ACCT 1220 Lecture Notes - Lecture 2: Deferral, Accounts Payable, Current Liability
Get access
Related Documents
Related Questions
Your answer is partially correct. Try again. | |
Presented below is the balance sheet of Sargent Corporation forthe current year, 2014.
SARGENT CORPORATION | ||||||
Current assets | $ 487,300 | Current liabilities | $ 382,300 | |||
Investments | 642,300 | Long-term liabilities | 1,002,300 | |||
Property, plant, and equipment | 1,722,300 | Stockholdersâ equity | 1,772,300 | |||
Intangible assets | 305,000 | $3,156,900 | ||||
$3,156,900 |
The following information is presented.
1. | The current assets section includes cash $152,300, accountsreceivable $172,300 less $12,300 for allowance for doubtfulaccounts, inventories $182,300, and unearned rent revenue $7,300.Inventory is stated on the lower-of-FIFO-cost-or-market. | |
2. | The investments section includes the cash surrender value of alife insurance contract $42,300; investments in common stock,short-term (trading) $82,300 and long-term (available-for-sale)$272,300; and bond sinking fund $245,400. The cost and fair valueof investments in common stock are the same. | |
3. | Property, plant, and equipment includes buildings $1,042,300less accumulated depreciation $362,300; equipment $452,300 lessaccumulated depreciation $182,300; land $502,300; and land held forfuture use $270,000. | |
4. | Intangible assets include a franchise $167,300; goodwill$102,300; and discount on bonds payable $35,400. | |
5. | Current liabilities include accounts payable $142,300; notespayable-short-term $82,300 and long-term $122,300; and income taxespayable $35,400. | |
6. | Long-term liabilities are composed solely of 8% bonds payabledue 2022. | |
7. | Stockholdersâ equity has preferred stock, no par value,authorized 200,000 shares, issued 72,300 shares for $433,800; andcommon stock, $1.00 par value, authorized 400,000 shares, issued102,300 shares at an average price of $10. In addition, thecorporation has retained earnings of $315,500. |
Prepare a balance sheet in good form, adjusting the amounts in eachbalance sheet classification as affected by the information givenabove. (List Current Assets in order of liquidity. ListProperty, Plant and Equipment in order of Land, Building andEquipment. Enter account name only and do not provide thedescriptive information provided in thequestion.)
Presented below is the balance sheet of Sargent Corporation forthe current year, 2014.
SARGENT CORPORATION | ||||||
Current assets | $ 488,120 | Current liabilities | $ 383,120 | |||
Investments | 643,120 | Long-term liabilities | 1,003,120 | |||
Property, plant, and equipment | 1,723,120 | Stockholdersâ equity | 1,773,120 | |||
Intangible assets | 305,000 | $3,159,360 | ||||
$3,159,360 |
The following information is presented.
1. | The current assets section includes cash $153,120, accountsreceivable $173,120 less $13,120 for allowance for doubtfulaccounts, inventories $183,120, and unearned rent revenue $8,120.Inventory is stated on the lower-of-FIFO-cost-or-market. | |
2. | The investments section includes the cash surrender value of alife insurance contract $43,120; investments in common stock,short-term (trading) $83,120 and long-term (available-for-sale)$273,120; and bond sinking fund $243,760. The cost and fair valueof investments in common stock are the same. | |
3. | Property, plant, and equipment includes buildings $1,043,120less accumulated depreciation $363,120; equipment $453,120 lessaccumulated depreciation $183,120; land $503,120; and land held forfuture use $270,000. | |
4. | Intangible assets include a franchise $168,120; goodwill$103,120; and discount on bonds payable $33,760. | |
5. | Current liabilities include accounts payable $143,120; notespayable-short-term $83,120 and long-term $123,120; and income taxespayable $33,760. | |
6. | Long-term liabilities are composed solely of 8% bonds payabledue 2022. | |
7. | Stockholdersâ equity has preferred stock, no par value,authorized 200,000 shares, issued 73,120 shares for $438,720; andcommon stock, $1.00 par value, authorized 400,000 shares, issued103,120 shares at an average price of $10. In addition, thecorporation has retained earnings of $303,200. |
Prepare a balance sheet in good form, adjusting the amounts in eachbalance sheet classification as affected by the information givenabove. (List Current Assets in order of liquidity. ListProperty, Plant and Equipment in order of Land, Building andEquipment. Enter account name only and do not provide thedescriptive information provided in thequestion.)
Mary Walker, president of Rusco Company, considers $28,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $23,000 in cash was available at the end of this year. Since the company reported a large net income for the year, and also issued both bonds and common stock, the sharp decline in cash is puzzling to Ms. Walker.
Rusco Company Comparative Balance Sheet at July 31 | |||||
This Year | Last Year | ||||
Assets | |||||
Current assets: | |||||
Cash | $ | 23,000 | $ | 42,600 | |
Accounts Receivable | 231,200 | 220,400 | |||
Inventory | 257,200 | 200,800 | |||
Prepaid expenses | 12,600 | 24,600 | |||
Total current assets | 524,000 | 488,400 | |||
Long-term investments | 114,000 | 160,000 | |||
Plant and equipment | 876,000 | 758,000 | |||
Less accumulated depreciation | 214,000 | 192,400 | |||
Net plant and equipment | 662,000 | 565,600 | |||
Total assets | $ | 1,300,000 | $ | 1,214,000 | |
Liabilities and Stockholders' Equity | |||||
Current liabilities: | |||||
Accounts payable | $ | 295,400 | $ | 238,800 | |
Accrued liabilities | 8,800 | 16,600 | |||
Income taxes payable | 48,400 | 43,000 | |||
Total current liabilities | 352,600 | 298,400 | |||
Bonds Payable | 224,000 | 116,000 | |||
Total liabilities | 576,600 | 414,400 | |||
Stockholdersâ equity: | |||||
Common stock | 665,000 | 640,000 | |||
Retained earnings | 58,400 | 159,600 | |||
Total stockholders' equity | 723,400 | 799,600 | |||
Total liabilities and stockholders' equity | $ | 1,300,000 | $ | 1,214,000 | |
Rusco Company Income Statement For This Year Ended July 31 | ||||||
Sales | $ | 960,000 | ||||
Cost of goods sold | 600,000 | |||||
Gross margin | 360,000 | |||||
Selling and administrative expenses | 256,800 | |||||
Net operating income | 103,200 | |||||
Nonoperating items: | ||||||
Gain on sale of investments | $ | 24,000 | ||||
Loss on sale of equipment | (7,600 | ) | 16,400 | |||
Income before taxes | 119,600 | |||||
Income taxes | 35,840 | |||||
Net income | $ | 83,760 | ||||
The following additional information is available for this year.
The company declared and paid a cash dividend.
Equipment was sold during the year for $50,400. The equipment originally cost $106,000 and had accumulated depreciation of $48,000.
Long-term investments that cost $46,000 were sold during the year for $70,000.
The company did not retire any bonds payable or repurchase any of its common stock.
Required:
1. Using the indirect method, compute the net cash provided by/used in operating activities for this year.
2. Prepare a statement of cash flows for this year.
3. Compute free cash flow for this year.