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OC user
OC user
in Accounting·
22 Dec 2017
PROBLEM 14-9 Understanding a Statement of Cash Flows (L014-1, L014-2] Brock Company is a merchandiser that prepared the statement of cash flows and income statement provided below: Brock Company Statement of Cash Flows-Indirect Method $ 275 Operating Activities Net income ... Adjustments to convert net income to a cash basis: Depreciation ........ Increase in accounts receivable.... Decrease in inventory ........ Decrease in accounts payable .......... Decrease in accrued liabilities ........ Increase in income taxes payable ................ Gain on sale of equipment... Net cash provided by operating activities ........... boa Investing Activities Additions to property, plant, and equipment ......... Proceeds from sale of equipment .... Net cash used in investing activities .............. long & nô Financing Activities Issuance of bonds payable ..... Issuance of common stock ............ Cash dividends paid ......... Net cash provided by financing activities ........... Net increase in cash and cash equivalents .......... Beginning cash and cash equivalents ............ Ending cash and cash equivalents ............ 34 Brock Company Income Statement Net sales .......... Cost of goods sold ............. .............. Gross margin ................ ............ Selling and administrative expenses ............. Net operating income ........... Nonoperating items: Gain on sale of equipment .... Income before taxes ... Income taxes . . . . . . . . $5,200 2,980 2,220 1,801 419 423 Net income .......................... $ 275 Required: Assume that you have been asked to teach a workshop to the employees within Brock Compa- ny's Marketing Department. The purpose of your workshop is to explain how the statement of cash flows differs from the income statement. Your audience is expecting you to explain the logic underlying each number included in the statement of cash flows. Prepare a memo that explains the format of the statement of cash flows and the rationale for each number included in Brock's state- ment of cash flows.
OC user
OC user
in Accounting·
21 Dec 2017
CASE 2-27 Scattergraph Analysis: Selection of an Activity Base [LO2-5] Angora Wraps of Pendleton, Oregon, makes fine sweaters out of pure angora wool. The business is seasonal, with the largest demand during the fall, the winter, and Christmas holidays. The company must increase production each summer to meet estimated demand. The company has been analyzing its costs to determine which costs are fixed and variable for planning purposes. Below are data for the company's activity and direct labor costs over the last year. Thousands of Units Produced Number of Paid Days Direct Labor Cost Month January February .. March 75 April ..... May ..... $14,162 $12,994 $15,184 $15,038 $15,768 $15,330 $13,724 $14,162 $15,476 $15,476 June ..... 102 July ....... August ... September October ............. 136 138 132 November .... December ... Na $12,972 $14,074 o The number of workdays varies from month to month due to the number of weekdays, holi- days, and days of vacation in the month. The paid days include paid vacations in July) and paid holidays (in November and December). The number of units produced in a month varies depend- ing on demand and the number of workdays in the month. The company has eight workers who are classified as direct labor. Required: 1. Plot the direct labor cost and units produced on a scattergraph. (Place cost on the vertical axis and units produced on the horizontal axis.) 2. Plot the direct labor cost and number of paid days on a scattergraph. (Place cost on the vertical axis and the number of paid days on the horizontal axis.) 3. Which measure of activity-number of units produced or paid days—should be used as the activity base for explaining direct labor cost? Explain.

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