Grant Wood Corporation’s balance sheet at the end of 2016 included the following items.

Current assets (\(Cash 82,000)	\)235,000	Current liabilities	\(150,000
Land	30,000	Bond payable	100,000
Building	120,000	Common stock	180,000
Equipment	90,000	Retained earnings	44,000
Accumulated depreciation – Building	(30,000)
Accumulated depreciation – Equipment	(11,000)
Patents	40,000
Total	\)474,000	Total	\(474,000

The following information is available for 2017.

1. Net income was \)55,000.

2. Equipment (cost \(20,000 and accumulated depreciation \)8,000) was sold for \(10,000.

3. Depreciation expense was \)4,000 on the building and \(9,000 on equipment.

4. Patent amortization was \)2,500.

5. Current assets other than cash increased by \(29,000. Current liabilities increased by \)13,000.

6. An addition to the building was completed at a cost of \(27,000.

7. A long-term investment in stock was purchased for \)16,000.

8. Bonds payable of \(50,000 were issued.

9. Cash dividends of \)30,000 were declared and paid.

10. Treasury stock was purchased at a cost of $11,000.

Instructions

(Show only totals for current assets and current liabilities.)

(a) Prepare a statement of cash flows for 2017.

(b) Prepare a balance sheet at December 31, 2017.

Step by step solution

01

Definition of Treasury Stock

Treasury stock is the initially issued shares of the company, which are now reacquired or repurchased from the shareholders.

02

Statement of Cash Flow

Particular	Amount $	Amount $
Cash flow from operations:
Net income	$55,000
Add or less: Adjustments to net income
Loss on sale of equipment	2,000
Depreciation expenses	13,000
Amortization expenses	2,500
Increase in current assets	(29,000)
Increase in current liabilities	13,000
Cash flow from operations		$56,500
Cash flow from investing activities:
Sale of equipment	10,000
Building completed	(27,000)
Investment in stock	(16,000)
Cash flow used in investing activities		(33,000)
Cash flow from financing activities:
Cash dividend	(30,000)
Issuance of bonds	50,000
Treasury stock purchase	(11,000)
Cash flow from financing activity		9,000
Net increase or decrease in cash		32,500
Add: opening cash balance		82,000
Ending cash balance		$114,500

03

Balance Sheet

Particular	Amount $	Particular	Amount $
Current assets	$296,500	Current liabilities	$163,000
Land	30,000	Bond payable	150,000
Building	147,000	Common stock	180,000
Equipment	70,000	Less: Treasury stock	(11,000)
Accumulated depreciation – Building	(34,000)	Retained earnings	69,000
Accumulated depreciation – Equipment	(12,000)
Patents	37,500
Long-term investment	16,000
Total	$551,000	Total	$551,000

Unlock Step-by-Step Solutions & Ace Your Exams!

• Full Textbook Solutions

  Get detailed explanations and key concepts

• Unlimited Al creation

  Al flashcards, explanations, exams and more...

• Ads-free access

  To over 500 millions flashcards

• Money-back guarantee

  We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!