Reference no: EM132405057
Question
Dingel Corporation has contracted with you to make a statement of cash flows. The controller has provided the following information.
December 31
2017 2016
Cash $ 38,500 $13,000
Accounts receivable 12,250 10,000
Inventory 12,000 10,000
Equity investments -0- 3,000
Buildings -0- 29,750
Equipment 4 0,000 20,000
Copyrights 5,000 5,250
Totals $107,750 $91,000
Allowance for doubtful accounts $ 3,000 $ 4,500
Accumulated depreciation-equipment 2,000 4,500
Accumulated depreciation-buildings -0- 6,000
Accounts payable 5,000 4,000
Dividends payable -0- 5,000
Notes payable, short-term (nontrade) 3,000 4,000
Long-term notes payable 36,000 25,000
Common stock 38,000 33,000
Retained earnings 20,750 5,000
$107,750 $91,000
Additional data related to 2017 are as follows.
1.Equipment that had cost $11,000 and was 30% depreciated at time of disposal was sold for $2,500.
2.$5,000 of the long-term note payable was paid by issuing common stock.
3.Cash dividends paid were $5,000.
4.On January 1, 2017, the building was completely destroyed by a flood. Insurance proceeds on the building were $33,000 (net of $4,000 taxes).
5.Equity investments (ownership is less than 20% of total shares) were sold at $1,500 above their cost. No unrealized gains or losses were recorded in 2017.
6.Cash and long-term note for $16,00 0 were given for the acquisition of equipment.
7.Interest of $2,000 and income taxes of $5,000 were paid in cash.
Instructions
(a) Use the indirect method to analyze the above information and prepare a statement of cash flows for Dingel.
(b) What would you expect to observe in the operating, investing, and financing sections of a statement of cash flows of:
1.A severely financially troubled firm?
2.A recently formed firm that is experiencing rapid growth?