A comparative balance sheet for Cate, Inc., on December 31, 2016 and 2015, follows. Additional information about the firm's financial activities during 2016 is also given below.

INSTRUCTIONS
Prepare a statement of cash flows for 2016. Additional information for the year follows:
a. Had net income of $90,000.
b. Recorded $19,000 in depreciation.
c. Issued bonds payable with a par value of $60,000 at par and received cash.
d. Received $20,000 in cash for the issue of an additional 2,000 shares of $10 par value common stock.
e. Purchased equipment for $60,000 in cash.
Analyze: Explain why an increase in accounts payable is considered an adjustment to cash flows from operating activities.

Transcribed Image Text:

Cate, Inc Balance Sheet December 31, 2016 and 2015 2016 2015 2 5 9 31 6 47 6 600 3900 2610 3 5 806 4 40 Property, Plant, and Equipment otal Assets 3781 Liabilities and Stockholders Equity Liabilities Accounts Payable Bonds Payable 550 17000 250 기기0 1100 1870 Total Liabilities Common Stock, (51 par, 50,000 shares authorized, 6,000 shares issued in 2015 and 8,000 shares issued in 2016 Retained Earnings 800 2 1 10 011 2610 600 131 1 19 1 1 3781 Total Stockholders Equity Total Liabilities and Stockholders Equity