Stellar Co. reported $145,700 of net income for 2020. The accountant, in preparing the statement of cash flows, noted the following items occurring during 2020 that might affect cash flows from operating activities. 1. Stellar purchased 100 shares of treasury stock at a cost of $20 per share. These shares were then resold at $25 per share. 2. Stellar sold 100 shares of IBM common at $200 per share. The acquisition cost of these shares was $160 per share. There were no unrealized gains or losses recorded on this investment in 2020. 3. Stellar revised its estimate for bad debts. Before 2020, Stellar’s bad debt expense was 1% of its receivables. In 2020, this percentage was increased to 2%. Net account for 2020 were $485,400, and net accounts receivable decreased by $12,800 during 2020. 4. Stellar issued 500 shares of its $10 par common stock for a patent. The market price of the shares on the date of the transaction was $23 per share. 5. Depreciation expense is $42,700. 6. Stellar Co. holds 40% of the Nirvana Company’s common stock as a long-term investment. Nirvana Company reported $26,900 of net income for 2020. 7. Nirvana Company paid a total of $2,100 of cash dividends to all investees in 2020. 8. Stellar declared a 10% stock dividend. One thousand shares of $10 par common stock were distributed. The market price at date of issuance was $20 per share. Prepare a schedule that shows the net cash flow from operating activities using the indirect method. Assume no items other than those listed above affected the computation of 2017 net cash flow from operating activities. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Stellar Co. reported $145,700 of net income for 2020. The accountant, in preparing the statement of cash flows, noted the following items occurring during 2020 that might affect cash flows from operating activities.

1.		Stellar purchased 100 shares of treasury stock at a cost of $20 per share. These shares were then resold at $25 per share.
2.		Stellar sold 100 shares of IBM common at $200 per share. The acquisition cost of these shares was $160 per share. There were no unrealized gains or losses recorded on this investment in 2020.
3.		Stellar revised its estimate for bad debts. Before 2020, Stellar’s bad debt expense was 1% of its receivables. In 2020, this percentage was increased to 2%. Net account for 2020 were $485,400, and net accounts receivable decreased by $12,800 during 2020.
4.		Stellar issued 500 shares of its $10 par common stock for a patent. The market price of the shares on the date of the transaction was $23 per share.
5.		Depreciation expense is $42,700.
6.		Stellar Co. holds 40% of the Nirvana Company’s common stock as a long-term investment. Nirvana Company reported $26,900 of net income for 2020.
7.		Nirvana Company paid a total of $2,100 of cash dividends to all investees in 2020.
8.		Stellar declared a 10% stock dividend. One thousand shares of $10 par common stock were distributed. The market price at date of issuance was $20 per share.

Prepare a schedule that shows the net cash flow from operating activities using the indirect method. Assume no items other than those listed above affected the computation of 2017 net cash flow from operating activities. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

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