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17E

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Intermediate Accounting (Kieso)
Found in: Page 247

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Short Answer

Grant Wood Corporation’s balance sheet at the end of 2016 included the following items.

Current assets ($Cash 82,000)

$235,000

Current liabilities

$150,000

Land

30,000

Bond payable

100,000

Building

120,000

Common stock

180,000

Equipment

90,000

Retained earnings

44,000

Accumulated depreciation – Building

(30,000)

Accumulated depreciation – Equipment

(11,000)

Patents

40,000

Total

$474,000

Total

$474,000

The following information is available for 2017.

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.

5. Current assets other than cash increased by $29,000. Current liabilities increased by $13,000.

6. An addition to the building was completed at a cost of $27,000.

7. A long-term investment in stock was purchased for $16,000.

8. Bonds payable of $50,000 were issued.

9. Cash dividends of $30,000 were declared and paid.

10. Treasury stock was purchased at a cost of $11,000.

Instructions

(Show only totals for current assets and current liabilities.)

(a) Prepare a statement of cash flows for 2017.

(b) Prepare a balance sheet at December 31, 2017.

The balance sheet of the company totals $551,000.

See the step by step solution

Step by Step Solution

Definition of Treasury Stock

Treasury stock is the initially issued shares of the company, which are now reacquired or repurchased from the shareholders.

Statement of Cash Flow

Particular

Amount $

Amount $

Cash flow from operations:

Net income

$55,000

Add or less: Adjustments to net income

Loss on sale of equipment

2,000

Depreciation expenses

13,000

Amortization expenses

2,500

Increase in current assets

(29,000)

Increase in current liabilities

13,000

Cash flow from operations

$56,500

Cash flow from investing activities:

Sale of equipment

10,000

Building completed

(27,000)

Investment in stock

(16,000)

Cash flow used in investing activities

(33,000)

Cash flow from financing activities:

Cash dividend

(30,000)

Issuance of bonds

50,000

Treasury stock purchase

(11,000)

Cash flow from financing activity

9,000

Net increase or decrease in cash

32,500

Add: opening cash balance

82,000

Ending cash balance

$114,500

Balance Sheet

Particular

Amount $

Particular

Amount $

Current assets

$296,500

Current liabilities

$163,000

Land

30,000

Bond payable

150,000

Building

147,000

Common stock

180,000

Equipment

70,000

Less: Treasury stock

(11,000)

Accumulated depreciation – Building

(34,000)

Retained earnings

69,000

Accumulated depreciation – Equipment

(12,000)

Patents

37,500

Long-term investment

16,000

Total

$551,000

Total

$551,000

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