Question

Stellar Co. reported $149,400 of net income for 2017. The accountant, in preparing the statement of cash flows, noted the following items occurring during 2017 that might affect cash flows from operating activities. Stellar purchased 100 shares of treasury stock at a cost of $20 per share. These shares were then resold at $25 per share. Stellar sold 100 shares of IBM common at $180 per share. The acquisition cost of these shares was $130 per share. There were no unrealized gains or losses recorded on this investment in 2017 1. 2. Stellar revised its estimate for bad debts. Before 2017, Stellar's bad debt expense was 1% of its net sales. In 2017, this percentage was increased to 2%. Net sales for 2017 were S4б,8D0, and net accounts receivable decreased by $13,200 during 2017. 3. 4. Stellar issued 500 shares of its $10 par common stock for a patent. The market price of the shares on the date of the transaction was $23 per share 5. Depreciation expense is $39,800 6. Stellar Co. holds 40% of the Nirvana Company's common stock as a long-term investment. Nirvana Company reported $26,800 of net income for 2017 7. Nirvana Company paid a total of $1,900 of cash dividends to all investees in 2017 8, Stellar declared a 10% stock dividend. One thousand shares of $10 par common stock were distributed. The market price at date of issuance was $20 per share. Prepare a schedule that shows the net cash flow from operating activities using the indirect method Assume no items other than those listed above affected the computation of 2017 net cash flow from operating activities. (Show amounts that decrease cash flow with either a -sign e.g. -15,000 or in parenthesis e.g. (15,000).) Stellar Co. Statement of Cash Flows (Partial) Adjustments to reconcile net income to

Answer 1

Stellar Co.

Statement of Cash Flows

Particulars	Amount	Amount
Income from Operations as per Income Statement		$149400
Add:-
Provision on Net sales	$13200
Depreciation	$39800
Dividends Paid	$1000
		$54000
Less:
Profit on sale of Treasury Stock	-$500
Profit on sale of IBM Common Stock	-$5000
Profit on sale of Long term investment	-$10720
Dividends Received	-$1900
		-$18120
Net Cash flow from Operations		$185200