ACC 451 Lecture Notes - Lecture 16: Main Source, Bank Statement, Financial Statement
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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 DepreciationâPP&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 ParâPreferred | 480,000 | 0 | |
Common Stock | 229,000 | 189,000 | |
Paid-In Capital in Excess of ParâCommon | 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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Question 11
The Kerchin Company purchased $60,000 worth of stock in theXeronics company in 2006. In 2012 the stock was sold for $78,000.On the statement of cash flows prepared using the indirect methodthe company will report:
A. | a subtraction of $60,000 in the investing section. | |
B. | an addition to net income of $18,000 in the operatingsection. | |
C. | a subtraction from net income of $18,000 in the operatingsection. | |
D. | an addition of $18,000 in the investing section. |
2 points
Question 12
When preparing the operating section of a statement of cashflows using the indirect method, various adjustments are needed.Which of the following adjustments is incorrectly stated?
A. | Add gains on sale of equipment. | |
B. | Add to net income any increases in current liabilities. | |
C. | Add to net income depreciation and amortization expense. | |
D. | Deduct any increases in inventories from net income. |
2 points
Question 13
In 2011 Armstrong Company sold for $76,000 cash, an asset whichhad an original cost of $204,000 and accumulated depreciation of$98,000. On the statement of cash flows prepared using the indirectmethod the company should report:
A. | an addition to net income in the operating section of$30,000. | |
B. | a subtraction from net income of $30,000 in the operatingsection. | |
C. | a subtraction of $106,000 in the investing section. | |
D. | an addition of $76,000 in the investing section. | |
E. | Both A and D are correct. |
2 points
Question 14
In 2011 Covington Company sold an asset which had an originalcost of $54,000 and accumulated depreciation of $28,000 for $15,000in cash. On the statement of cash flows prepared using the indirectmethod the company should report:
A. | an addition to net income in the operating section of$11,000. | |
B. | a subtraction from net income in the operating section of$11,000. | |
C. | a source of cash of $15,000 in the investing section. | |
D. | a use of cash in the investing section of $39,000. | |
E. | Both a and c are correct. |
2 points
Question 15
Henry Company's statement of cash flows indicated a $52,000decrease in cash during the year. The statement also indicated that$63,000 was provided by operating activities and $71,000 was usedby investing activities. How much are net cash used by financingactivities?
A. | $86,000 | |
B. | ($44,000) | |
C. | $42,000 | |
D. | $40,000 |
2 points
Question 16
Which of the following would be an example of a cashequivalent?
A. | Notes receivable. | |
B. | Accounts receivable. | |
C. | Money market funds. | |
D. | Investment in GMC stock. |
2 points
Question 17
Carte Company reported cost of goods sold for $100,000 anddepreciation expense totaling $7,000. On January 1, Carte hadinventory and accounts payable of $21,000 and $24,000,respectively. On December 31, inventory and accounts payable were$28,000 and $20,000, respectively. Net income is $60,000. Beginningaccounts receivable was $13,000 and ending was $12,000. How muchare the cash flows from operating activities using the indirectmethod?
A. | $57,000 | |
B. | $50,000 | |
C. | $65,000 | |
D. | $77,000 |
2 points
Question 18
The statement of cash flows is typically used to determine if acompany can:
A. | generate enough cash to pay cash dividends to stockholders. | |
B. | generate enough cash to pay an increase in employees wages. | |
C. | generate enough cash to acquire another company. | |
D. | generate enough cash to buy equipment. |
2 points
Question 19
Cash flows related to buying and selling long-term assets areclassified as:
A. | financing activities. | |
B. | investing activities. | |
C. | non-cash activities. | |
D. | operating activities. |
2 points
Question 20
Given the following information, what amount of cash wascollected from customers during 2012? All sales are on account.
2011 | 2012 | |
Accounts receivable | $ 800,000 | $ 580,000 |
Sales | 3,100,000 | 3,250,000 |
A. | $2,880,000 | |
B. | $3,620,000 | |
C. | $2,670,000 | |
D. | $3,470,000 |
2 points
Problem 12-13A Prepare and Interpret a Statement of Cash Flows; Free Cash Flow [LO12-1, LO12-2, LO12-3]
Mary Walker, president of Rusco Company, considers $38,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $33,000 in cash was available at the end of 2015. 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 July 31, 2015 and 2014 | ||||
2015 | 2014 | |||
Assets | ||||
Current assets: | ||||
Cash | $ | 33,000 | $ | 54,600 |
Accounts Receivable | 221,600 | 233,400 | ||
Inventory | 266,200 | 206,800 | ||
Prepaid expenses | 19,600 | 36,600 | ||
Total current assets | 540,400 | 531,400 | ||
Long-term investments | 144,000 | 210,000 | ||
Plant and equipment | 896,000 | 768,000 | ||
Less accumulated depreciation | 219,000 | 195,400 | ||
Net plant and equipment | 677,000 | 572,600 | ||
Total assets | $ | 1,361,400 | $ | 1,314,000 |
Liabilities and Stockholders' Equity | ||||
Current liabilities: | ||||
Accounts payable | $ | 191,200 | $ | 249,800 |
Accrued liabilities | 9,800 | 18,600 | ||
Income taxes payable | 56,400 | 48,000 | ||
Total current liabilities | 257,400 | 316,400 | ||
Bonds Payable | 254,000 | 0 | ||
Total liabilities | 511,400 | 316,400 | ||
Stockholdersâ equity: | ||||
Common stock | 717,000 | 690,000 | ||
Retained earnings | 133,000 | 307,600 | ||
Total stockholders' equity | 850,000 | 997,600 | ||
Total liabilities and stockholders' equity | $ | 1,361,400 | $ | 1,314,000 |
Rusco Company Income Statement For the Year Ended July 31, 2015 | |||
Sales | $ | 1,160,000 | |
Cost of goods sold | 725,000 | ||
Gross margin | 435,000 | ||
Selling and administrative expenses | 310,300 | ||
Net operating income | 124,700 | ||
Nonoperating items: | |||
Gain on sale of investments | $29,000 | ||
Loss on sale of equipment | (9,600) | 19,400 | |
Income before taxes | 144,100 | ||
Income taxes | 43,140 | ||
Net income | $ | 100,960 | |
The following additional information is available for the year 2015. |
a. | The company declared and paid a cash dividend. |
b. | Equipment was sold during the year for $58,400. The equipment had originally cost $126,000 and had accumulated depreciation of $58,000. |
c. | Long-term investments that had cost $66,000 were sold during the year for $95,000. |
d. | 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 operating activities for 2015. (Negative amount should be indicated by a minus sign.) |
2. | Using the data from (1) above, and other data from the problem as needed, prepare a statement of cash flows for 2015. (List any deduction in cash and cash outflows as negative amounts.) |
Rusco Company |
Statement of Cash Flows - Indirect Method |
For the year ended July 31,2015 |
|
3. | Compute free cash flow for 2015. (Negative amount should be indicated by a minus sign.) |
Free cash flow |