Answer:
A cash flow statement for the year ended December 31, 2017,using indirect method was prepared for BENETEAU CORPORATION.
Explanation:
Solution
Prepare the cash flow statement using indirect method as follows:
Statement of cash flows for the year ended December 31, 2017, using the indirect method.
B Corporation
Statement of Cash Flows For the Year Ended December 31, 2017
Cash flows from operating activities:
Net loss=-12000
Adjustments to reconcile net loss with cash flows from operating activities:
Depreciation ($20,000 + $10,000 - $13,000) = 17000
Loss on sale of land = 2000
Increase in accounts receivable= -20000
Increase in prepaid expenses=-5000
Increase in accounts payable=6000
Net cash used in operating activities=-12000
Cash flows from investing activities:
Sale of land ($40,000 - $18,000 - $2,000) =20000
Sale of equipment =5000
Net cash generated by investing activities =25000
Cash flows from financing activities:
Retirement of bonds=-12000
Proceeds from issuance of bonds=20000
Dividends paid=-15000
Net cash used by financing activities=<u>-7000</u>
Net increase in cash=6000
Add: Beginning cash balance=31000
Ending cash balance=<u>37000</u>
Now:
(1) The Calculation of Depreciation:
The accumulated Depreciation at end of 2017 = $ (20,000)
Thus,
Accumulated Depreciation at end of 2017 = $ (13,000)
Increase in Accumulated Depreciation during 2017 = 20,000 - 13,000 = $ 7,000
Add: Accumulated depreciation on equipment sold during 2017 = $ 10,000
Total Depreciation expense for 2017 = $ 7,000 + 10,000 = $ 17,000
(2) Calculation of Proceeds from the sale of land:
The land cost sold = $ 40,000 - 18,000 = $ 22,000
The sale of the loss of land = $ 2,000
Hence,
Proceeds from sale of land = Cost of land sold - Loss on sale of land = $ 22,000 - 2,000 = $ 20,000
(3) Calculation of Issuance of bonds payable during 2017
The Bonds Payable at the end of 2016 = $ 19,000
So,
Bonds Payable at the end of 2017 = $ 27,000
Retirement of bonds during 2017 = $ 12,000
Bonds issued during 2017 = $ 27,000 + 12,000 - 19,000 = $ 20,000
Now,
(a) Calculation of Current cash debt Coverage times:
Current cash debt Coverage times = Net cash provided by operating activities / Average current liabilities
Provision of net cash operating activities = ($12,000)
The current average liabilities = (Opening current liabilities + Closing current liabilities) / 2
= (12,000 + 6,000) / 2 = $ 9,000
Current cash debt Coverage times = ($12,000) / $ 9,000 = -1.33 times
(b) Calculation of Cash debt coverage times:
Cash debt coverage times = Net cash provided by operating activities / Average total liabilities
Thus,
Net cash provided by operating activities = ($12,000)
Average Total liabilities = (Opening Total liabilities + Closing Total liabilities) / 2
= ($ 25,000 + 39,000) / 2 = $ 32,000
Therefore, the cash debt coverage times = ($12,000) / $32,000 = -0.375 = -0.38 times
