The Extra Surplus Company's Balance Sheet for December 31, 2017 and the Income Statement for 2018 are shown below.Extra Surplus CompanyBalance SheetDecember 31, 2017AssetsCash $10,000Accounts Receivable 5,000Inventory 12,000Property and Equipment, Net 20,000$47,000Liabilities and Stockholders'; EquityAccounts Payable $10,000Note Payable, Long-Term5,000Common Stock20,000Retained Earnings 12,000$47,000Extra Surplus CompanyIncome StatementFor the Year Ended December 31, 2018Sales $13,000Cost of Goods Sold 3,000Salaries and Wage Expense 3,000Interest Expense 1,000Other Expenses 500Net Income$ 5,500 Additional data:• Sales were $13,000; $8,000 in cash was received from customers.• Bought new land for cash, $10,000.• Sold other land for its book value of
$5,000.• Paid $1,000 principal on the long-term note payable and $1,000 in interest.• Issued new shares of stock for $10,000 cash.• Cash dividends of $1,000 were declared and paid to stockholders.• Paid $5,500 on accounts payable.• No inventory purchases were made; other expenses were incurred on account.• All wages were paid in cash.• Other expenses were on account.Required:Part a. Prepare a balance sheet at December 31, 2018.Part b. Prepare the statement of cash flows using the direct method.
What will be an ideal response?
Part aExtra Surplus Company
Balance Sheet
December 31, 2018
| ? | 2018 | ? | 2017 | Change | Reason for change |
| Cash | $11,500 | ? | $10,000 | +1,500 | Net increase in cash |
| Accounts Receivable | 10,000 | ? | 5,000 | +5,000 | $13,000 (sales on account) ? $8,000 (collections) |
| Inventory | 9,000 | ? | 12,000 | ?3,000 | Cost of goods sold |
| PP&E | 25,000 | ? | 20,000 | +5,000 | $10,000 (land bought) ? $5,000 (land sold) |
| ? | $55,500 | ? | $47,000 | ? | |
| Accounts Payable | $5,000 | ? | $10,000 | ?5,000 | ?$5,500 (accounts payable paid) + $500
(other expenses on account) |
| Note Payable, LT | 4,000 | ? | 5,000 | ?1,000 | (principal paid) |
| Common Stock | 30,000 | ? | 20,000 | +10,000 | Issuance of stock for cash |
| Retained Earnings | 16,500 | ? | 12,000 | +4,500 | $5,500 (net income) ? $1,000 (cash dividends) |
| ? | $55,500 | ? | $47,000 | ? | ? |
Part b
| Year ending December 31, 2018 |
Cash Flows from Operating Activities
| Cash collected from customers | $ 8,000 |
| Cash paid to suppliers of inventory | (5,500) |
| Cash paid to employees | (3,000) |
| Cash paid for interest | (1,000) |
| Net cash used in operating activities | (1,500) |
Cash Flows from Investing Activities
| Purchase of land | (10,000) |
| Proceeds from sale of land | 5,000 |
| Net cash used in investing activities | (5,000) |
| Cash Flows from Financing Activities | |
| Payments on long-term debt | (1,000) |
| Payment of cash dividends | (1,000) |
| Proceeds from issuing common stock | 10,000 |
| Net cash provided by financing activities | 8,000 |
| Net increase in cash during the year | 1,500 |
| Cash and cash equivalents, beginning of period | 10,000 |
| Cash and cash equivalents, end of period | $11,500 |
Business
