Increase in current liabilities 13000 increase in

Increase in current liabilities ........................... 13,000
Increase in current assets (other than cash) .... (29,000) 1,500
Net cash provided by operating activities ........... 56,500
Cash flows from investing activities
Sale of equipment ................................................... 10,000
Addition to building ................................................ (27,000)
Investment in stock ................................................ (16,000)
Net cash used by investing activities ................... (33,000)
Cash flows from financing activities
Issuance of bonds .................................................. 50,000
Payment of dividends ............................................ (30,000)
Purchase of treasury stock ................................... (11,000 )
Net cash provided by financing activities ............ 9,000
Net increase in cash ..................................................... $32,500
a
*[$10,000 – ($20,000 – $8,000)]
a
An additional proof to arrive at the increase in cash is provided as follows:
Total current assets—end of period $296,500 [from part (b)]
Total current assets—beginning of period 235,000
Increase in current assets during the period 61,500
Increase in current assets other than cash 29,000
Increase in cash during year $ 32,500
5-11

EXERCISE 5-17 (Continued)
(b) Grant Wood Corporation
Balance Sheet
December 31, 2007
Assets
Current assets ................................................. $296,500
b
Long-term investments .................................. 16,000
Property, plant, and equipment
Land ........................................................... $ 30,000
Building ($120,000 + $27,000) .................. $147,000
Less: Accum. depreciation
($30,000 + $4,000) .................................. (34,000) 113,000
Equipment ($90,000 – $20,000) ............... 70,000
Less: Accum. depreciation
($11,000 – $8,000 + $9,000) ................... (12,000) 58,000
Total property, plant, and equipment .... 201,000
Intangible assets—patents
($40,000 – $2,500) .................................. 37,500
Total assets ........................................ $551,000
Liabilities and Stockholders’ Equity
Current liabilities ($150,000 + $13,000) ..................... $163,000
Long-term liabilities
Bonds payable ($100,000 + $50,000) ................... 150,000
Total liabilities .................................................. 313,000
Stockholders’ equity
Common stock ....................................................... $180,000
Retained earnings ($44,000 + $55,000 – $30,000) .... 69,000
Total paid-in capital and retained earnings .... 249,000
Less: Cost of treasury stock ................................ (11,000)
Total stockholders’ equity .............................. 238,000
Total liabilities and stockholders’ equity ...... $551,000
b
The amount determined for current assets could be computed last and then is a
“plug” figure. That is, total liabilities and stockholders’ equity is computed because
information is available to determine this amount. Because the total assets amount is
the same as total liabilities and stockholders’ equity amount, the amount of total
assets is determined. Information is available to compute all the asset amounts except
current assets and therefore current assets can be determined by deducting the total
of all the other asset balances from the total asset balance (i.e., $551,000 – $37,500 –
$201,000 – $16,000). Another way to compute this amount, given the information, is
that beginning current assets plus the $29,000 increase in current assets other than
cash plus the $32,500 increase in cash equals $296,500.
5-12

PROBLEM 5-2
Letterman, Inc.
Balance Sheet
December 31, 2007
Assets
Current assets
Cash ................................................... $ 360,000
Trading securities ............................. 121,000
Notes receivable ............................... 545,700
Income taxes receivable ................... 97,630
Inventories ........................................ 239,800
Prepaid expenses ............................. 87,920
Total current assets ................... $1,452,050
Property, plant, and equipment
Land ................................................... $ 480,000
Building ............................................. $1,640,000
Less: Accum. depreciation—
building .....................................