he accounting staff of Harris Company has assembled the followinginformation for the year ended December 31, 2011:
Cash sales $ 810,000 Credit sales 2,500,000 Collections on accounts receivable 2,205,000 Cash transferred from the money market fund to thegeneral bank account 250,000 Interest and dividends received 100,000 Purchases (all on account) 1,800,000 Payments on accounts payable to merchandisesuppliers 1,470,000 Cash payments for operating expenses 1,065,000 Interest paid 180,000 Income taxes paid 95,000 Loans made to borrowers 500,000 Collections on loans (excluding receipts ofinterest) 260,000 Cash paid to acquire plant assets 3,100,000 Book value of plant assets sold 650,300 Loss on sales of plant assets 80,400 Proceeds from issuing bonds payable 2,500,000 Dividends paid 120,000 Cash and cash equivalents, Jan. 1 489,000
Cashflows from operating activities:
Cashreceived fromcustomers ________________
Interestand dividendsreceived ________________
Cashprovided by operating activities _______________
Cashpaid to suppliers and employees ______________
Incometaxespaid ________________
Interestpaid ________________
Cashdisbursed for operating activities ______________
Netcash flow from operatingactivites ______________
Cashflows from investing activities:
Proceedsfrom sales of plantassets _______________
Loansmade toborrowers _______________
Collectionsonloans ________________
Cashpaid to acquire plantassets ________________
Netcash used in investingactivities: ________________
Cashflows from financing activites:
Dividendspaid _________________
Proceedsfrom issuing bonds payable ________________
Netcash provided by financing activites _______________
Netdecrease in cash and cash equivalents ____________
Cashand cash equivalents, beginning of year __________
Cashand cash equivalents, end of year _______________
Compute the amount of collections from customers
Cash reveived fromcustomers _________________
Compute the amount of cash paid to suppliers andemployees
Cash paid to suppliers and employees _______________
Compute the amount of proceeds from sales of plantassets
Proceeds from sales of plantassets _________________
Show your work
he accounting staff of Harris Company has assembled the followinginformation for the year ended December 31, 2011: |
| Cash sales | $ | 810,000 |
| Credit sales | 2,500,000 | |
| Collections on accounts receivable | 2,205,000 | |
| Cash transferred from the money market fund to thegeneral bank account | 250,000 | |
| Interest and dividends received | 100,000 | |
| Purchases (all on account) | 1,800,000 | |
| Payments on accounts payable to merchandisesuppliers | 1,470,000 | |
| Cash payments for operating expenses | 1,065,000 | |
| Interest paid | 180,000 | |
| Income taxes paid | 95,000 | |
| Loans made to borrowers | 500,000 | |
| Collections on loans (excluding receipts ofinterest) | 260,000 | |
| Cash paid to acquire plant assets | 3,100,000 | |
| Book value of plant assets sold | 650,300 | |
| Loss on sales of plant assets | 80,400 | |
| Proceeds from issuing bonds payable | 2,500,000 | |
| Dividends paid | 120,000 | |
| Cash and cash equivalents, Jan. 1 | 489,000 | |
Cashflows from operating activities:
Cashreceived fromcustomers ________________
Interestand dividendsreceived ________________
Cashprovided by operating activities _______________
Cashpaid to suppliers and employees ______________
Incometaxespaid ________________
Interestpaid ________________
Cashdisbursed for operating activities ______________
Netcash flow from operatingactivites ______________
Cashflows from investing activities:
Proceedsfrom sales of plantassets _______________
Loansmade toborrowers _______________
Collectionsonloans ________________
Cashpaid to acquire plantassets ________________
Netcash used in investingactivities: ________________
Cashflows from financing activites:
Dividendspaid _________________
Proceedsfrom issuing bonds payable ________________
Netcash provided by financing activites _______________
Netdecrease in cash and cash equivalents ____________
Cashand cash equivalents, beginning of year __________
Cashand cash equivalents, end of year _______________
Compute the amount of collections from customers
Cash reveived fromcustomers _________________
Compute the amount of cash paid to suppliers andemployees
Cash paid to suppliers and employees _______________
Compute the amount of proceeds from sales of plantassets
Proceeds from sales of plantassets _________________
Show your work
Related questions
(Question 1). The accounting staff of Wyoming Outfitters, Inc.,has assembled the following information for the year ended December31, 2015:
| Cashand cash equivalents, Jan. 1 | $ | 35,800 |
| Cashand cash equivalents, Dec. 31 | 150,000 | |
| Cashpaid to acquire plant assets | 23,000 | |
| Proceeds from short-term borrowing | 10,000 | |
| Loans made to borrowers | 5,200 | |
| Collections on loans (excluding interest) | 4,000 | |
| Interest and dividends received | 32,400 | |
| Cashreceived from customers | 835,000 | |
| Proceeds from sales of plant assets | 9,000 | |
| Dividends paid | 53,000 | |
| Cashpaid to suppliers and employees | 606,000 | |
| Interest paid | 19,000 | |
| Income taxes paid | 70,000 | |
| Using this information, prepare a statement of cash flows underdirect method. (List any deduction in cash and cashoutflows as negative amounts.)
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Statement of Cash Flows Using a Work SheetâIndirect Method (Appendix)
Peoria Corp. just completed another successful year, as indicated by the following income statement:
| For the Year Ended December 31, 2017 | |
| Sales revenue | $1,250,000 |
| Cost of goods sold | 700,000 |
| Gross profit | $550,000 |
| Operating expenses | 150,000 |
| Income before interest and taxes | $400,000 |
| Interest expense | 25,000 |
| Income before taxes | $375,000 |
| Income tax expense | 150,000 |
| Net income | $225,000 |
Presented here are comparative balance sheets:
| December 31 | |||
| 2017 | 2016 | ||
| Cash | $52,000 | $90,000 | |
| Accounts receivable | 180,000 | 130,000 | |
| Inventory | 230,000 | 200,000 | |
| Prepayments | 15,000 | 25,000 | |
| Total current assets | $477,000 | $445,000 | |
| Land | $750,000 | $600,000 | |
| Plant and equipment | 700,000 | 500,000 | |
| Accumulated depreciation | (250,000) | (200,000) | |
| Total long-term assets | $1,200,000 | $900,000 | |
| Total assets | $1,677,000 | $1,345,000 | |
| Accounts payable | $130,000 | $148,000 | |
| Other accrued liabilities | 68,000 | 63,000 | |
| Income taxes payable | 90,000 | 110,000 | |
| Total current liabilities | $288,000 | $321,000 | |
| Long-term bank loan payable | $350,000 | $300,000 | |
| Common stock | $550,000 | $400,000 | |
| Retained earnings | 489,000 | 324,000 | |
| Total stockholders' equity | $1,039,000 | $724,000 | |
| Total liabilities and stockholders' equity | $1,677,000 | $1,345,000 | |
Other information is as follows:
Dividends of $60,000 were declared and paid during the year.
Operating expenses include $50,000 of depreciation.
Land and plant and equipment were acquired for cash, and additional stock was issued for cash. Cash also was received from additional bank loans.
The president has asked you some questions about the year's results. She is very impressed with the profit margin of 18% (net income divided by sales revenue). She is bothered, however, by the decline in the company's cash balance during the year. One of the conditions of the existing bank loan is that the company maintain a minimum cash balance of $50,000.
Required:
1. Using the format in the chapter's appendix, prepare a statement of cash flows work sheet. If an amount box does not require an entry, leave it blank. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash.
| Balances | Cash Inflows (Outflows) | |||||
| Accounts | 12/31/17 | 12/31/16 | Changes | Operating | Investing | Financing |
| Cash | $ | $ | $ | $ | $ | $ |
| Accounts Receivable | ||||||
| Inventory | ||||||
| Prepayments | ||||||
| Land | ||||||
| Plant and Equipment | ||||||
| Accumulated Depreciation | ||||||
| Accounts Payable | ||||||
| Other Accrued Liabilities | ||||||
| Income Taxes Payable | ||||||
| Long-Term Bank Loan Payable | ||||||
| Common Stock | ||||||
| Retained Earnings | ||||||
| Net Income | ||||||
| Totals | $ | $ | $ | $ | $ | $ |
| Net increase (decrease) in cash | $ | |||||
2. Prepare a statement of cash flows for 2017 using the indirect method in the Operating Activities section. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash.
| Peoria Corp. | |
| Statement of Cash Flows | |
| For the Year Ended December 31, 2017 | |
| Cash Flows from Operating Activities | |
| $ | |
| Adjustments to reconcile net income to net cash provided by operating activities: | |
| $ | |
| Cash Flows from Investing Activities | |
| $ | |
| $ | |
| Cash Flows from Financing Activities | |
| $ | |
| $ | |
| $ | |
| Cash balance, December 31, 2016 | |
| Cash balance, December 31, 2017 | $ |
3. During the year Peoria experienced a decrease in cash at the end of the year due to
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash.
Since you are well trained in budgeting, you have decided to prepare comprehensive budgets for the upcoming second quarter in order to show management the benefits that can be gained from an integrated budgeting program. To this end, you have worked with accounting and other areas to gather the information assembled below.
The company sells many styles of earrings, but all are sold for the same priceâ$13 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):
| January (actual) | 21,400 | June (budget) | 51,400 |
| February (actual) | 27,400 | July (budget) | 31,400 |
| March (actual) | 41,400 | August (budget) | 29,400 |
| April (budget) | 66,400 | September (budget) | 26,400 |
| May (budget) | 101,400 | ||
The concentration of sales before and during May is due to Motherâs Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.
Suppliers are paid $4.7 for a pair of earrings. One-half of a monthâs purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 20% of a monthâs sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.
Monthly operating expenses for the company are given below:
| Variable: | |||
| Sales commissions | 4% | of sales | |
| Fixed: | |||
| Advertising | $ | 270,000 | |
| Rent | $ | 25,000 | |
| Salaries | $ | 120,000 | |
| Utilities | $ | 10,500 | |
| Insurance | $ | 3,700 | |
| Depreciation | $ | 21,000 | |
Insurance is paid on an annual basis, in November of each year.
The company plans to purchase $19,500 in new equipment during May and $47,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $20,250 each quarter, payable in the first month of the following quarter.
A listing of the companyâs ledger accounts as of March 31 is given below:
| Assets | ||
| Cash | $ | 81,000 |
| Accounts receivable ($35,620 February sales;$430,560 March sales) | 466,180 | |
| Inventory | 124,832 | |
| Prepaid insurance | 24,500 | |
| Property and equipment (net) | 1,020,000 | |
| Total assets | $ | 1,716,512 |
| Liabilities and Stockholdersâ Equity | ||
| Accounts payable | $ | 107,000 |
| Dividends payable | 20,250 | |
| Common stock | 940,000 | |
| Retained earnings | 649,262 | |
| Total liabilities and stockholdersâ equity | $ | 1,716,512 |
The company maintains a minimum cash balance of $57,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.
The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $57,000 in cash.
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