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Homework answers / question archive /  A comparative balance sheet for A

 A comparative balance sheet for A

Finance

 A comparative balance sheet for A.A Corporation is presented below: A.A CORPORATION Comparative Balance Sheet _2013 Assets Cash $ 39,000 Accounts receivable (net) 80,000 Prepaid insurance 22,000 Land 18,000 Equipment 70,000 Accumulated depreciation (20,000) Total Assets $209.000 Liabilities and Stockholders' Equity Accounts payable $ 11,000 Bonds payable 27,000 Common stock 140,000 Retained carnings 31.000 Total liabilities and stockholders' equity $209.000 $ 31,000 60,000 17,000 40,000 60,000 (13,000) $195.000 $ 6,000 19,000 115,000 55,000 $195.000 Additional information: 1. Net loss for 2013 is $20,000. 2. Cash dividends of $4,000 were declared and paid in 2013. 3. Land was sold for cash at a loss of $10,000. This was the only land transaction during the year. 4. Equipment with a cost of $15,000 and accumulated depreciation of $10,000 was sold for $5,000 cash 5. $12,000 of bonds were retired during the year at carrying (book) value. 6. Equipment was acquired for common stock. The fair market value of the stock at the time of the exchange was $25,000. Instructions: Prepare a statement of cash flows for the year ended 2013, using the indirect method.

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Cash flow statement for A.A Corporation for the year ended 2013

Particulars Amount Notes
CASH FLOW FROM OPERATING ACTIVITIES  
Net loss -20,000  
     
Add back non-cash items:    
Depreciation 17,000 1
Loss on sale of land 10,000 2
     
Changes in working capital    
Add:    
Increase in accounts payable 5,000 from 2012 to 2013
Subtract:    
Increase in accounts receivable 20,000 from 2012 to 2013
Increase in prepaid insurance 5,000
     
A.Net cash flows from operating activities -13,000  
     
CASH FLOW FROM INVESTING ACTIVITIES  
Add:    
Proceeds from sale of equipment 5,000  
Proceeds from sale of land 12,000 2
     
B.Net cash flows from investing activities 17,000  
     
CASH FLOW FROM FINANCING ACTIVITIES  
Add:    
Proceeds from issue of additional bonds 20,000 3
Subtract:    
Redemption of bonds 12,000  
Payment of dividends 4,000  
     
C.Net cash flows from financing activities 4,000  
     
     
Net change in cash (A + B+ C) 8,000  
Beginning cash balance 31,000  
     
Ending cash balance 39,000  

Notes:

1. Accumulated depreciation Account

Particulars Amount   Particulars Amount
Equipment A/C 10,000   Balance b/d 13,000
         
Balance c/d 20,000   Depreciation A/C (balancing figure) 17,000
  30,000     30,000

2. Land

Balance on 2012 = 40,000

Balance on 2013 = 18,000

Net change = 40,000 - 18,000 = 22,000

Therefore, book value of land sold = 22,000

Land sold at a loss of = 10,000

Proceeds from land sale = Book value - Loss = 22,000 - 10,000 = 12,000

3. Bonds payable A/c

Particulars Amount   Particulars Amount
Investor A/c (redemption of bonds) 12,000   Balance b/d 19,000
         
Balance c/d 27,000   Investor A/c (issue of bonds - balancing figure) 20,000
  39,000     39,000

4. Since equipment was exchanged for stock, therefore no cash transaction is there.

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