Answer:
(a) Plant assets that had cost $20,000 6 years before and were being depreciated on a straight-line basis over 10 years with no estimated scrap value were sold for $5,300.
- increases cash flows from investing activities
(b) During the year, 10,000 shares of common stock with a stated value of $10 a share were issued for $43 a share
- increases cash flows from financing activities
(c) Uncollectible accounts receivable in the amount of $27,000 were written off against Allowance for Doubtful Accounts.
- this corresponds to bad debt expense which is included in the income statement
(d) The company sustained a net loss for the year of $50,000. Depreciation amounted to $22,000, and a gain of $9,000 was realized on the sale of land for $39,000 cash.
- the net loss and the gain on the sale of land decreases the cash flows from operating activities, while the depreciation expense increases it.
- the $39,000 received will increase cash flow from investing activities
(e) A 3-month U.S. Treasury bill was purchased for $100,000. The company uses a cash and cash equivalent basis for its cash flow statement.
- not included in teh cash flow statements
(f) Patent amortization for the year was $20,000
- increases cash flow from operating activities (in a similar way than depreciation)
(g) The company exchanged common stock for a 70% interest in Tabasco Co. for $900,000.
- this is a non-cash financing and investing activity
(h) During the year, treasury stock costing $47,000 was purchased
- decreases cash flow from financing activities
