ACG-2021 Lecture Notes - Lecture 7: Financial Statement, Accounts Payable, Retained Earnings
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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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| Comparative financial statement data for Carmono Company follow: |
| This Year | Last Year | |||
| Assets | ||||
| Cash | $ | 7.50 | $ | 14.00 |
| Accounts receivable | 50.00 | 43.00 | ||
| Inventory | 92.50 | 79.20 | ||
| Total current assets | 150.00 | 136.20 | ||
| Property, plant, and equipment | 231.00 | 194.00 | ||
| Less accumulated depreciation | 45.60 | 34.20 | ||
| Net property, plant, and equipment | 185.40 | 159.80 | ||
| Total assets | $ | 335.40 | $ | 296.00 |
| Liabilities and Stockholdersâ Equity | ||||
| Accounts payable | $ | 55.50 | $ | 46.00 |
| Common stock | 118.00 | 91.00 | ||
| Retained earnings | 161.90 | 159.00 | ||
| Total liabilities and stockholdersâ equity | $ | 335.40 | $ | 296.00 |
| For this year, the company reported net income as follows: |
| Sales | $ | 850.00 |
| Cost of goods sold | 510.00 | |
| Gross margin | 340.00 | |
| Selling and administrative expenses | 320.00 | |
| Net income | $ | 20.00 |
| This year Carmono declared and paid a cash dividend. There were no sales of property, plant, and equipment during this year. The company did not repurchase any of its own stock this year. Carmono CompanyStatement of Cash Flows - Indirect MethodFor This Year Ended December 31Operating activities:Net income$20.00Adjustments to convert net income to a cash basis:Depreciation$11.40Increase in accounts receivable(7.00)Increase in inventory(13.30)Increase in accounts payable9.500.60Net cash provided by operating activities20.60Investing activities:Increase in plant and equipment(37.00)Net cash used in investing activities(37.00)Financing activities:Increase in common stock27.00Cash dividends(17.10)Net cash provided by financing activities9.90Net decrease in cash(6.50)Beginning cash and cash equivalents14.00Ending cash and cash equivalents$7.50 |
| | ||
| 2. | Compute Carmonoâs free cash flow for this year. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to 2 decimal places.) |
Free cash flow$
3.
| Changes in various accounts and gains and losses on the sale of assets during the year for Argon Company are given below: |
| Item | Amount | ||
| Accounts receivable | $ | 79,000 | decrease |
| Inventory | $ | 120,000 | increase |
| Prepaid expenses | $ | 3,500 | decrease |
| Accounts payable | $ | 41,000 | decrease |
| Accrued liabilities | $ | 9,600 | increase |
| Income taxes payable | $ | 15,700 | increase |
| Sale of equipment | $ | 8,100 | gain |
| Sale of long-term investments | $ | 12,200 | loss |
| Required: |
| For each item, indicate whether the dollar amount should be added to or deducted from net income under the indirect method when computing the net cash provided by operating activities for the year. |
|
4.
| Apex Company prepared the statement of cash flows for the current year that is shown below: |
| Apex Company Statement of Cash FlowsâIndirect Method | ||||
| Operating activities: | ||||
| Net income | $ | 41,500 | ||
| Adjustments to convert net income to cash basis: | ||||
| Depreciation | $ | 20,100 | ||
| Increase in accounts receivable | (61,500) | |||
| Increase in inventory | (25,100) | |||
| Decrease in prepaid expenses | 9,400 | |||
| Increase in accounts payable | 54,300 | |||
| Decrease in accrued liabilities | (10,100) | |||
| Increase in income taxes payable | 3,300 | (9,600) | ||
| Net cash provided by operating activities | 31,900 | |||
| Investing activities: | ||||
| Proceeds from the sale of equipment | 15,200 | |||
| Loan to Thomas Company | (41,900) | |||
| Additions to plant and equipment | (121,800) | |||
| Net cash used for investing activities | (148,500) | |||
| Financing activities: | ||||
| Increase in bonds payable | 88,800 | |||
| Increase in common stock | 38,700 | |||
| Cash dividends | (28,400) | |||
| Net cash provided by financing activities | 99,100 | |||
| Net decrease in cash | (17,500) | |||
| Beginning cash balance | 27,200 | |||
| Ending cash balance | $ | 9,700 | ||
| Required: |
| Compute Apex Companyâs free cash flow for the current year. (Negative amount should be indicated by a minus sign.) |
Free Cash Flow
5.
| For the just completed year, Hanna Company had net income of $95,000. Balances in the companyâs current asset and current liability accounts at the beginning and end of the year were as follows: |
| December 31 | ||||
| End of Year | Beginning of Year | |||
| Current assets: | ||||
| Cash | $ | 59,000 | $ | 80,000 |
| Accounts receivable | $ | 164,000 | $ | 184,000 |
| Inventory | $ | 448,000 | $ | 346,000 |
| Prepaid expenses | $ | 11,500 | $ | 15,000 |
| Current liabilities: | ||||
| Accounts payable | $ | 366,000 | $ | 392,000 |
| Accrued liabilities | $ | 8,000 | $ | 13,000 |
| Income taxes payable | $ | 32,000 | $ | 25,000 |
| The Accumulated Depreciation account had total credits of $42,000 during the year. Hanna Company did not record any gains or losses during the year. |
| Required: |
| Use the indirect method to determine the net cash provided by (or used in) operating activities for the year. (List any deduction in cash and cash outflows as negative amounts.) |
Statement of Cash FlowsâIndirect Method
The comparative balance sheet of Mavenir Technologies Inc. for December 31, 2014 and 2013, is shown as follows:
| Dec. 31, 2014 | Dec. 31, 2013 | ||||
| Assets | |||||
| Cash | $246,880 | $232,300 | |||
| Accounts receivable (net) | 89,440 | 83,430 | |||
| Inventories | 252,460 | 247,030 | |||
| Investments | 0 | 95,700 | |||
| Land | 129,500 | 0 | |||
| Equipment | 278,560 | 218,400 | |||
| Accumulated depreciation-equipment | (65,210) | (58,890) | |||
| Total | $931,630 | $817,970 | |||
| Liabilities and Stockholders' Equity | |||||
| Accounts payable (merchandise creditors) | $168,630 | $161,140 | |||
| Accrued expenses payable (operating expenses) | 16,770 | 21,270 | |||
| Dividends payable | 9,320 | 7,360 | |||
| Common stock, $10 par | 50,310 | 40,080 | |||
| Paid-in capital in excess of par-common stock | 189,120 | 111,240 | |||
| Retained earnings | 497,480 | 476,880 | |||
| Total | $931,630 | $817,970 | |||
The following additional information was taken from the records:
The investments were sold for $111,970 cash.
Equipment and land were acquired for cash.
There were no disposals of equipment during the year.
The common stock was issued for cash.
There was a $59,040 credit to Retained Earnings for net income.
There was a $38,440 debit to Retained Earnings for cash dividends declared.
Required:
Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash and for any adjustments, if required.
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