ADM 1340 Lecture Notes - Lecture 3: General Ledger, Trial Balance, Accounts Payable
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Statement of Cash Flows Using A method of preparing the statement of cash flows that reconciles net income with net cash flows from operating activities.Indirect Method
For the year ending March 31, 20Y5, Omega Systems Inc. reported net income of $105,450 and paid dividends of $7,500. Comparative balance sheets as of March 31, 20Y5 and 20Y4, are as follows:
OMEGA SYSTEMS INC. | |||||||
Balance Sheets | |||||||
March 31, | Changes Increase (Decrease) | ||||||
20Y5 | 20Y4 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash | $ 39,500 | $ 29,250 | $ 10,250 | ||||
Accounts receivable | 114,120 | 78,000 | 36,120 | ||||
Inventory | 126,550 | 117,550 | 9,000 | ||||
Estimated Returns Inventory | 6,600 | 5,000 | 1,600 | ||||
Office supplies | 4,255 | 4,435 | (180) | ||||
Prepaid insurance | 3,975 | 4,500 | (525) | ||||
Total current assets | $ 295,000 | $238,735 | $ 56,265 | ||||
Property, plant, and equipment: | |||||||
Land | $ 30,000 | $ 30,000 | $ 0 | ||||
Store equipment | 350,000 | 285,000 | 65,000 | ||||
Accumulated depreciation—store equipment | (118,550) | (93,900) | (24,650) | ||||
Office equipment | 23,355 | 15,000 | 8,355 | ||||
Accumulated depreciation—office equipment | (7,080) | (3,345) | (3,735) | ||||
Total property, plant, and equipment | $ 277,725 | $232,755 | $ 44,970 | ||||
Total assets | $ 572,725 | $471,490 | $101,235 | ||||
Liabilities | |||||||
Current liabilities: | |||||||
Accounts payable | $ 24,630 | $ 13,905 | $ 10,725 | ||||
Customer refunds payable | 9,000 | 7,500 | 1,500 | ||||
Notes payable (current portion) | 7,500 | 7,500 | 0 | ||||
Salaries payable | 1,710 | 2,250 | (540) | ||||
Unearned rent | 2,700 | 3,600 | (900) | ||||
Total current liabilities | $ 45,540 | $ 34,755 | $ 10,785 | ||||
Long-term liabilities: | |||||||
Notes payable (final payment due in eight years) | 30,000 | 37,500 | (7,500) | ||||
Total liabilities | $ 75,540 | $ 72,255 | $ 3,285 | ||||
Stockholders’ Equity | |||||||
Common stock | $ 37,500 | $ 37,500 | $ 0 | ||||
Retained earnings | 459,685 | 361,735 | 97,950 | ||||
Total stockholders’ equity | $ 497,185 | $399,235 | $ 97,950 | ||||
Total liabilities and stockholders’ equity | $ 572,725 | $471,490 | $101,235 |
Instructions:
1. Prepare a statement of cash flows, using the indirect method. Enter account decreases, cash outflows, and the income statement effects that reduce net income as negative amounts.
Omega Systems Inc. | |||
Statement of Cash Flows | |||
For the Year Ended March 31, 20Y5 Cash flows from operating activities: Net income Depreciation expense-store equipment Depreciation expense-office equipment Changes in noncash current operating assets and liabilities: Increase in accounts receivable Increase in inventory Increase in estimated returns inventory Decrease in office supplies Decrease in prepaid insurance Increase in accounts payable Increase in customer refunds payable Decrease in salaries payable Decrease in unearned rent Net cash flows used for investing activities Cash flows used for financing activities: Payment of note payable Payment of dividends Net cash flows used for financing activities Net increase in cash April 1, 20Y4 cash balance March 31, 20Y5 cash balance |
On October 31, Legacy Rocks Inc., a marble contractor, issuedfor cash 79,500 shares of $10 par common stock at $11, and onNovember 19, it issued for cash 19,070 shares of preferred stock,$45 par at $56.
Required:
A. | Journalize the entries forOctober 31 and November 19. Refer to the Chart of Accounts forexact wording of account titles. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
B. | What is the total amount invested (total paid-in capital) byall stockholders as of November 19?
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Data Table
Outdoor Adventure Company | |||
Comparative Balance Sheet | |||
December 31, 2019 and 2018 | |||
2019 | 2018 | ||
Assets | |||
Current Assets: | |||
Cash | $1,398,330 | $14,790 | |
Short-term Investments, net | 29,000 | 0 | |
Accounts Receivable, net | 1,600 | 6,300 | |
Merchandise Inventory | 400 | 0 | |
Office Supplies | 70 | 300 | |
Prepaid Rent | 0 | 2,000 | |
Property, Plant, and Equipment: | |||
Land | 615,000 | 75,000 | |
Building | 944,000 | 94,000 | |
Canoes | 13,920 | 13,920 | |
Office Furniture and Equipment | 140,000 | 0 | |
Accumulated Depreciation—PP&E | (31,920) | (1,740) | |
Total Assets | $3,110,400 | $204,570 | |
Liabilities | |||
Current Liabilities: | |||
Accounts Payable | $6,420 | $4,400 | |
Utilities Payable | 550 | 250 | |
Telephone Payable | 640 | 290 | |
Wages Payable | 3,700 | 1,200 | |
Notes Payable | 18,000 | 0 | |
Interest Payable | 630 | 30 | |
Unearned Revenue | 650 | 450 | |
Long-Term Liabilities: | |||
Notes Payable | 6,720 | 6,720 | |
Mortgage Payable | 725,000 | 0 | |
Bonds Payable | 1,000,000 | 0 | |
Discount on Bonds Payable | (1,140) | 0 | |
Total Liabilities | 1,761,170 | 13,340 | |
Stockholders' Equity | |||
Paid-In Capital: | |||
Preferred Stock | 60,000 | 0 | |
Paid-In Capital in Excess of Par—Preferred | 480,000 | 0 | |
Common Stock | 229,000 | 189,000 | |
Paid-In Capital in Excess of Par—Common | 240,000 | 0 | |
Retained Earnings | 340,230 | 2,230 | |
Total Stockholders' Equity | 1,349,230 | 191,230 | |
Total Liabilities and Stockholders' Equity | $3,110,400 | $204,570 |
1. | Theincome statement for 20192019 included the following items: | |
a. | Net income, $ 435 comma 000$435,000 | |
b. | Depreciation expense for the year, $ 30 comma 180$30,180. | |
c. | Amortization on the bonds payable, $ 380$380. | |
2. | There were no disposals of property, plant and equipment duringthe year. All acquisitions of PP&E were for cash except theland, which was acquired by issuing preferred stock. | |
3. | Thecompany issued bonds payable with a face value of $ 1 comma 000 comma 000$1,000,000 , receiving cash of$ 998 comma 480$998,480. | |
4. | Thecompany distributed 8 comma 0008,000 shares of common stock in a stock dividend when the market valuewas$ 9.00$9.00 per share. All other dividends were paid in cash. | |
5. | The common stock, except for the stock dividend, was issued forcash. | |
6. | Thecash receipt from the notes payable in 20192019 is considered a financing activity because it does not relate tooperations. |
Net Cash Provided by (Used for) Investing Activities | (990,000) |
Cash Flows From Financing Activities: | ||
Cash Receipt from Issuance of Common Stock | ||
Cash Receipt from Issuance of Notes Payable | ||
Cash Receipt from Issuance of Mortgage Payable | ||
Cash Receipt from Issuance of Bonds Payable | ||
Cash Payment of Dividends | ||
Net Cash Provided by (Used for) Financing Activities |
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