Question

Problem 17-8A The financial statements for Facetime Corp. for the year ended December 31, 2017, are as follows Distingulshing among operating. investing, and finanding activities, using the finandal statements to compute the cash effects of a wide variety of business transactions; preparing a cash flow statement by the indirect method FACETIME CORP Balance Sheet December 31, 2017 and 2016 2016 2017 1. Net cash flow from operating, $586,000 investing, S(204,000) financing, $(430,000) Assets $ 18,000 $ 10,000 Cash 40,000 0 Investment in money market fund 175,000 Accounts receivable 189,000 610,000 Merchandise inventory 280,000 23,000 30,000 Prepaid expenses Plant and equipment 1,798,000 1,654,000 (120,000) (160,000) Less accumulated amortization 200,000 Investment Goodwill 90,000 100,000 Total assets $2,437,000 $2,500,000 Liabilities $ 176,000 Accounts payable $120,000 Salaries payable 110,000 100,000 Loan payable 350,000 400,000 Total liabilities 636,000 620,000 Shareholders' equity Preferred shares 800,000 500,000 Common shares 500,000 500,000 Retained earnings 501,000 880,000 Total shareholders' equity 1,801,000 1,880,000 Total liabilities and shareholders' equity $2,437,000 $2,500,000

Answer 1

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Facetime Corp.			Workings	Amount $
Cashflow statement as on 31.12.2017			Increase in Accounts Receivable
Indirect Method	Amount $	Amount $	Closing Balance (net)	189,000.00
Particulars			Less: Opening Balance (net)	175,000.00
Income before income taxes	140,000.00		Increase in Accounts Receivable	14,000.00
Adjustment to reconcile Net Income to Net Cash
Add:			Increase in Prepaid Expenses
Amortization Expense	100,000.00		Closing Balance	30,000.00
Write down of Goodwill	10,000.00		Less: Opening Balance	23,000.00
Less:			Increase in Prepaid Expenses	7,000.00
Income Tax paid	39,000.00
Cash flow from Operations		211,000.00	Decrease in Merchandise Inventory
Changes in Current Assets/Current Liabilities			Closing Balance	280,000.00
Increase in Accounts Receivable	(14,000.00)		Less: Opening Balance	610,000.00
Increase in Prepaid Expenses	(7,000.00)		Decrease in Merchandise Inventory	(330,000.00)
Decrease in Merchandise Inventory	330,000.00
Money market fund sold	40,000.00		Increase in Accounts Payable
Increase in Accounts Payable	56,000.00		Closing Balance	176,000.00
Increase in Salaries Payable	10,000.00	415,000.00	Less: Opening Balance	120,000.00
Net cash provided by (Used for) operating activities		626,000.00	Increase in Accounts Payable	56,000.00
Cash flow from investing activities			Increase in Salaries Payable
Equipment sold	370,000.00		Closing Balance	110,000.00
Equipment Purchased	(574,000.00)		Less: Opening Balance	100,000.00
Net cash provided by (Used for) investing activities		(204,000.00)	Increase in Salaries Payable	10,000.00
Cash flow from financing activities			Equipment sold
Loans Paid	(50,000.00)		Cost	430,000.00
Preference Shares issued	100,000.00		Less: amortized	60,000.00
Dividend paid- Common Stock	(250,000.00)		Book Value	370,000.00
Dividend paid- Preferred Stock	(230,000.00)		Equipment is sold at Book Value.
Net cash provided by (Used for) financing activities		(430,000.00)
			Loans Paid
Net Increase/(Decrease) in cash		(8,000.00)	Closing Balance	350,000.00
Cash Balance, Jan 1, 2017		18,000.00	Less: Opening Balance	400,000.00
Cash Balance, Dec 31, 2017		10,000.00	Loans Paid	(50,000.00)
Answer 2			Preference Shares issued
No the company’s cash position did not improve. The net decrease in cash in $ 8,000.			No. of Preference Shares	20,000.00
Company even sold its Money market fund in 2017.			Value per share	5.00
			Preference Shares issued	100,000.00