ACCT 2013 Lecture 1: Chapter 1 Notes
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Waterways prepared the balance sheet and income statement forthe irrigation installation division for last year. Now the companyneeds to prepare a cash flow statement for the same division. Thecomparative balance sheets for Waterways Corporation’s IrrigationInstallation Division for last year and the prior year and theincome statement for last year are presented below. (Note: Work inProcess is a current asset and should be treated as any othercurrent asset.)
Additional information:
1. Waterways sold a piece of company equipment for $30,000. Theequipment had been used for six years. It had cost $100,000 whenpurchases and had a 10-years life and a $10,000 salvage value.Straight-line depreciation was used.
2. Waterways purchased new equipment costing $200,000.
3. The division paid $100,000 in dividends.
Waterways Corporation - Installation Division | |||
Income Statement | |||
For the Year Ending December 31, Last Year | |||
Sales | $5,536,077 | ||
Less: Cost of goods sold | 3,132,777 | ||
Gross Profit | 2,403,300 | ||
Operating expenses: | |||
Advertising | $52,000 | ||
Insurance | 382,000 | ||
Salaries and wages | 594,650 | ||
Depreciation | 72,500 | ||
Other operating expenses | 30,500 | ||
Total operating expenses | 1,131,650 | ||
Income from operations | 1,271,650 | ||
Other income | |||
Loss on sale of equip | (16,000) | ||
Other expenses | |||
Interest expense | (12,200) | ||
Net other income and expenses | (28,200) | ||
Income before income tax | 1,243,450 | ||
Income tax expenses | 373,035 | ||
Net income | $870,415 |
Waterways Corporation - Installation Division | ||||
Balance Sheet | ||||
December 31 | ||||
Assets | Last Year | Prior Year | ||
Current assets | ||||
Cash | $792,306 | $746,681 | ||
Accounts receivable | 680,750 | 542,685 | ||
Work in process | 680,450 | 0 | ||
Inventory | 16,750 | 7,500 | ||
Prepaid expenses | 71,500 | 42,590 | ||
Total current assets | 2,241,756 | 1,339,456 | ||
Property, plant, and equipment | ||||
Furnishings | 40,416 | 40,416 | ||
Equipment | 900,200 | 800,200 | ||
Buildings | 450,000 | 450,000 | ||
Land | 300,000 | 300,000 | ||
Accumulated depreciation | (503,704) | (485,204) | ||
Total property, plant, and equipment | 1,186,912 | 1,105,412 | ||
Total Assets | $3,428,668 | $2,444,868 | ||
Liabilities and Stockholders' Equity | ||||
Current liabilities | ||||
Accounts payable | $156,300 | $128,360 | ||
Income taxes payable | 100,344 | 79,989 | ||
Wages payable | 600 | 1,984 | ||
Interest payable | 1,200 | 0 | ||
Other current liabilities | 14,520 | 15,246 | ||
Revolving bank loan payable | 16,000 | 0 | ||
Total current liabilities | 288,964 | 225,579 | ||
Long-term liabilities | ||||
Notes payable | 150,000 | 0 | ||
Total liabilities | 438,964 | 225,579 | ||
Stockholders' equity | ||||
Common stock | 1,250,000 | 1,250,000 | ||
Retained earnings | 1,739,704 | 969,289 | ||
Total stockholders' equity | 2,989,704 | 2,219,289 | ||
Total liabilities and stockholders' equity | $3,428,668 | $2,444,868 |
Instructions:
For last year:
a. Prepare a statement of cash flowusing the indirect method.
b. Determine free cash flow.
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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