Question

Exercise 12-7 Shown below are comparative balance sheets for Pharoah Company. Pharoah Company Comparative Balance Sheets December 31 Assets 2017 2016 Cash Accounts receivable Inventory Land $ 126,820 164,120 311,455 149,200 484,900 (123,090 ) $1,113,405 $ 41,030 141,740 352,485 186,500 373,000 (59,680 ) $1,035,075 Equipment Accumulated depreciation equipment Total $ 72,735 279,750 Liabilities and Stockholders' Equity Accounts payable Bonds payable Common stock ($1 par) Retained earnings Total 402,840 $ 80,195 373,000 324,510 257,370 $1,035,075 358,080 $1,113,405

Answer 1

Solution: $173,445 Pharoah Company Statement of Cash Flows For Year Ended December 31, 2017 Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense Increase in accounts receivable ($164,120 - $141,740) Decrease in inventory ($352,485 - $311,455) Decrease in accounts payable ($80,195 - $72,735) | $63,410 ($22,380) $41,030 ($7,460) $74,600 $248,045 Net Cash provided by Operating Activities Cash flows from investing activities Cash paid for equipment purchase ($484,900 - $373,000) Cash received from sale of land ($186,500 - $149,200) Net Cash used in Investing Activities ($111,900) $37,300 ($74,600) Cash flows from financing activities Cash paid for dividends (WN-1) Cash paid to redeem bonds ($373,000 - $279,750) Cash received from stock issuance ($402,840 - $324,510) Net Cash used in Financing Activities ($ 72,735) ($93,250) $78,330 ($87,655) Net increase (decrease) in cash Cash balance at prior year end Cash balance at current year end $85,790 $41,030 $126,820 WN-1: Cash paid for dividends Retained earnings, Beginning Balance Add: Net income for the year 2017 $257,370 $173,445 $430,815 ($358,080) $72,735 Less: Retained Earnings, ending balance Cash paid for dividends