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Chapter One
Challenge Exercise 1
LO: 3
The following items and amounts were taken from Lotte Inc.’s 2017 financial statements.
Cash $ 84,700 Accounts receivable $ 88,419
Retained earnings (1/1/17) 123,192 Sales revenue 584,951
Cost of goods sold 438,192 Notes payable 6,499
Challenge Exercise 1 – Solution
(a)
LOTTE CORPORATION
Balance Sheet
December 31, 2017
Assets
Cash $ 84,700
Accounts receivable 88,419
Liabilities and Stockholders’ Equity
Liabilities
Accounts payable $ 49,384
Notes payable 6,499
Total liabilities $ 55,883
Stockholders’ Equity
Challenge Exercise 1 – Solution (Continued)
Challenge Exercise 2
LO: 3
This information is for Kidmann Corporation for the year ended December 31, 2017.
Cash collected from customers $60,000
Cash received from issuing common stock 40,000
Cash paid for new building 70,000
Cash dividends paid 6,000
Instructions
(a) Prepare the 2017 statement of cash flows for Kidmann Corporation.
Challenge Exercise 2 – Solution
(a) KIDMANN CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Cash collected from customers $60,000
Cash paid to suppliers (15,000)
Cash paid for operating expenses (10,000)
Net cash provided by operating activities $35,000
Cash flows from investing activities
Challenge Exercise 2 – Solution (Continued)
(b) Operating activities are the most important activities to the long-run success of a company because, in the
