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Preparing the Statement of Cash Flows

To prepare the statement of cash flows, you will need the following information:

• selected information from the income statement for the current year,    
• selected data (dividends) from the statement of retained earnings,
• the balance sheet for the current and previous year, and
• selected journal entries related to
  • the purchase and sale of plant assets and other long-term assets,
  • long-term borrowing and repayment of long-term debt,
  • the issuance of common and preferred stock,
  • the purchase and sale of treasury stock, and 
  • the payment of dividends.

You will use these financial statements to prepare

• cash flows from operations,
• cash flows from investing activities,
• cash flows from financing activities, and
• non-cash investing and financing transactions.

You will prepare the statement of cash flows for Lucky 7, Inc. using the following information from the company's financial statements:

• selected data from the income statement:

  Net income	$49,000
  Depreciation expense	$20,000
  Gain on sale of investments	$7,000
  Loss on sale of plant assets	$5,000

• selected data from the statement of retained earnings:

  Dividends

  $4,000

• the balance sheet for the years ending December 31, 2015 and 2016:

  Lucky 7, Inc.
  Comparative Balance Sheets 
  December 31, 2016 and 2015

  -	ASSETS
  -	2016	2015
  Current assets:	-	-
  Cash	$35,000	$14,500
  Accounts receivable (net)	$17,500	$19,500
  Inventory	$59,000	$42,000
  Prepaid expenses	$500	$2,500
  Total current assets	$112,000	$78,500
  -	-	-
  Long-term investments	$62,000	$45,000
  -	-	-
  Plant assets	$520,000	$320,000
  Less: accumulated depreciation	$50,000	$35,000
  Total plant assets	$470,000	$285,000
  Total assets	$644,000	$408,500
  -	-	-
  Current liabilities:	LIABILITIES
  Accounts payable	$27,000	$22,500
  Accrued liabilities	$1,000	$1,200
  Income taxes payable	$1,500	$2,500
  Total current liabilities	$29,500	$26,200
  Long-term liabilities:	-	-
  Notes payable	$250,000	$150,000
  Total liabilities	$279,500	$176,200
  -	-	-
  -	STOCKHOLDERS' EQUITY
  Common stock, $5 par value	$150,000	$100,000
  Additional paid-in capital	$116,000	$66,300
  Retained earnings	$111,000	$66,000
  Treasury stock	-$12,500	$0
  Total stockholders' equity	$364,500	$232,300
  Total liabilities and stockholders' equity	$644,000	$408,500

You will also use information related to the following transactions:

• The company purchased long-term investments in the amount of $100,000.
• The company sold, for $90,000, long-term investments that cost $83,000.
• The company purchased plant assets in the amount of $200,000.
• The company sold, for $40,000 in cash, plant assets that had a cost of $50,000 and a balance in accumulated depreciation of $5,000.
• The company purchased $50,000 of plant assets in exchange for notes payable. This is a non-cash transaction.
• The company repaid $75,000 of notes payable.
• The company borrowed $125,000 cash, signing a long-term note payable.
• The company issued 10,000 shares of $5.00 par value common stock for $9.97.
• The company paid a $4,000 dividend.
• The company purchased 10,000 shares of treasury stock for $12,500.