Increase in current liabilities 13000 Increase in current assets other than

Increase in current liabilities 13000 increase in

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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
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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
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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 .....................................
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