acct221 week 3 homework latest 2015
Week 3
Gainesville Corporation's income statement revealed sales of
$700,000; gross profit of $300,000; selling and administrative costs of
$140,000; and income taxes of $45,000.
The selling and administrative expenses included $10,000 for
depreciation. The company's operating
activities generated positive cash
Beginning-of-Period Balance End-of-Period Balance
Account receivable $70,000 $82,000
Inventory 50,000 41,000
Gainesville Corporation's income statement revealed sales of $700,000; gross profit of $300,000; selling and administrative costs of $140,000; and income taxes of $45,000. The selling and administrative expenses included $10,000 for depreciation. The company's operating activities generated positive cash flow of $129,000. Use the "indirect" approach to demonstrate how this amount was calculated. The following additional information is available:
Beginning-of-Period Balance End-of-Period Balance
Account receivable $70,000 $82,000
Inventory 50,000 41,000
Accounts payable 37,000 44,000
"Ozark Corporation reported net income of $100,000 for 20X5. The income statement revealed sales of $1,000,000; gross profit of $520,000; selling and administrative costs of $340,000; interest expense of $20,000; and income taxes of $60,000.
The selling and administrative expenses included $25,000 for
depreciation. No equipment was sold
during the year. Equipment purchases were made with cash. Prepaid insurance included in the balance
sheet related to administrative costs.
All accounts payable included in the balance sheet relate to inventory
purchases. The change in retained
"
Using the indirect approach, prepare a statement of
OZARK CORPORATION
Balance Sheet
December 31, 20X4 and 20X5
Assets 20X5 20X4
Cash $4,58,700 $4,71,450
Accounts receivable 1,99,250 1,71,500
Inventories 2,48,600 2,78,800
Prepaid insurance 13,000 11,000
Land 2,50,000 2,50,000
Building and equipment 15,00,000 13,00,000
Less: Accumulated depreciation (2,05,000) (1,80,000)
Total assets $24,64,550 $23,02,750
Liabilities
Accounts payable $85,700 $93,400
Interest payable 10,500 15,000
Income taxes payable 22,000 8,000
Stockholders' equity
Common
Paid in capital in excess of par 9,90,000 9,00,000
Retained earnings 6,46,350 5,86,350
Total liabilities and equity $24,64,550 $23,02,750
Waguespack Corporation and Hedrick Corporation had identical cash positions at the beginning and end of 20X9. Each company also reported a net income of $150,000 for 20X9. Evaluate their cash flow statements that follow. Which company is displaying elements of cash flow stress? What factors cause you to reach this conclusion? What is the importance of evaluating a company's cash flow statement?
WAGUESPACK CORPORATION
Statement of Cash Flows
For the year ending December 31, 20X9
Cash flows from operating activities:
Net income $1,50,000
Add (deduct) noncash effects on operating income
Depreciation expense $20,000
Gain on sale of equipment (1,85,200)
Increase in accounts receivable (45,000)
Decrease in inventory 37,500
Increase in accounts payable 11,400
Decrease in income taxes payable (3,000) (1,64,300)
Net cash provided by operating activities $(14,300)
Cash flows from investing activities:
Sale of equipment 2,04,900
Cash flows from financing activities:
Proceeds from long-term borrowing 20,000
Net increase in cash $2,10,600
Cash balance at January 1, 20X9 66,000
Cash balance at December 31, 20X9 $2,76,600
HEDRICK CORPORATION
Statement of Cash Flows
For the year ending December 31, 20X9
Cash flows from operating activities:
Net income $1,50,000
Add (deduct) noncash effects on operating income
Depreciation expense $1,60,000
Decrease in accounts receivable 43,700
Increase in inventory (87,500)
Decrease in accounts payable (8,100)
Decrease in income taxes payable (8,600) 99,500
Net cash provided by operating activities $2,49,500
Cash flows from investing activities:
Cash flows from financing activities:
Repayment of long-term borrowing (18,500)
Net increase in cash $2,10,600
Cash balance at January 1, 20X9 66,000
Cash balance at December 31, 20X9 $2,76,600
"Fred Slezak presented the following comparative balance sheet:
"
FRED SLEZAK CORPORATION
Comparative Balance Sheet
December 31, 20X5 and 20X4
Assets 20X5 20X4
Current assets
Cash $6,64,000 $9,000
Accounts receivable 3,75,000 3,45,000
Inventories 1,50,000 1,60,000
Prepaid expenses 35,000 25,000
Total current assets $12,24,000 $5,39,000
Property, plant, & equipment
Land $3,00,000 $4,00,000
Building 7,00,000 7,00,000
Equipment 5,30,000 4,50,000
$15,30,000 $15,50,000
Less: Accumulated depreciation (3,00,000) (2,70,000)
Total property, plant, & equipment $12,30,000 $12,80,000
Total assets $24,54,000 $18,19,000
Liabilities
Current liabilities
Accounts payable $1,12,000 $1,19,000
Interest payable 2,000 -
Total current liabilities $1,14,000 $1,19,000
Long-term liabilities
Long-term note payable 80,000 -
Total liabilities $1,94,000 $1,19,000
Stockholders' equity
Common stock ($1 par) $7,00,000 $6,00,000
Paid-in capital in excess of par 8,00,000 4,00,000
Retained earnings 7,60,000 7,00,000
Total stockholders' equity $22,60,000 $17,00,000
Total liabilities and equity $24,54,000 $18,19,000
Additional information about transactions and events occurring in 20X5 follows:
Dividends of $55,000 were declared and paid.
Accounts payable and accounts receivable relate solely to purchases and sales of inventory. Prepaid items related only to advertising expenses.
The decrease in land resulted from the sale of a parcel at a $45,000 loss. No land was purchased during the year. Equipment was purchased during the year in exchange for a promissory note payable. No equipment was sold.
The increase in paid-in capital resulted from issuing additional shares for cash.
The income statement for the year ending December 31, 20X5, included the following key amounts:
Sales $20,00,000
Cost of goods sold 12,00,000
Salaries expense 4,00,000
Advertising expense 1,50,000
Depreciation expense 30,000
Utilities expense 15,000
Interest expense 5,000
Loss on sale of land 45,000
Income tax expense 40,000
Net income 1,15,000
Prepare Fred Slezak's statement of cash flows for the year ending 20X5. Use the indirect approach, and include required supplemental information about cash paid for interest and taxes.
Gainesville Corporation's income statement revealed sales of $700,000; gross profit of $300,000; selling and administrative costs of $140,000; and income taxes of $45,000. The selling and administrative expenses included $10,000 for depreciation. The company's operating activities generated positive cash flow of $129,000. Use the "indirect" approach to demonstrate how this amount was calculated. The following additional information is available:
Beginning-of-Period Balance End-of-Period Balance
Account receivable $70,000 $82,000
Inventory 50,000 41,000
Accounts payable 37,000 44,000
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Solution: umuc acct221 week 3 homework latest 2015