Statement of Cash Flows—Indirect Method The following balances are available for Chrisman Company: December 31 2017 2016 Cash $14,400 $18,000 Accounts receivable 36,000 27,000 Inventory 28,600 47,800 Prepaid rent 16,200 10,800 Land 135,000 135,000 Plant and equipment 720,000 540,000 Accumulated depreciation (117,000) (54,000) Totals $833,200 $724,600 Accounts payable $21,600 $18,000 Income taxes payable 5,400 9,000 Short-term notes payable 63,000 45,000 Bonds payable 135,000 180,000 Common stock 360,000 270,000 Retained earnings 248,200 202,600 Totals $833,200 $724,600 Bonds were retired during 2017 at face value, plant and equipment were acquired for cash, and common stock was issued for cash. Depreciation expense for the year was $63,000. Net income was reported at $45,600. Required: 1. Prepare a statement of cash flows for 2017 using the indirect method in the Operating Activities section. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash. Chrisman Company Statement of Cash Flows For the 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 Decrease in inventory Increase in prepaid rent Increase in accounts payable Decrease in income taxes payable Net cash provided by operating activities $ Cash Flows from Investing Activities Acquisition of plant and equipment $ Cash Flows from Financing Activities Retirement of bonds payable $ Issuance of short-term notes payable Issuance of common stock Net cash provided by financing activities $ Net decrease in cash $ Cash balance, December 31, 2016 Cash balance, December 31, 2017 $
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
Statement of
The following balances are available for Chrisman Company:
|
December 31 |
|||
| 2017 | 2016 | ||
| Cash | $14,400 | $18,000 | |
| Accounts receivable | 36,000 | 27,000 | |
| Inventory | 28,600 | 47,800 | |
| Prepaid rent | 16,200 | 10,800 | |
| Land | 135,000 | 135,000 | |
| Plant and equipment | 720,000 | 540,000 | |
| Accumulated |
(117,000) | (54,000) | |
| Totals | $833,200 | $724,600 | |
| Accounts payable | $21,600 | $18,000 | |
| Income taxes payable | 5,400 | 9,000 | |
| Short-term notes payable | 63,000 | 45,000 | |
| Bonds payable | 135,000 | 180,000 | |
| Common stock | 360,000 | 270,000 | |
| 248,200 | 202,600 | ||
| Totals | $833,200 | $724,600 |
Bonds were retired during 2017 at face value, plant and equipment were acquired for cash, and common stock was issued for cash. Depreciation expense for the year was $63,000. Net income was reported at $45,600.
Required:
1. Prepare a statement of cash flows for 2017 using the indirect method in the Operating Activities section. Use the minus sign to indicate cash payments,
| Chrisman Company | |
| Statement of Cash Flows | |
| For the 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 | |
| Decrease in inventory | |
| Increase in prepaid rent | |
| Increase in accounts payable | |
| Decrease in income taxes payable | |
| Net cash provided by operating activities | $ |
| Cash Flows from Investing Activities | |
| Acquisition of plant and equipment | $ |
| Cash Flows from Financing Activities | |
| Retirement of bonds payable | $ |
| Issuance of short-term notes payable | |
| Issuance of common stock | |
| Net cash provided by financing activities | $ |
| Net decrease in cash | $ |
| Cash balance, December 31, 2016 | |
| Cash balance, December 31, 2017 | $ |
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