Cloverdale Sales Corp. had the financial statements for the year ended December 31 shown below:

Additional information:
a. The administrative expenses included the following:
Amortization expense on plant and equipment = $24,000
Write-down of goodwill = $4,500
b. Sold equipment for its net book value. The equipment cost $44,685 and had been amortized for $15,000.
c. Purchased additional equipment for $94,750.
d. Exchanged common shares for land valued at $90,000.
e. Declared and paid cash dividends on common shares, $5,100.
f. Repurchased common shares for $75,000.
g. Paid $23,700 (of which $8,700 was interest) on the loans.
Required
1. Prepare a cash flow statement for Cloverdale Sales Corp. for the year ended December 31, 2017, using the indirect method. Consider the investments in money market funds to be a cash equivalent.
2. Comment on the results indicated by the cash flow statement.

Transcribed Image Text:

CLOVERDALE SALES CORP Income Statement For the Year Ended December 31, 2017 Net sales Cost of goods sold Gross margin Operating expenses $267,000 120,000 147,000 Selling expenses Administrative expenses Interest expense Total operating expenses 73,800 43,500 8,700 Operating income Income taxes Net income 126,000 21,000 8,400 $12,600 CLOVERDALE SALES CORP Balance Sheet December 31,2017 and 2016 2017 2016 27,600 Investments in money Accounts receivable Merchandise inventory Prepaid expenses Plant and equipment 6,000 1,500 12,700 45,900 market funds 107,815 Less accumulated amortization (24,000) 90,000 18,000 $439,300 (15,000) Goodwill Total assets Liabilities $420,000 Accounts Salaries payable Loans payable $22,500 21,000 99,000 142,500 21,300 84,000 Total liabilities 139,300 Shareholders' equity 165,000 135,000 300,000 $439,300 150,000 127,500 277,500 $420,000 Common shares Total shareholders' equity Total liabilities and shareholders' equity