Following are comparative balance sheets for Millco, Inc., at January 31 and February 28, 2011: MILLCO, INC.Balance SheetsFebruary 28 and January 31, 2011 Assets February 28 January 31 Cash $ 42,000 $ 37,000 Accounts receivable 64,000 53,000 Merchandise inventory 81,000 94,000 Total current assets $ 187,000 $ 184,000 Plant and equipment: Production equipment 166,000 152,000 Less: Accumulated depreciation (24,000 ) (21,000) Total assets $ 329,000 $ 315,000 Liabilities Accounts payable $ 37,000 $ 41,000 Short-term debt 44,000 44,000 Other accrued liabilities 21,000 24,000 Total current liabilities $ 102,000 $ 109,000 Long-term debt 33,000 46,000 Total liabilities $ 135,000 $ 155,000 Owners' Equity Common stock, no par value, 40,000 shares authorized, 30,000 and 28,000 shares issued, respectively $ 104,000 $ 96,000 Retained earnings: Beginning balance $ 64,000 $ 43,000 Net income for month 36,000 29,000 Dividends (10,000 ) (8,000) Ending balance $ 90,000 $ 64,000 Total owners' equity $ 194,000 $ 160,000 Total liabilities and owners' equity $ 329,000 $ 315,000 Required:(a) Calculate the change that occurred in cash during the month. You may assume that the change in each balance sheet amount is due to a single event (for example, the change in the amount of production equipment is not the result of both a purchase and sale of equipment). (Hints: What is the purpose of the statement of cash flows? How is this purpose accomplished?) Because the retained earnings section of the balance sheet is, in and of itself, an analysis of the change in the retained earnings account for the month, the row for net income and dividends should be entered as the February amount and not the change. Use the space to the right of the January 31 data to enter the difference between the February 28 and January 31 amounts of each balance sheet item. (Negative amount should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required.Omit the "$" sign in your response.) MILLCO, INC.Balance SheetsFebruary 28 and January 31, 2011 Assets February 28 January 31 Change Cash $ 42,000 $ 37,000 Accounts receivable 64,000 53,000 Merchandise inventory 81,000 94,000 Total current assets $ 187,000 $ 184,000 Plant and Equipment: Production equipment 166,000 152,000 Less: Accumulated depreciation (24,000 ) (21,000 ) Total assets $ 329,000 $ 315,000 Liabilities: Accounts payable $ 37,000 $ 41,000 Short-term debt 44,000 44,000 Other accrued liabilities 21,000 24,000 Total current liabilities $ 102,000 $ 109,000 Long-term debt 33,000 46,000 Total liabilities $ 135,000 $ 155,000 Owners' Equity Common stock, no par value, 40,000 shares authorized, 30,000 and 28,000 shares issued, respectively $ 104,000 $ 96,000 Retained earnings: Beginning balance $ 64,000 $ 43,000 Net income for month 36,000 29,000 Dividends (10,000 ) (8,000 ) Ending balance $ 90,000 $ 64,000 Total owners' equity $ 194,000 $ 160,000 Total liabilities and owners' equity $ 329,000 $ 315,000 (b) Prepare a statement of cash flows that explains above changes? (Negative amount should be indicated by a minus sign.Omit the "$" sign in your response.)MILLCO, INC.Statement of Cash FlowsFor the Month Ended February 28, 2011 Cash flows from operating activities: Net income $ Add (deduct) items not affecting cash: Net cash by operating activities $ Cash flows from investing activities: Purchases of production equipment Cash flows from financing activities: $ Net cash flows by financing activities Net in cash for the year $
Related questions
Following are comparative balance sheets for Millco, Inc., atJanuary 31 and February 28, 2011:
| MILLCO, INC. Balance Sheets February 28 and January 31, 2011 | |||||
| Assets | February 28 | January 31 | |||
| Cash | $ | 42,000 | $ | 37,000 | |
| Accounts receivable | 64,000 | 53,000 | |||
| Merchandise inventory | 81,000 | 94,000 | |||
| Total current assets | $ | 187,000 | $ | 184,000 | |
| Plant and equipment: | |||||
| Production equipment | 166,000 | 152,000 | |||
| Less: Accumulated depreciation | (24,000 | ) | (21,000) | ||
| Total assets | $ | 329,000 | $ | 315,000 | |
| | | ||||
| Liabilities | |||||
| Accounts payable | $ | 37,000 | $ | 41,000 | |
| Short-term debt | 44,000 | 44,000 | |||
| Other accrued liabilities | 21,000 | 24,000 | |||
| Total current liabilities | $ | 102,000 | $ | 109,000 | |
| Long-term debt | 33,000 | 46,000 | |||
| Total liabilities | $ | 135,000 | $ | 155,000 | |
| | | ||||
| Owners' Equity | |||||
| Common stock, no par value, 40,000 shares authorized, 30,000 and28,000 shares issued, respectively | $ | 104,000 | $ | 96,000 | |
| Retained earnings: | |||||
| Beginning balance | $ | 64,000 | $ | 43,000 | |
| Netincome for month | 36,000 | 29,000 | |||
| Dividends | (10,000 | ) | (8,000) | ||
| Ending balance | $ | 90,000 | $ | 64,000 | |
| Total owners' equity | $ | 194,000 | $ | 160,000 | |
| Total liabilities and owners' equity | $ | 329,000 | $ | 315,000 | |
| | | ||||
| Required: |
| (a) | Calculate the change that occurredin cash during the month. You may assume that the change in eachbalance sheet amount is due to a single event (for example, thechange in the amount of production equipment is not the result ofboth a purchase and sale of equipment). (Hints: What is thepurpose of the statement of cash flows? How is this purposeaccomplished?) Because the retained earnings section of thebalance sheet is, in and of itself, an analysis of the change inthe retained earnings account for the month, the row for net incomeand dividends should be entered as the February amount and not thechange. Use the space to the right of the January 31 data to enterthe difference between the February 28 and January 31 amounts ofeach balance sheet item. (Negative amount should beindicated by a minus sign. Leave no cells blank - be certain toenter "0" wherever required.Omit the "$" sign in yourresponse.) |
| MILLCO, INC. Balance Sheets February 28 and January 31, 2011 | |||||||
| Assets | February 28 | January 31 | Change | ||||
| Cash | $ | 42,000 | $ | 37,000 | |||
| Accounts receivable | 64,000 | 53,000 | |||||
| Merchandise inventory | 81,000 | 94,000 | |||||
| Total current assets | $ | 187,000 | $ | 184,000 | |||
| Plant and Equipment: | |||||||
| Production equipment | 166,000 | 152,000 | |||||
| Less: Accumulated depreciation | (24,000 | ) | (21,000 | ) | |||
| Total assets | $ | 329,000 | $ | 315,000 | |||
| | | ||||||
| Liabilities: | |||||||
| Accounts payable | $ | 37,000 | $ | 41,000 | |||
| Short-term debt | 44,000 | 44,000 | |||||
| Other accrued liabilities | 21,000 | 24,000 | |||||
| Total current liabilities | $ | 102,000 | $ | 109,000 | |||
| Long-term debt | 33,000 | 46,000 | |||||
| Total liabilities | $ | 135,000 | $ | 155,000 | |||
| Owners' Equity | |||||||
| Common stock, no par value, 40,000 shares authorized, 30,000 and 28,000 shares issued, respectively | $ | 104,000 | $ | 96,000 | |||
| Retained earnings: | |||||||
| Beginning balance | $ | 64,000 | $ | 43,000 | |||
| Netincome for month | 36,000 | 29,000 | |||||
| Dividends | (10,000 | ) | (8,000 | ) | |||
| Ending balance | $ | 90,000 | $ | 64,000 | |||
| Total owners' equity | $ | 194,000 | $ | 160,000 | |||
| Total liabilities and owners' equity | $ | 329,000 | $ | 315,000 | |||
| | | ||||||
| (b) | Prepare a statement of cash flowsthat explains above changes? (Negative amount should beindicated by a minus sign.Omit the "$" sign in yourresponse.) |
| MILLCO, INC. Statement of Cash Flows For the Month Ended February 28, 2011 | ||
| Cashflows from operating activities: | ||
| Netincome | $ | |
| Add(deduct) items not affecting cash: | ||
| depreciation expense | ||
| decrease in merchendise inventory | ||
| increase in accounts recievable | ||
| decrease in other accured liabilities | ||
| decrease in accounts payable | ||
| Netcash provided by operating activities | $ | |
| Cashflows from investing activities: | ||
| Purchases of production equipment | ||
| Cashflows from financing activities: | ||
| saleof common stock | $ | |
| payment of long term debt | ||
| payment of divedends | ||
| Netcash flows used by financing activities | ||
| Netincrease in cash for the year | $ | |
| | ||
| Addedlong termdebt of : | $3,75,000 | ||||
| Sale of PPE:Accum deprec.= | $70,000 | ||||
| Sale of PPE: Sold for: | $65,000 | ||||
| Sale of PPE: Cost = $110000 | $1,10,000 | ||||
| Other comprehensive income inequity increased , offset in Other current assets | $44,000 | ||||
| Used Treasury Stock to buyPPE | $54,000 | ||||
| Issued/sold common stock: | $8,00,000 | ||||
| Paid dividend of | $60,000 | ||||
| No additions to Goodwill | |||||
| HW Problem | Prepare Cash FlowStatement; Indirect Method | ||||
| Class Company, Inc. | |||||
| Balance Sheet asof | |||||
| Assets: | 12/31/2xx2 | 12/31/2xx1 | |||
| Current Assets: | $s | $s | |||
| Cash | 13,54,000 | 1,93,000 | |||
| Accounts Receivable | 4,50,000 | 4,18,000 | |||
| Prepaid Expenses | 44,000 | 19,000 | |||
| Other Current Assets | 55,000 | 32,000 | |||
| Total Current Assets: | 19,03,000 | 6,62,000 | |||
| Plant Property &Equipment | 12,00,000 | 9,70,000 | |||
| Accumulated Depreciation | 5,50,000 | 4,50,000 | |||
| Net Plant Property &Equipment | 6,50,000 | 5,20,000 | |||
| Other Non-Current Assets: | |||||
| Goodwill | 6,10,000 | 6,10,000 | |||
| Deferred Loan PlacementCosts | 25,000 | 25,000 | |||
| Other Non-Current assets | 72,000 | 81,000 | |||
| Total Other Non-CurrentAssets | 7,07,000 | 7,16,000 | |||
| Total Assets | 32,60,000 | 18,98,000 | |||
| Liabilities: | |||||
| Current Liabilities | |||||
| Accounts Payable | 1,29,000 | 1,39,000 | |||
| Accrued Expenses | 60,000 | 72,000 | |||
| Current Portion of LTdebt | 90,000 | 1,00,000 | |||
| Other Current Liabilities | 40,000 | 30,000 | |||
| Total Current Liabilities | 3,19,000 | 3,41,000 | |||
| Non-Current Liabilities | |||||
| Long Term Debt | 11,00,000 | 9,15,000 | |||
| Deferred Income Taxes | 1,05,000 | 86,000 | |||
| Other Non-currentLiabilities | 14,000 | 12,000 | |||
| Total Non-CurrentLiabilities | 12,19,000 | 10,13,000 | |||
| Total Liabilities | 15,38,000 | 13,54,000 | |||
| Owners Equity | |||||
| Paid-in Capital | 10,00,000 | 2,00,000 | |||
| Treasury Stock | 26,000 | 80,000 | |||
| Dividends paid [before closingentries] | 60,000 | 0 | |||
| Other comprehensiveincome | 68,000 | 24,000 | |||
| Retained Earnings | 7,40,000 | 4,00,000 | |||
| Total Owners' Equity | 17,22,000 | 5,44,000 | |||
| Total Liabilities and OwnersEquity | 32,60,000 | 18,98,000 | |||
| 0 | 0 | ||||
| Class Company, Inc. | Statement ofIncome | ||||
| Period Ending12/31/2xx2 | |||||
| $s | $s | ||||
| Revenue | 45,00,000 | 100.0% | |||
| Cost of Goods Sold | 23,00,000 | 51.1% | |||
| Gross Profit | 22,00,000 | 48.9% | |||
| Operating Expenses: | |||||
| Total Operating Expenses | 17,00,000 | 24.5% | |||
| Operating Income | 5,00,000 | 11.1% | |||
| Other Income ( net of(expense)) | 60,000 | 1.3% | |||
| Income Before Taxes | 5,60,000 | 12.4% | |||
| Provision for IncomeTaxes | 2,20,000 | 4.9% | |||
| Net Income | 3,40,000 | 7.6% | |||
Complex Balance Sheet
Presented below is the unaudited balance sheet as of December31, 2016, prepared by Zeus Manufacturing Corporationâsbookkeeper.
| Zeus Manufacturing Corporation Balance Sheet for the Year Ended December 31, 2016 | ||||
| Assets | Liabilities and Shareholders' Equity | |||
| Cash | $225,000 | Accounts payable | $133,800 | |
| Accounts receivable (net) | 345,700 | Mortgage payable | 900,000 | |
| Inventories | 560,000 | Notes payable | 500,000 | |
| Prepaid income taxes | 40,000 | Lawsuit liability | 80,000 | |
| Investments | 57,700 | Income taxes payable | 61,200 | |
| Land | 450,000 | Deferred tax liability | 28,000 | |
| Building | 1,750,000 | Accumulated depreciation | 420,000 | |
| Machinery and equipment | 1,964,000 | Total Liabilities | $2,123,000 | |
| Goodwill | 37,000 | Common stock, $50 par; 40,000 shares issued | $2,231,000 | |
| Total Assets | $5,429,400 | Retained earnings | 1,075,400 | |
| Total Shareholders' Equity | $3,306,400 | |||
| Total Liabilities and Shareholders' Equity | $5,429,400 | |||
Your company has been engaged to perform an audit, during whichyou discover the following information:
Checks totaling $14,000 in payment of accounts payable weremailed on December 31, 2016, but were not recorded until 2017. Latein December 2016, the bank returned a customerâs $2,000 checkmarked "NSF," but no entry was made. Cash includes $100,000restricted for building purposes.
Included in accounts receivable is a $30,000 note due onDecember 31, 2019, from Zeusâs president.
During 2016, Zeus purchased 500 shares of common stock of amajor corporation that supplies Zeus with raw materials. Total costof this stock was $51,300, and fair value on December 31, 2016, was$47,000. The decline in fair value is considered temporary. Zeusplans to hold these shares indefinitely.
Treasury stock was recorded at cost when Zeus purchased 200 ofits own shares for $32 per share in May 2016. This amount isincluded in investments.
On December 31, 2016, Zeus borrowed $500,000 from a bank inexchange for a 10% note payable, maturing December 31, 2021. Equalprincipal payments are due December 31 of each year beginning in2017. This note is collateralized by a $250,000 tract of landacquired as a potential future building site, which is included inland.
The mortgage payable requires $50,000 principal payments, plusinterest, at the end of each month. Payments were made on January31 and February 28, 2017. The balance of this mortgage was due June30, 2017. On March 1, 2017, prior to issuance of the auditedfinancial statements, Zeus consummated a noncancelable agreementwith the lender to refinance this mortgage. The new terms require$100,000 annual principal payments, plus interest, on February 28of each year, beginning in 2018. The final payment is due February28, 2025.
The lawsuit liability will be paid in 2017.
Of the total deferred tax liability, $5,000 is considered acurrent liability.
The current income tax expense reported in Zeusâs 2016 incomestatement was $61,200.
The company was authorized to issue 100,000 shares of $50 parvalue common stock.
Required:
Prepare a corrected classified balance sheet as of December 31,2016.
| Zeus Manufacturing Corporation Balance Sheet December 31, 2016 | |||
| Assets | |||
| Current Assets: | |||
| Cash | $ | ||
| Accounts receivable (net) | |||
| Inventories | |||
| Total current assets | $ | ||
| Long-Term investment, at fair value | |||
| Property, Plant, and Equipment (at cost): | |||
| Land | $ | ||
| Building | $ | ||
| Machinery and equipment | |||
| Total | |||
| Less: Accumulated depreciation | |||
| Total property, plant, and equipment | |||
| Intangible Asset: | |||
| Goodwill | |||
| Other Assets: | |||
| Cash restricted for building purposes | $ | ||
| Officer's note receivable | |||
| Land held for future building site | |||
| Total Assets | $ | ||
| Liabilities | |||
| Current Liabilities: | |||
| Accounts payable | $ | ||
| Current installments of long-term debt | |||
| Lawsuit liability | |||
| Income taxes payable | |||
| Deferred tax liability | |||
| Total current liabilities | $ | ||
| Long-Term Debt: | |||
| Mortgage payable | $ | ||
| Notes payable | |||
| Deferred tax liability | |||
| Total long-term debt | |||
| Total Liabilities | $ | ||
| Shareholders' Equity | |||
| Contributed Capital: | |||
| Common stock, $50 par value | $ | ||
| Additional paid-in capital | |||
| Total paid-in capital | $ | ||
| Retained earnings | |||
| Accumulated Other Comprehensive Loss: | |||
| Unrealized decrease in value of long-term investment | |||
| Total | $ | ||
| Less: Cost of treasury stock | |||
| Total Shareholders' Equity | |||
| Total Liabilities and Shareholders' Equity | $ | ||
