ACCT 2001 Lecture Notes - Lecture 3: A Question Of Balance, Accounting Equation, Equals Sign

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ACCT 2001 Lecture Notes - Lecture 2: Accounting Equation, Financial Accounting, Net Income

ACCT 2001 Lecture Notes - Lecture 3: A Question Of Balance, Accounting Equation, Equals Sign

ACCT 2001 Lecture 4: The Balance Sheet Continued ...

Document Summary

Assets: economic resources presently controlled by the company that have measurable value and are expected to benefit the company by producing cash inflows or reducing cash outflows in the future. Liabilities: measurable amounts that the company owes to creditors. Stockholders" equity: owners" claim to the business resources. Two sources of financing are available to businesses: debt financing and equity financing. Debt financing refers to money the business obtains through loans. Equity financing refers to money a business obtains through owners" contributions and reinvestments of profit. A business is obligated to repay debt financing, but it is not obligated to repay equity financing. Using a combination of debt and equity financing, a company will start investing in business assets, such as buildings, equipment, furniture, and other assets that will be used to generate revenue. Equity financing & debt financing invest in assets. The accounting process captures and reports the financial effects of a company"s transactions.

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The balance sheet for Plasma Screens Corporation, along with additional information, are provided below:

PLASMA SCREENS CORPORATION Balance Sheets December 31, 2018 and 2017
	2018		2017
Assets:
Current assets:
Cash	$	142,950	$	154,000
Accounts receivable		76,800		90,500
Inventory		92,000		77,300
Prepaid rent		3,400		1,700
Long-term assets:
Land		465,000		465,000
Equipment		762,000		655,000
Accumulated depreciation		(421,000)		(262,000)

Total assets	$	1,121,150	$	1,181,500

Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable	$	96,000	$	82,300
Interest payable		6,750		13,500
Income tax payable		7,400		4,700
Long-term liabilities:
Notes payable		112,500		225,000
Stockholders' equity:
Common stock		685,000		685,000
Retained earnings		213,500		171,000

Total liabilities and stockholders' equity	$	1,121,150	$	1,181,500

Additional Information for 2018:

1. Net income is $66,000.

2. The company purchases $107,000 in equipment.

3. Depreciation expense is $159,000.

4. The company repays $112,500 in notes payable.

5 .The company declares and pays a cash dividend of $23,500.

Required:

Prepare the statement of cash flows using the indirect method.

PLASMA SCREENS CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash Flows from Operating Activities

Adjustments to reconcile net income to net cash flows from operating activities









Net cash flows from operating activities
Cash Flows from Investing Activities




Net cash flows from investing activities
Cash Flows from Financing Activities




Net cash flows from financing activities

Cash at the beginning of the period
Cash at the end of the period

peachbee375

The balance sheet for Plasma Screens Corporation along with additional information, are provided below:

PLASMA SCREENS CORPORATION Balance Sheets December 31, 2018 and 2017
	2018		2017
Assets:
Current assets:
Cash	$	82,000	$	120,000
Accounts receivable		72,000		96,000
Inventory		65,000		80,000
Prepaid rent		5,000		4,000
Long-term assets:
Land		500,000		500,000
Equipment		800,000		600,000
Accumulated depreciation		(380,000)		(300,000)

Total assets	$	1,144,000	$	1,100,000

Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable	$	78,000	$	82,000
Interest payable		5,000		9,000
Income tax payable		9,000		7,000
Long-term liabilities:
Notes payable		75,000		150,000
Stockholders' equity:
Common stock		600,000		600,000
Retained earnings		377,000		252,000

Total liabilities and stockholders' equity	$	1,144,000	$	1,100,000

Additional Information for 2018:

1. Net income is $160,000.

2. The company purchases $200,000 in equipment.

3. Depreciation expense is $80,000.

4. The company repays $75,000 in notes payable.

5. The company declares and pays a cash dividend of $35,000.

Prepare the statement of cash flows using the indirect method.

PLASMA SCREENS CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash flows from operating activities:









Net cash flows from operating activities
Cash Flows from Investing Activities




Net cash flows from investing activities
Cash Flows from Financing Activities




Net cash flows from financing activities

Cash at the beginning of the period
Cash at the end of the period

coraldeer142

Foxboro Company%u2019s income statement for Year 2 follows:

Foxboro Company

Income Statement

Sales $ 710,000

Cost of goods sold 234,000

Gross margin 476,000

Selling and administrative expenses 218,000

Net operating income 258,000

Gain on sale of equipment 10,000

Income before taxes 268,000

Income taxes 80,400

Net income $ 187,600

Its balance sheet amounts at the end of Years 1 and 2 are asfollows:

Foxboro Company

Balance Sheet

Year 2 Year 1

Assets

Cash $ 143,900 $ 106,100

Accounts receivable 269,000 119,000

Inventory 318,000 270,000

Prepaid expenses 9,500 19,000

Total current assets 740,400 514,100

Plant and equipment 622,000 517,000

Accumulated depreciation 166,300 131,600

Net plant and equipment 455,700 385,400

Loan to Harker Company 47,000 0

Total assets

$ 1,243,100 $ 899,500

Liabilities and Stockholders' Equity

Accounts payable $ 310,000 $ 260,000

Accrued liabilities 46,000 59,000

Income taxes payable 85,900 80,500

Total current liabilities 441,900 399,500

Bonds payable 207,000 119,000

Total liabilities 648,900 518,500

Common stock 345,000 286,000

Retained earnings 249,200 95,000

Total stockholders' equity 594,200 381,000

Total liabilities and stockholders' equity $ 1,243,100 $ 899,500

Equipment that had cost $31,600 and on which there wasaccumulated depreciation of $11,000 was sold during Year 2 for$30,600. The company declared and paid a cash dividend during Year2. It did not retire any bonds or repurchase any of its ownstock.

Required:

Using the indirect method, compute the net cash for operatingactivities for Year 2. (Negative amount should be indicated by aminus sign. Omit the "$" sign in your response.)

Net cash operating activities $

Prepare a statement of cash flows for Year 2. (Amounts to bededucted should be indicated with a minus sign. Omit the "$" signin your response.)

Foxboro Company

Statement of Cash Flows

Operating activities:

Adjustments to convert net income to cash basis:

Net cash operating activities

Investing activities:

Net cash investing activities

Financing activities:

Net cash financing activities

Cash balance, beginning of year

Cash balance, end of year $

Compute the free cash flow for Year 2.(Negative amount should beindicated by a minus sign. Omit the "$" sign in your response.)

Free cash flow $

limemink763

ACCT 2001 Lecture Notes - Lecture 3: A Question Of Balance, Accounting Equation, Equals Sign

ACCT 2001 Lecture Notes - Lecture 2: Accounting Equation, Financial Accounting, Net Income

ACCT 2001 Lecture Notes - Lecture 3: A Question Of Balance, Accounting Equation, Equals Sign

ACCT 2001 Lecture 4: The Balance Sheet Continued ...

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