Question

The income statement, balance sheet, and additional information for Video Phones, Inc., are provided.

VIDEO PHONES, INC.
Income Statement
For the Year Ended December 31, 2024
Net sales $ 2,756,000
Expenses:
Cost of goods sold $ 1,700,000
Operating expenses 808,000
Depreciation expense 22,000
Loss on sale of land 7,500
Interest expense 12,500
Income tax expense 43,000
Total expenses 2,593,000
Net income $ 163,000
VIDEO PHONES, INC.
Balance Sheet
December 31
2024 2023
Assets
Current assets:
Cash $ 172,900 $ 102,700
Accounts receivable 75,500 55,000
Inventory 105,000 130,000
Prepaid rent 9,600 4,800
Long-term assets:
Investments 100,000 0
Land 205,000 230,000
Equipment 260,000 205,000
Accumulated depreciation (63,000) (41,000)
Total assets $ 865,000 $ 686,500
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 61,500 $ 76,000
Interest payable 5,500 9,000
Income tax payable 14,500 13,500
Long-term liabilities:
Notes payable 275,000 220,000
Stockholders' equity:
Common stock 250,000 250,000
Retained earnings 258,000 118,000
Total liabilities and stockholders’ equity $ 865,000 $ 686,500
Additional Information for 2024:
1. Purchase investment in bonds for $100,000.
2. Sold land for $17,500. the land originally was purchased for 25,000, resulting in a 7,500 loss being recorded at the time of the sale.
3.
Purchased $55,000 in equipment by issuing a $55,000 long-term note payable to the seller. No cash is exchanged in the transaction.

4.
Declare and pay a cash dividend of $22,500

VIDEO PHONES, INC.
Statement of Cash Flows
For the Year Ended December 31, 2024
Cash Flows from Operating Activities:
Adjustments to reconcile net income to net cash flows from operating activities
Net cash flows from operating activities
Cash Flows from Investing Activities:
Net cash flows from investing activities
Cash Flows from Financing Activities:
Net cash flows from financing activities
Cash at the beginning of the period
Cash at the end of the period
Note: Noncash Activities

Answer 1

Step-by-step explanation:

To prepare the Statement of Cash Flows for Video Phones, Inc. for the year ended December 31, 2024, we need to consider the information provided and calculate the cash flows from operating, investing, and financing activities. Noncash activities should also be disclosed.

VIDEO PHONES, INC.

Statement of Cash Flows

For the Year Ended December 31, 2024

Cash Flows from Operating Activities:

Net income $163,000

Adjustments to reconcile net income to net cash flows from operating activities:

Depreciation expense 22,000

Loss on sale of land 7,500

Changes in operating assets and liabilities:

Increase in accounts receivable (20,500) [($75,500 - $55,000)]

Decrease in inventory 25,000 [($130,000 - $105,000)]

Increase in prepaid rent (4,800) [($9,600 - $4,800)]

Increase in accounts payable (14,500) [($61,500 - $76,000)]

Decrease in interest payable (3,500) [($9,000 - $5,500)]

Increase in income tax payable 1,000 [($14,500 - $13,500)]

Net Cash Flows from Operating Activities $166,200 [163,000 + 22,000 + 7,500 - 20,500 + 25,000 - 4,800 - 14,500 - 3,500 + 1,000]

Cash Flows from Investing Activities:

Purchase of investment in bonds (100,000)

Proceeds from the sale of land 17,500 [Loss on sale of land: $7,500, Cash received: $25,000]

Purchase of equipment through long-term note payable (55,000)

Net Cash Flows from Investing Activities ($137,500) [-100,000 + 17,500 - 55,000]

Cash Flows from Financing Activities:

Payment of cash dividend (22,500)

Net Cash Flows from Financing Activities ($22,500)

Cash at the beginning of the period $172,900

Cash at the end of the period $178,100 [$172,900 + $166,200 - $137,500 - $22,500]

Note: Noncash Activities: There were noncash investing and financing activities related to the issuance of a long-term note payable for the purchase of equipment. No cash was exchanged in the transaction.

The cash at the end of the period is $178,100.