The transactions below took place during the year 2017.

1. Convertible bonds payable with a par value of \(300,000 were exchanged for unissued common stock with a par value of \)300,000. The market price of both types of securities was par.

2. The net income for the year was \(410,000.

3. Depreciation expense for the building was \)90,000.

4. Some old office equipment was traded in on the purchase of some dissimilar office equipment, and the following entry was made.

Equipment 50,000

Accum. Depreciation—Equipment 30,000

Equipment 40,000

Cash 34,000

Gain on Disposal of Plant Assets 6,000

The Gain on Disposal of Plant Assets was included in income before income taxes.

5. Dividends in the amount of $123,000 were declared. They are payable in January of next year.

Instructions

Show by journal entries the adjustments that would be made on a worksheet for a statement of cash flows.

Step by step solution

01

Definition of dividends

The dividends are defined as the part of profits which are distributed among the shareholders of the company. It can be in form of cash or stocks

02

Preparation statement of cash flows

Journal
Date	Particulars	Debit ($)	Credit ($)
1	Bonds Payable	300,000
	Common stock		300,000
	(Noncash financing activities)
2	Operating – Net Income	410,000
	Retained Earnings		410,000
	(Net Income recorded)
3	Operating - Depreciation Expense	90,000
	Accumulated Depreciation - Equipment		90,000
	(Depreciation expense recorded)
4	Accumulated Depreciation – Equipment	30,000
	Equipment	10,000
	Operating – Gain on disposal of plant assets		6,000
	Investing – Purchase of equipment		34,000
	(Sale and purchase of equipment recorded)
5	Retained Earnings	123,000
	Dividends payable		123,000
	(Dividends recorded)

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