Cash Flow 1

4. Prepare a statement of cash flows for the Crosby Corporation.
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CROSBY CORPORATION
Income Statement
For the Year Ended December 31, 2015
Sales.......................................................................................... $1,000,000
Cost of goods sold .................................................................. 600,000
Gross profits ...................................................................... 400,000
Selling and administrative expense ..................................... 60,000
Depreciation expense ............................................................ 50,000
Operating income............................................................. 290,000
Interest expense ...................................................................... 20,000
Earnings before taxes....................................................... 270,000
Taxes ........................................................................................ 70,000
Earnings after taxes .......................................................... 200,000
Preferred stock dividends ....................................................... 50,000
Earnings available to common stockholders ..................... $ 150,000
Statement of Retained Earnings

For the Year Ended December 31, 2015
Retained earnings, balance, January 1, 2015 ...................... $50,000
Add: Earnings available to common stockholders, 2015 150,000
Deduct: Cash dividends declared and paid in 2015 ...... 20,000
Retained earnings, balance, December 31, 2015 ................ $180,000
Comparative Balance Sheets

For 2014 and 2015
Year-End Year-End
Assets 2014 2015
Current assets:
Cash .................................................................................... $ 150,000 $180,000
Accounts receivable (net) ................................................ 70,000 110,000
Inventory ................................................................................. 160,000 100,000
Prepaid expenses .................................................................... 20,000 10,000
Total current assets .......................................................... 400,000 400,000
Investments (long-term securities) ...................................... 100,000 150,000
Plant and equipment ............................................................. 900,000 1,000,000
Less: Accumulated depreciation .................................... 200,000 250,000
Net plant and equipment ...................................................... 700,000 750,000
Total assets .............................................................................. $1,200,000 $1,300,000
Liabilities and Stockholders’ Equity

Current liabilities:
Accounts payable ............................................................. $ 100,000 $ 120,000
Notes payable ................................................................... 150,000 100,000
Accrued expenses............................................................. 20,000 30,000
Total current liabilities ................................................. 270,000 250,000
Long-term liabilities:
Bonds payable, 2020......................................................... 100,000 80,000
Total liabilities ............................................................... 370,000 330,000
Stockholders’ equity:
Preferred stock, $100 par value ...................................... 160,000 200,000
Common stock, $1 par value .......................................... 600,000 550,000
Capital paid in excess of par........................................... 20,000 40,000
Retained earnings............................................................. 50,000 180,000
Total stockholders’ equity............................................ 830,000 970,000
Total liabilities and stockholders’ equity ............................ $1,200,000 $1,300,000
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4. Prepare the statement of cash flow.

Operating Activities
Net income (earnings after taxes) ....................................................90,000
Add items not requiring an outlay of cash:
Amortization .................................................................................20,000
Cash flow from operations ............................................................... 110,000
Changes in non-cash working capital
Increase in accounts receivable ..................................................(10,000)
Increase in inventory ...................................................................(10,000)
Decrease in prepaid expense ......................................................5,000
Decrease in accounts payable .....................................................(10,000)
Increase in accrued expenses ......................................................5,000
Net change in non-cash working .................................................... (20,000)
Cash provided by (used in) operating activities ........................... 90,000
Investing Activities:
Decrease in investments (long-term securities) .......................5,000
Increase in plant and equipment ...............................................(10,000)
Cash used in investing ..................................................................... (5,000)
Financing Activities:
Increase in notes payable ............................................................5,000
Decrease in bonds payable .........................................................(15,000)
Decrease in preferred stock .......................................................40,000
Preferred stock dividends paid ..................................................(10,000)
Decrease in common stock ........................................................(25,000)
Common stock dividends paid ..................................................(10,000)
Decrease in capital paid ..............................................................(5,000)
Cash flows from financing activities .........................................…………….(20,000)
Net cash flows .............................................................................……………..65,000
*Cash, beginning of year ............................................................
*Cash, end of year .......................................................................

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4. Prepare a statement of cash flows for the Crosby Corporation.

Statement of Retained Earnings

Comparative Balance Sheets

Liabilities and Stockholders’ Equity

4. Prepare the statement of cash flow.

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