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Chapter 23: Q14E (page 1379)
Data for Brecker Inc. are presented in E23-13. Instructions Prepare a statement of cash flows using the indirect method.
As per statement of cash flow is prepared using indirect method, net change in cash equals ($1,000).
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Question: Michaels Company had available at the end of 2017 the following information.
MICHAELS COMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31, 2017 AND 2016 | ||
2017 | 2016 | |
Cash | \(10,000 | \)4,000 |
Accounts receivable | 20,500 | 12,950 |
Short-term investments | 22,000 | 30,000 |
Inventory | 42,000 | 35,000 |
Prepaid rent | 3,000 | 12,000 |
Prepaid insurance | 2,100 | 900 |
Supplies | 1,000 | 750 |
Land | 125,000 | 175,000 |
Building | 350,000 | 350,000 |
Accumulated depreciation – building | (105,000) | (87,500) |
Equipment | 525,000 | 400,000 |
Accumulated depreciation – equipment | (130,000) | (112,000) |
Patents | 45,000 | 50,000 |
Total assets | \(910,600 | \)871,100 |
Account payable | \(22,000 | \)32,000 |
Income tax payable | 5,000 | 4,000 |
Salaries and wages payable | 5,000 | 3,000 |
Short-term note payable | 10,000 | 10,000 |
Long-term note payable | 60,000 | 70,000 |
Bond payable | 400,000 | 400,000 |
Premium on bond payable | 20,303 | 25,853 |
Common stock | 240,000 | 220,000 |
Paid-in-capital in excess of par – common stock | 25,000 | 17,500 |
Retained earnings | 123,297 | 88,747 |
Total liabilities and stockholders equity | \(910,600 | \)871,100 |
MICHAELS COMPANY INCOME STATEMENT AND DIVIDEND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2017 | ||
Sales revenue | \(1,160,000 | |
Cost of goods sold | 748,000 | |
Gross margin | 412,000 | |
Operating expenses | ||
Selling expenses | \)79,200 | |
Administrative expenses | 156,700 | |
Depreciation/Amortization expenses | 40,500 | |
Total operating expenses | 276,400 | |
Income from operations | 135,600 | |
Other revenue/expenses | ||
Gain on sale of land | 8,000 | |
Gain on sale of short-term investment | 4,000 | |
Dividend revenue | 2,400 | |
Interest expenses | (51,750) | (37,350) |
Income before tax | 98,250 | |
Income tax expenses | 39,400 | |
Net income | 58,850 | |
Dividend to common stockholders | (24,300) | |
To Retained earnings | $34,550 | |
Instructions
Prepare a statement of cash flows for Michaels Company using the direct method accompanied by a reconciliation schedule. Assume the short-term investments are debt securities, classified as available-for-sale
Springsteen Co. had the following activity in its most recent year of operations.
Instructions Classify the items as (1) operating—add to net income, (2) operating—deduct from net income, (3) investing, (4) financing, or (5) significant non-cash investing and financing activities. Use the indirect method.
Following are selected statement of financial position accounts of Sander Bros. Corp. at December 31, 2017 and 2016, and the increases or decreases in each account from 2016 to 2017. Also presented is selected income statement information for the year ended December 31, 2017, and additional information.
Selected statement of financial position accounts
2017 | 2016 | Increase (Decrease) | |
Assets | |||
Property, plant, and equipment | \(277,000 | \)247,000 | \(30,000 |
Accumulated depreciation | (178,000) | (167,000) | (11,000) |
Accounts receivable | 34,000 | 24,000 | 10,000 |
Equity and liabilities | |||
Share capital—ordinary, \)1 par | \( 22,000 | \) 19,000 | \( 3,000 |
Share premium—ordinary | 9,000 | 3,000 | 6,000 |
Retained earnings | 104,000 | 91,000 | 13,000 |
Bonds payable | 49,000 | 46,000 | 3,000 |
Dividends payable | 8,000 | 5,000 | 3,000 |
| Selected income statement information for the year ended December 31, 2017 | |||
Sales revenue | \)155,000 | ||
Depreciation | 38,000 | ||
Gain on sale of equipment | 14,500 | ||
Net income | 31,000 | ||
Additional information:
There was no amortization of bond discount or premium.
Instructions Determine the category (operating, investing, or financing) and the amount that should be reported in the statement of cash flows for the following items.
Moxley Corporation had January 1 and December 31 balances as follows.
1/1/17 12/31/17
Inventory \(95,000 \)113,000
Accounts payable 61,000 69,000
For 2017, cost of goods sold was $500,000. Compute Moxley’s 2017 cash payments to suppliers.
Hendrickson Corporation reported net income of \(50,000 in 2017. Depreciation expense was \)17,000. The following working capital accounts changed.
Accounts receivable $11,000 increase
Available-for-sale debt securities 16,000 increase
Inventory 7,400 increase
Nontrade note payable 15,000 decrease
Accounts payable 12,300 increase
Compute net cash provided by operating activities.
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