ACCT 2102 Lecture Notes - Lecture 3: Income Tax
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The comparative balance sheet of Canace Products Inc. forDecember 31, 2016 and 2015, is shown as follows:
1 | Dec. 31, 2016 | Dec. 31, 2015 | |
2 | Assets | ||
3 | Cash | $643,320.00 | $679,710.00 |
4 | Accounts receivable (net) | 567,060.00 | 547,290.00 |
5 | Inventories | 1,010,150.00 | 983,330.00 |
6 | Investments | 0.00 | 240,620.00 |
7 | Land | 520,090.00 | 0.00 |
8 | Equipment | 879,420.00 | 680,200.00 |
9 | Accumulated depreciation-equipment | (244,310.00) | (200,240.00) |
10 | Total assets | $3,375,730.00 | $2,930,910.00 |
11 | Liabilities and Stockholdersâ Equity | ||
12 | Accounts payable (merchandise creditors) | $772,600.00 | $747,990.00 |
13 | Accrued expenses payable (operating expenses) | 63,150.00 | 70,180.00 |
14 | Dividends payable | 8,990.00 | 7,370.00 |
15 | Common stock, $2 par | 56,000.00 | 32,000.00 |
16 | Paid-in capital: Excess of issue price over parâcommon stock | 408,000.00 | 192,000.00 |
17 | Retained earnings | 2,066,990.00 | 1,881,370.00 |
18 | Total liabilities and stockholdersâ equity | $3,375,730.00 | $2,930,910.00 |
The income statement for the year ended December 31, 2016, is asfollows:
1 | Sales | $5,978,640.00 | |
2 | Cost of merchandise sold | 2,452,460.00 | |
3 | Gross profit | $3,526,180.00 | |
4 | Operating expenses: | ||
5 | Depreciation expense | $44,070.00 | |
6 | Other operating expenses | 3,099,060.00 | |
7 | Total operating expenses | 3,143,130.00 | |
8 | Operating income | $383,050.00 | |
9 | Other expense: | ||
10 | Loss on sale of investments | (65,430.00) | |
11 | Income before income tax | $317,620.00 | |
12 | Income tax expense | 103,420.00 | |
13 | Net income | $214,200.00 |
Additional data obtained from an examination of the accounts inthe ledger for 2016 are as follows:
A. | Equipment and land were acquiredfor cash. |
B. | There were no disposals ofequipment during the year. |
C. | The investments were sold for$175,190 cash |
D. | The common stock was issued forcash. |
E. | There was a $28,580 debit toRetained Earnings for cash dividends declared. |
Prepare a statement of cash flows, using the direct method ofpresenting cash flows from operating activities. Be sure tocomplete the heading of the statement. Refer to the Labels andAmount Descriptions list provided for the exact wording of theanswer choices for text entries. Use the minus sign only toindicate the net cash outflows for each section. âDeductâ, âLessâor colons (:) will automatically appear if required.
Labels and Amount Descriptions
Labels andAmount Descriptions | |
---|---|
Cash paid for dividends | |
Cash paid for purchase ofequipment | |
Cash paid for purchase of land | |
Cash paid for purchase of treasurystock | |
Cash payments for income taxes | |
Cash payments for merchandise | |
Cash payments for operatingexpenses | |
Cash received from customers | |
Cash received from sale of commonstock | |
Cash received from sale ofinvestments | |
December 31, 2016 | |
Decrease in cash | |
Depreciation | |
For the Year Ended December 31,2016 | |
Gain on sale of investments | |
Increase in cash | |
Issuance of common stock foracquisition of land | |
Issuance of common stock forpurchase of equipment | |
Loss on sale of investments | |
Net cash flow from financingactivities | |
Net cash flow from investingactivities | |
Net cash flow from operatingactivities | |
Net cash flow used for financingactivities | |
Net cash flow used for investingactivities | |
Net cash flow used for operatingactivities |
Statement of Cash Flows
Prepare a statement of cash flows, using the direct method ofpresenting cash flows from operating activities. Be sure tocomplete the heading of the statement. Refer to the Labels andAmount Descriptions list provided for the exact wording of theanswer choices for text entries. Use the minus sign only toindicate the net cash outflows for each section. âDeductâ, âLessâor colons (:) will automatically appear if required.
Canace Products Inc. |
Statement of Cash Flows |
1 | Cash flows from operating activities: | |||
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8 | Cash flows from investing activities: | |||
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13 | ||||
14 | Cash flows from financing activities: | |||
15 | ||||
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18 | ||||
19 | Cash at the beginning of the year | |||
20 | Cash at the end of the year |