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Spears Company is preparing its financial statements for the year ended June 30, 2017. The financial statements are complete except for the statement of cash flows. Prepare a statement of cash flows for the year ended June 30, 2017.
1.Prepare a spreadsheet to support a statement of cash flows for the year ended June 30, 2017.
2.Prepare Journal Entries, show in journal entry form, the entries that would be made in preparation of the statement of cash flows.
3.Prepare Spears Company’s statement of cash flows for the year ended June 30, 2017 using the indirect method. Note: Prepare the statement of cash flow in good form with all necessary disclosures, including disclosures about noncash financing and investing activities.
June 30, 2016 June 30, 2017
Cash $397,520 $1,128,203
Accounts Receivable 110,000 162,500
Marketable Securities (at cost) 11,700 24,700
Allowance for Change in Value 1,500 2,800
Construction in Process 185,625 526,500
Prepaid Expenses 49,500 13,000
Investments (long-term) – 17,550
Leased Equipment – 26,000
Building 33,000 –
Deferred tax asset 5,913 2,860
Land 13,650 13,650
Totals 808,408 1,917,763
Allowance for doubtful accounts $6,600 $5,850
Accounts Payable 96,250 273,000
Deferred tax liability 1,100 4,290
Income Taxes Payable 3,850 11,700
Note Payable (long-term) 3,500 –
Accumulated Depreciation on Building 2,750 –
Accumulated Depreciation on Leased Asset – 3,900
Lease obligation – 23,400
Interest payable on lease obligation – 2,340
Bonds payable – 60,000
Premium on bonds payable – 1,140
Billings on construction in process 165,000 422,500
Pension liability 165,000 520,000
Convertible preferred stock, $100 par 9,000 –
Common Stock, $10 par 16,000 26,500
Additional Paid-in Capital 8,700 13,700
Unrealized Increase in Value of Marketable Securities 1,500 2,800
Retained Earnings 329,158 546,643
Totals 808,408 1,917,763
a. Dividends declared and paid totaled $1,500.
b. 300 shares common stock (at par) were issued for cash.
c. On July 1, 2016, convertible preferred stock that had originally been issued at par value were converted into 500 shares of common stock. The book value method was used to account for the conversion.
d. The long-term note payable was paid by issuing 250 shares of common stock at the beginning of the fiscal year.
e. Short-term marketable securities were purchased at a cost of $13,000. The portfolio was increased by $1,300 to a $27,500 fair value at year-end by adjusting the related allowance account.
f. During the year, a 25% interest in Ricochet Co. was purchased as an investment for $13,000. Ricochet reported $24,000 in net income for the year and paid dividends of $1,450 to Spears.
g. $4,800 of accounts receivable were written off as uncollectible during the year.
h. Spears’ inventory consists of Construction-in-Process in excess of the Billings on Construction-in-Process account balance.
i. A building was destroyed by fire during the year and insurance proceeds of $36,000 were collected.
j. Ten-year, 10% bonds payable were sold on December 31, 2016, at 102, plus accrued interest. Discounts and premiums are amortized using the straight-line method. Interest is paid with cash semiannually.
k. Spears recorded pension expense of $470,000 for the year.
l. A lease agreement was signed on July 1st, 2016 for the use of equipment worth $26,000. The company determined that the transaction should be recorded as a capital lease.