Question

Following are selected balance sheet accounts of Del Conte Corp. at December 31, 2021 and 2020, and the increases or decreases in each account from 2020 to 2021. Also presented is selected income statement information for the year ended December 31, 2021, and additional information.

Selected Balance Sheet Accounts 2021 2020 Increase (Decrease)
Assets Accounts receivable $ 48,000 $ 31,000 $ 17,000 Property, plant, and equipment 291,000 254,000 37,000 Accumulated depreciation (192,000) (174,000) 18,000 Liabilities and Stockholders’ Equity Bonds payable 70,000 60,000 10,000 Dividends payable 11,500 7,800 3,700 Common stock, $1 par 36,000 26,000 10,000 Additional paid-in capital 12,500 5,800 6,700 Retained earnings 118,000 98,000 20,000 Selected Income Statement Information for the Year Ended December 31, 2021 Sales revenue $ 169,000 Depreciation 47,000 Gain on sale of equipment 16,500 Net income 42,000 Additional information:
Accounts receivable relate to sales of merchandise.
During 2021, equipment costing $54,000 was sold for cash.
During 2021, bonds payable with a face value of $34,000 were issued in exchange for property, plant, and equipment. There was no amortization of bond discount or premium.
Required:
Items 1 through 5 represent activities that will be reported in Del Conte's statement of cash flows for the year ended December 31, 2021. The following two responses are required for each item:
Determine the amount that should be reported in Del Conte's 2021 statement of cash flows.
Select the category (i.e., O - Operating activity, I - Investing activity and F - Financing activity) in which the amount should be reported in the statement of cash flows
Following are selected balance sheet accounts of Del Conte Corp. at December 31, 2021 and 2020, and the increases or decreases in each account from 2020 to 2021. Also presented is selected income statement information for the year ended December 31, 2021, and additional information.
Selected Balance Sheet Accounts 2021 2020 Increase (Decrease)
Assets Accounts receivable $ 48,000 $ 31,000 $ 17,000 Property, plant, and equipment 291,000 254,000 37,000 Accumulated depreciation (192,000) (174,000) 18,000 Liabilities and Stockholders’ Equity Bonds payable 70,000 60,000 10,000 Dividends payable 11,500 7,800 3,700 Common stock, $1 par 36,000 26,000 10,000 Additional paid-in capital 12,500 5,800 6,700 Retained earnings 118,000 98,000 20,000 Selected Income Statement Information for the Year Ended December 31, 2021 Sales revenue $ 169,000 Depreciation 47,000 Gain on sale of equipment 16,500 Net income 42,000 Additional information:
Accounts receivable relate to sales of merchandise.
During 2021, equipment costing $54,000 was sold for cash.
During 2021, bonds payable with a face value of $34,000 were issued in exchange for property, plant, and equipment. There was no amortization of bond discount or premium.
Required:
Items 1 through 5 represent activities that will be reported in Del Conte's statement of cash flows for the year ended December 31, 2021. The following two responses are required for each item:
1. Determine the amount that should be reported in Del Conte's 2021 statement of cash flows.
2. Select the category (i.e., O - Operating activity, I - Investing activity and F - Financing activity) in which the amount should be reported in the statement of cash flows.

Answer 1

For Del Conte's 2021 statement of cash flows, accounts receivable will show a $17,000 operating activity outflow; equipment sale, an investing activity of $70,500 inflow; bonds payable, a $44,000 financing inflow; common stock increase, a $16,700 financing inflow; and dividends payable, a $3,700 financing outflow.

Step-by-step explanation:

To generate the statement of cash flows for Del Conte Corp., we need to determine the cash impact of various balance sheets and income statement items for the year ended December 31, 2021. Each activity reported in the cash flow statement is categorized as operating (O), investing (I), or financing (F) activity.

Item 1: Accounts Receivable

Accounts receivable increased by $17,000. This indicates that cash collected from customers was less than sales revenue, therefore it's negative cash flow for operating activities.

Amount: -$17,000

Category: O

Item 2: Sale of Equipment

The company sold equipment costing $54,000 for more than its book value, recognizing a gain of $16,500. The cash received from this sale is the book value plus the gain.

Amount: $54,000 (cost) + $16,500 (gain) = $70,500

Category: I

Item 3: Bonds Payable

Bonds payable increased by $10,000, and $34,000 worth of bonds were issued for plant, property, and equipment.

Amount: $10,000 + $34,000 = $44,000

Category: F

Item 4: Common Stock and Additional Paid-in Capital

The company issued common stock, which increased common stock and additional paid-in capital by $10,000 and $6,700 respectively.

Amount: $10,000 + $6,700 = $16,700

Category: F

Item 5: Dividends Payable

The increase in dividends payable by $3,700 represents financing activities since it relates to rewards to stockholders. This is an addition to cash used in the period.

Amount: $3,700

Category: F

Answer 2

Del Conte's 2021 cash flow saw growth from receivables and equipment sales, countered by depreciation and dividends, with additional funding from bond issuance.

Del Conte's 2021 cash flows stemmed from operations, equipment sale, and bond issuance, while outflows went to operations, dividends, and financing.

How is that so?

1. Below are the amounts that should be reported in Del Conte's 2021 statement of cash flows

Item | Amount

Increase in accounts receivable | $17,000

Gain on sale of equipment | $16,500

Depreciation expense | $47,000

Issuance of bonds payable | $34,000

Payment of dividends | $11,500

2. Below is the categories in which they should be reported:

Item | Amount | Category

Increase in accounts receivable | $17,000 | Operating

Gain on sale of equipment | $16,500 | Investing

Depreciation expense | $47,000 | Operating

Issuance of bonds payable | $34,000 | Financing

Payment of dividends | $11,500 | Financing

Step-by-step explanation:

• Increase in accounts receivable: This is an operating activity because it represents the cash that Del Conte expects to collect from customers for sales of merchandise.
• Gain on sale of equipment: This is an investing activity because it represents the cash that Del Conte received from the sale of equipment.
• Depreciation expense: This is an operating activity because it represents the non-cash expense of using up Del Conte's property, plant, and equipment.
• Issuance of bonds payable: This is a financing activity because it represents the cash that Del Conte received from issuing bonds.
• Payment of dividends: This is a financing activity because it represents the cash that Del Conte paid to its shareholders.