SWEET VALLEY, INC.Comparative Balance SheetDecember 31, 2018 and 201720182017Assets$ 26,300Current Assets:$ 15,400Cash26,40025,100Accounts Receivable79,30091,300Merchandise InventoryLong-term Assets:34,90014,000Land115,790108,330Plant Assets(19,890)(18,630)Accumulated Depreciation-Plant Assets$ 262,800$ 235,500Total AssetsLiabilitiesCurrent Liabilities:$ 35,600$ 30,100Accounts Payable28,90030,800Accrued LiabilitiesLong-term Liabilities:78,000105,000Notes Payable142,500165,900Total LiabilitiesStockholders' Equity88,20064,800Common Stock, no par32,1004,800Retained Earnings120,30069,600Total Stockholders' Equity$ 262,800$ 235,500Total Liabilities and Stockholders' EquityAdditionally, Sweet Valley purchased land of $20,900 by financing it 100% with long-term notes payable during 2018. During the year, there were no sales of land, noretirements of stock, and no treasury stock transactions. A plant asset was disposed offor $0. The cost and the accumulated depreciation of the disposed asset was $13,240.Plant asset was acquired for cash.Requirements1. Prepare the 2018 statement of cash flows, formatting operating activities by theindirect method.2. How will what you learned in this problem help you evaluate an investment?

Question
Asked Dec 3, 2019
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SWEET VALLEY, INC.
Comparative Balance Sheet
December 31, 2018 and 2017
2018
2017
Assets
$ 26,300
Current Assets:
$ 15,400
Cash
26,400
25,100
Accounts Receivable
79,300
91,300
Merchandise Inventory
Long-term Assets:
34,900
14,000
Land
115,790
108,330
Plant Assets
(19,890)
(18,630)
Accumulated Depreciation-Plant Assets
$ 262,800
$ 235,500
Total Assets
Liabilities
Current Liabilities:
$ 35,600
$ 30,100
Accounts Payable
28,900
30,800
Accrued Liabilities
Long-term Liabilities:
78,000
105,000
Notes Payable
142,500
165,900
Total Liabilities
Stockholders' Equity
88,200
64,800
Common Stock, no par
32,100
4,800
Retained Earnings
120,300
69,600
Total Stockholders' Equity
$ 262,800
$ 235,500
Total Liabilities and Stockholders' Equity
Additionally, Sweet Valley purchased land of $20,900 by financing it 100% with long-
term notes payable during 2018. During the year, there were no sales of land, no
retirements of stock, and no treasury stock transactions. A plant asset was disposed of
for $0. The cost and the accumulated depreciation of the disposed asset was $13,240.
Plant asset was acquired for cash.
Requirements
1. Prepare the 2018 statement of cash flows, formatting operating activities by the
indirect method.
2. How will what you learned in this problem help you evaluate an investment?
help_outline

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SWEET VALLEY, INC. Comparative Balance Sheet December 31, 2018 and 2017 2018 2017 Assets $ 26,300 Current Assets: $ 15,400 Cash 26,400 25,100 Accounts Receivable 79,300 91,300 Merchandise Inventory Long-term Assets: 34,900 14,000 Land 115,790 108,330 Plant Assets (19,890) (18,630) Accumulated Depreciation-Plant Assets $ 262,800 $ 235,500 Total Assets Liabilities Current Liabilities: $ 35,600 $ 30,100 Accounts Payable 28,900 30,800 Accrued Liabilities Long-term Liabilities: 78,000 105,000 Notes Payable 142,500 165,900 Total Liabilities Stockholders' Equity 88,200 64,800 Common Stock, no par 32,100 4,800 Retained Earnings 120,300 69,600 Total Stockholders' Equity $ 262,800 $ 235,500 Total Liabilities and Stockholders' Equity Additionally, Sweet Valley purchased land of $20,900 by financing it 100% with long- term notes payable during 2018. During the year, there were no sales of land, no retirements of stock, and no treasury stock transactions. A plant asset was disposed of for $0. The cost and the accumulated depreciation of the disposed asset was $13,240. Plant asset was acquired for cash. Requirements 1. Prepare the 2018 statement of cash flows, formatting operating activities by the indirect method. 2. How will what you learned in this problem help you evaluate an investment?

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Expert Answer

Step 1

Statement of cash flows: This statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period. Statement of cash flows includes the changes in cash balance due to operating, investing, and financing activities. Operating activities include cash inflows and outflows from business operations. Investing activities includes cash inflows and cash outflows from purchase and sale of land or equipment, or investments. Financing activities includes cash inflows and outflows from issuance of common stock and debt, payment of debt and dividends.

Step 2

1.

Prepare 2018 statement of cash flows, formatting operatin...

Statement of Cash Flows
Particulars
Amount
Amount
Cash flows from operating activities:
$107,500
Net income
Adjustments to reconcile net income to net cash provided by
operating activity:
Depreciation expense
Increase in accounts receivable ($26,400 - $25,100)
Decrease in inventory ($79,300 $91,300)
Increase in Accounts payable ($35,600- $30,100)
Decrease in Accrued liabilities ($28,900 $30,800)
Net cash from operating activities (1)
$14,500
($1,300)
$12,000
$5,500
($ 1,900)$28,800
$136,300
Cash Flows from Investing activities:
Acquisition of plant ($115,790 +$13,240- $108,330)
Net cash used for investing activities (2)
($ 20,700)
($ 20,700)
Cash flows from Financing Activities:
Cash receipt from issue of common stock ($88,200-$64,800)
Cash dividend paid ($107,500 +$4,800-$32,100)
Repayment of notes payable ($105,000 +$20,900 -$78,000)
Net cash used for financing activities (3)
Net increase (decrease) in cash ( 1 +2+3)
$23,400
($ 80,200)
($47,900)
($ 104,700)
$10,900
$15,400
Add: Opening cash balance
$26,300
Ending cash balance
Non-Cash Investing and Financing activities:
Purchase of land with long term notes payable
$20,900
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Statement of Cash Flows Particulars Amount Amount Cash flows from operating activities: $107,500 Net income Adjustments to reconcile net income to net cash provided by operating activity: Depreciation expense Increase in accounts receivable ($26,400 - $25,100) Decrease in inventory ($79,300 $91,300) Increase in Accounts payable ($35,600- $30,100) Decrease in Accrued liabilities ($28,900 $30,800) Net cash from operating activities (1) $14,500 ($1,300) $12,000 $5,500 ($ 1,900)$28,800 $136,300 Cash Flows from Investing activities: Acquisition of plant ($115,790 +$13,240- $108,330) Net cash used for investing activities (2) ($ 20,700) ($ 20,700) Cash flows from Financing Activities: Cash receipt from issue of common stock ($88,200-$64,800) Cash dividend paid ($107,500 +$4,800-$32,100) Repayment of notes payable ($105,000 +$20,900 -$78,000) Net cash used for financing activities (3) Net increase (decrease) in cash ( 1 +2+3) $23,400 ($ 80,200) ($47,900) ($ 104,700) $10,900 $15,400 Add: Opening cash balance $26,300 Ending cash balance Non-Cash Investing and Financing activities: Purchase of land with long term notes payable $20,900

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