Question: Philadelphia Widget Corporation is in the process…
Philadelphia Widget Corporation is in the process of preparing financial statements for the year ended December 31, 2015. They have completed the balance sheet and income statement as shown.
| Philadelphia Widget Corporation | ||
| Income Statement | ||
| For the year ended December 31, 2015 | ||
| Revenue | $1,235,000 | |
| Cost of Goods Sold | 806,356 | |
| Gross Profit | $428,644 | |
| Administrative Expenses: | ||
| Salaries | $212,450 | |
| Rent | 82,500 | |
| Depreciation | 24,800 | |
| Total Administrative Expense | 319,750 | |
| Operating Profit | $108,894 | |
| Gain on Sale of Equipment | 4,500 | |
| Interest Expense | (42,115) | |
| Net Income | $71,279 | |
| Philadelphia Widget Corporation | ||||||
| Comparative Balance Sheets | ||||||
| December 31, 2015; 2014; and 2013 | ||||||
| 2015 | 2014 | 2013 | ||||
| Cash | $119,411 | $89,564 | $105,644 | |||
| Accounts Receivable | 85,455 | 83,118 | 78,400 | |||
| Inventory | 41,600 | 48,560 | 62,600 | |||
| Prepaid Expenses | 14,500 | 18,100 | 24,000 | |||
| Total Current Assets | 260,966 | 239,342 | 270,644 | |||
| Land | 50,000 | 50,000 | 50,000 | |||
| Buildings & Equipment | $182,450 | $172,450 | $166,800 | |||
| Accumulated Depreciation | 78,900 | 103,550 | 62,600 | 109,850 | 54,580 | 112,220 |
| Total Assets | $414,516 | $399,192 | $432,864 | |||
| Accounts Payable | $62,525 | $51,480 | $45,200 | |||
| Wages Payable | 4,500 | 4,500 | 1,500 | |||
| Unearned Revenue | 3,000 | – | – | |||
| Current Portion of Long-Term Debt | 50,000 | 50,000 | 50,000 | |||
| Total Current Liabilities | 120,025 | 105,980 | 96,700 | |||
| Long-Term Debt | 175,000 | 225,000 | 275,000 | |||
| Common Stock, 3,500 shares outstanding | $35,000 | $35,000 | $35,000 | |||
| Retained Earnings | 84,491 | 33,212 | 26,164 | |||
| Total Stockholders’ Equity | 119,491 | 68,212 | 61,164 | |||
| Total Liabilities & Equity | $414,516 | $399,192 | $432,864 | |||
Instructions
Prepare a Statement of Cash Flow using the indirect method for the 2015, using the above statements and the following additional information:
Equipment costing $30,000 was purchased in 2015.
Equipment having an original cost of $20,000 and accumulated depreciation of $8,500 was sold for $16,000 during 2015.
A dividend of $20,000 was declared and paid in 2015.
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