation expense ( $ 4,000 + $ 9,000 )	$ 13,000
	patent amortization	$ 2,500
	increase in current liabilities ( cash will be increase )	$ 13,000
	increase in current assets other than cash ( cash will be decrease)	( $ 29,000 )	$ 1,500
	net cash provided by operating activities		$ 56,500
	CASH FLOWS FROM INVESTING ACTIVITIES :
	sale of equipment	$ 10,000
	addition to building	( $ 27,000)
	long term investment in stock	( $ 16,000)
	net cash used by investing activities		( $33,000)
	CASH FLOWS FROM FINANCING ACTIVITIES :
	Issue of bonds	$ 50,000
	payment of dividend	($ 30,000)
	purchase of treasury stock	($ 11,000 )
	net cash provided by investing activities		$ 9,000
	NET INCREASE IN CASH ( $ 56,500 -$ 33,000 + $ 9,000 )		$ 32,500

B)

( B)	GRANT WOOD CORPORATION
	BALANCE SHEET
	AS ON DECEMBER 31,2020
			AMOUNT ($)	AMOUNT ( $ )
	ASSETS :
	current assets ( bal in fig. ) ( see in note 3 )			$ 296,500
	long term investments			$ 16,000
	property , plant and equipment :
	land		$ 30,000
	building ( $ 120,000 + $ 27,000 )	$ 147,000
	less: accumulated depreciation ( $ 30,000 +$ 4,000 )	( $ 34,000 )	$ 113,000
	equipment ( $ 90,000 -$ 20,000)	$ 70,000
	less: accumulated depreciation ( $ 11,000 -$ 8,000 +$ 9,000 )	( $ 12,000)	$ 58,000
	total property , plant and equipment :			$ 201,000
	intangible assets :
	patents ( $ 40,000 - $ 2,500 )			$ 37,500
	TOTAL ASSETS ( $ 296,500 + $ 16,000 + $ 201,000 +$ 37,500 )			$ 551,000
	LIABILITIES AND STOCKHOLDERS EQUITY :
	current liabilities ( $ 150,000 + $ 13,000 )			$ 163,000
	long term liabilities :
	bonds payable ( $ 100,000 + $ 50,000 )			$ 150,000
	total liabilities			$ 313,000
	stockholders equity :
	common stock		$ 180,000
	retained earnings ( see note 2 )		$ 69,000
	total paid in capital and retained earnings		$ 249,000
	less: cost of treasury stock		( $ 11,000 )
	total stockholders equity			$ 238,000
	total liabilities and stockholders equity			$ 551,000

EXPLANATION IS GIVEN BELOW IN DETAIL :.

NOTE 1:
to find out loss on sale of equipment :
cost of equipment	$ 20,000
less: accumulated depreciation	( $ 8,000)
book value of equipment	$ 12,000
less: sale of equipment	($ 10,000)
loss on sale of equipment	$ 2,000

note 2 :
to find out retained earnings :
beginning retained earnings december 31,2019	$ 44,000
add: net income	$ 55,000
less ; cash dividend paid	( $ 30,000 )
ending retained earnings december 31,2020	$ 69,000
note 3 :
here , accounting equation formula
total assets = (total liabilities+ stockholders equity )
total assets= ($ 313,000 +$ 238,000 )
total assets = $ 551,000
to find out current assets :
here, total assets = current assets + long term investments +total property , plant and equipment + intangible assets( patents)
$ 551,000 = current assets+ $ 16,000 +$ 201,0000 + $ 37,500
current assets = $ 551,000 -$ 16,000 -$ 201,000 - $ 37,500
current assets = $ 296,500