Question : 139. (CMA adapted, Jun 94 #4) Spring Corporation, a public company, : 1245799

 

139. (CMA adapted, Jun 94 #4) Spring Corporation, a public company, has prepared all of its year-end financial statements with the exception of the statement of cash flows. Presented below is condensed financial information for the years ended May 31, Year 3 and Year 4, as well as supplemental data on certain transactions that occurred during the year ended May 31, Year 4. 

Spring CorporationStatement of Financial Positionat May 31, Year 3 and Year 4

 

 

 

 

 

 

Cash

$  4,300

$  5,100

Accounts receivable

3,700

4,200

Inventories

34,200

31,700

Prepaid expenses

1,800

2,100

Land

38,000

27,000

Buildings (net)

126,800

117,700

Equipment (net)

50,500

66,800

Leased equipment

 

 

Total assets

 

 

 

 

 

Accounts payable

$  5,900

$  3,400

Income taxes payable

2,600

2,100

Obligation under capital lease

–

7,700

Bonds payable

50,000

60,000

Deferred income taxes

2,200

2,400

Common stock, $10 par

125,000

135,000

Paid-in capital in excess of par

12,000

14,000

Retained earnings

 

 

Total liabilities and shareholders’ equity

 

 

 

 

 

 

Spring CorporationIncome StatementFor the Year Ended May 31, Year 4

 

 

 

Sales

 

$127,900

Cost of goods sold

$69,800

 

Selling expense

21,000

 

Administrative expense

20,000

 

Deprec. expense-buildings

700

 

Deprec. expense-equipment

1,200

 

Bond interest expense

 

 

    Income before gain & tax

 

$ 11,200

Gain on sale of land

 

3,500

Less: Income tax expense

 

 

Income from operations

 

$ 13,900

Extraordinary loss (net of tax)

 

 

    Net income

 

 

 

 

 

 

Spring CorporationRetained Earnings Statementat May 31, Year 4

 

 

Beginning retained earnings

$61,600 

    Net income

11,300 

    Stock dividends

(12,000)

    Cash dividends

)

Ending retained earnings

 

 

 

 

Supplemental InformationFor Fiscal Year Ended May 31, Year 4

(a)

Land costing $11,000 was sold for $14.500, resulting in a $3,500 gain.

(b)

During the year, a fire completely destroyed a building with an original cost of $24,000 and a net book value of $8,400. The insurance settlement resulted in after-tax cash proceeds of $5,800 and an extraordinary loss (net of income taxes) of $2,600.

(c)

Equipment was purchased for cash at a cost $17,500.

(d)

On May 31, Year 4, the company leased equipment under a long-term capital lease, recording the lease at $7,700.

(e)

At the end of the year, bonds payable with a face value of $10,000 were issued at par.

(f)

A stock dividend was declared and issued during the year. The dividend involved 1,000 shares of $10 par common stock; the market value of the stock on the date of issuance was $12 per share.

(g)

Taxable Income was less than pretax accounting income for the year, resulting in an increase in deferred income taxes payable of $200.

 

 

Required:Using the indirect method, prepare the Statement of Cash Flows for Spring Corporation for the year ended May 31, Year 4. The statement should comply with the requirements of Statements of Financial Accounting Standards No. 95, ‘Statement of Cash Flows,’ and be supported by appropriate calculations.