7. An appropriation of retained earnings by the board ofdirectors of a corporation for future plant expansion will resultin. Please explain
A.
A decrease in the total retained earnings presented on thebalance sheet.
B.
A decrease in cash on the balance sheet with an equal increasein the investments and funds section of the balance sheet.
C.
The establishment of a fund to help finance future plantexpansion.
D.
The disclosure that management does not intend to distribute, inthe form of dividends, assets equal to the amount of theappropriation.
8. The primary purpose of a statement of cash flows is toprovide relevant information about. Please explain
A.
Differences between net income and associated cash receipts anddisbursements.
B.
An entityâs ability to meet cash operating needs.
C.
An entityâs ability to generate future positive net cashflows.
D.
The cash receipts and cash disbursements of an entity during aperiod.
7. An appropriation of retained earnings by the board ofdirectors of a corporation for future plant expansion will resultin. Please explain | ||||||||||
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8. The primary purpose of a statement of cash flows is toprovide relevant information about. Please explain | ||||||||||
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Related questions
Following are comparative balance sheets for Millco, Inc., atJanuary 31 and February 28, 2011:
| MILLCO, INC. Balance Sheets February 28 and January 31, 2011 | |||||
| Assets | February 28 | January 31 | |||
| Cash | $ | 42,000 | $ | 37,000 | |
| Accounts receivable | 64,000 | 53,000 | |||
| Merchandise inventory | 81,000 | 94,000 | |||
| Total current assets | $ | 187,000 | $ | 184,000 | |
| Plant and equipment: | |||||
| Production equipment | 166,000 | 152,000 | |||
| Less: Accumulated depreciation | (24,000 | ) | (21,000) | ||
| Total assets | $ | 329,000 | $ | 315,000 | |
| | | ||||
| Liabilities | |||||
| Accounts payable | $ | 37,000 | $ | 41,000 | |
| Short-term debt | 44,000 | 44,000 | |||
| Other accrued liabilities | 21,000 | 24,000 | |||
| Total current liabilities | $ | 102,000 | $ | 109,000 | |
| Long-term debt | 33,000 | 46,000 | |||
| Total liabilities | $ | 135,000 | $ | 155,000 | |
| | | ||||
| Owners' Equity | |||||
| Common stock, no par value, 40,000 shares authorized, 30,000 and28,000 shares issued, respectively | $ | 104,000 | $ | 96,000 | |
| Retained earnings: | |||||
| Beginning balance | $ | 64,000 | $ | 43,000 | |
| Netincome for month | 36,000 | 29,000 | |||
| Dividends | (10,000 | ) | (8,000) | ||
| Ending balance | $ | 90,000 | $ | 64,000 | |
| Total owners' equity | $ | 194,000 | $ | 160,000 | |
| Total liabilities and owners' equity | $ | 329,000 | $ | 315,000 | |
| | | ||||
| Required: |
| (a) | Calculate the change that occurredin cash during the month. You may assume that the change in eachbalance sheet amount is due to a single event (for example, thechange in the amount of production equipment is not the result ofboth a purchase and sale of equipment). (Hints: What is thepurpose of the statement of cash flows? How is this purposeaccomplished?) Because the retained earnings section of thebalance sheet is, in and of itself, an analysis of the change inthe retained earnings account for the month, the row for net incomeand dividends should be entered as the February amount and not thechange. Use the space to the right of the January 31 data to enterthe difference between the February 28 and January 31 amounts ofeach balance sheet item. (Negative amount should beindicated by a minus sign. Leave no cells blank - be certain toenter "0" wherever required.Omit the "$" sign in yourresponse.) |
| MILLCO, INC. Balance Sheets February 28 and January 31, 2011 | |||||||
| Assets | February 28 | January 31 | Change | ||||
| Cash | $ | 42,000 | $ | 37,000 | |||
| Accounts receivable | 64,000 | 53,000 | |||||
| Merchandise inventory | 81,000 | 94,000 | |||||
| Total current assets | $ | 187,000 | $ | 184,000 | |||
| Plant and Equipment: | |||||||
| Production equipment | 166,000 | 152,000 | |||||
| Less: Accumulated depreciation | (24,000 | ) | (21,000 | ) | |||
| Total assets | $ | 329,000 | $ | 315,000 | |||
| | | ||||||
| Liabilities: | |||||||
| Accounts payable | $ | 37,000 | $ | 41,000 | |||
| Short-term debt | 44,000 | 44,000 | |||||
| Other accrued liabilities | 21,000 | 24,000 | |||||
| Total current liabilities | $ | 102,000 | $ | 109,000 | |||
| Long-term debt | 33,000 | 46,000 | |||||
| Total liabilities | $ | 135,000 | $ | 155,000 | |||
| Owners' Equity | |||||||
| Common stock, no par value, 40,000 shares authorized, 30,000 and 28,000 shares issued, respectively | $ | 104,000 | $ | 96,000 | |||
| Retained earnings: | |||||||
| Beginning balance | $ | 64,000 | $ | 43,000 | |||
| Netincome for month | 36,000 | 29,000 | |||||
| Dividends | (10,000 | ) | (8,000 | ) | |||
| Ending balance | $ | 90,000 | $ | 64,000 | |||
| Total owners' equity | $ | 194,000 | $ | 160,000 | |||
| Total liabilities and owners' equity | $ | 329,000 | $ | 315,000 | |||
| | | ||||||
| (b) | Prepare a statement of cash flowsthat explains above changes? (Negative amount should beindicated by a minus sign.Omit the "$" sign in yourresponse.) |
| MILLCO, INC. Statement of Cash Flows For the Month Ended February 28, 2011 | ||
| Cashflows from operating activities: | ||
| Netincome | $ | |
| Add(deduct) items not affecting cash: | ||
| depreciation expense | ||
| decrease in merchendise inventory | ||
| increase in accounts recievable | ||
| decrease in other accured liabilities | ||
| decrease in accounts payable | ||
| Netcash provided by operating activities | $ | |
| Cashflows from investing activities: | ||
| Purchases of production equipment | ||
| Cashflows from financing activities: | ||
| saleof common stock | $ | |
| payment of long term debt | ||
| payment of divedends | ||
| Netcash flows used by financing activities | ||
| Netincrease in cash for the year | $ | |
| | ||
