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Baker and Harris Solution.doc

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Department
Administrative Studies
Course
ADMS 2500
Professor
All Professors
Semester
Fall

Description
Baker Corporation Solution Create an Indirect Cash Flow Statement Information available: Account Amount Change Cash (#12) 75 - A/R (#3) 40 + Inventory (#4) 30 + Capital Assets 60 + Acc Depn 20 + A/P (#5) 25 - Bonds Payable 35 - Common Shares (#7) 45 + R/E 50 + • Additional Data – Equipment costing 15 with A/D of 12 sold for 3 – Bonds with face value of 50 retired at face value – 20 of dividends paid Solution: * Note: For all T Accounts to be calculated you need both the Opening and Closing balances – for this example to work the opening balance for each of the accounts will be zero and the closing balance will be the amount of the change in the account. Operations: Calculation of Net Income: (#1) & (#9) R/E increased over the year $50 and the company paid out $20 in Dividends (see above) Net Income X Dividend -$20 Retained Earnings $50 Then X (Net Income) is equal to $70 (#2)Depreciation Expense Depreciation 0 12 from sale of asset 32* 20 Finance Activities (#6) Bond Payable 0 50 retired Bond given 15 new issue of Bonds 35 (#8)Bond Transaction Dr Bonds Payable $50 Cr Cash $50 (#9)Declared Dividends Dr Net Income $20 Cr Cash $20 Investing Activities (#10)Equipment Sale- Disposal: Dr Cash $3 Dr Acc Deprn $12 Cr Asset $15 Note not gain or loss (#11)Equipment T account Equipment 0 75 15 Retired *Is calculated to balance this T account 60 Baker Company - Cash Flow Statement For the year ended….. OPERATIONS NI (#1) 70 + DEP’N (#2) 32 - INCREASE IN A/R (#3) (40) - INCREASE IN (30) INVENTORY (#4) - DECREASE IN A/P(#5) (25) CASH FROM 7 OPERATIONS FINANCING ACTIVITIES BONDS ISSUED (#6) 15 SHARES ISSUED (#7) 45 BONDS RETIRED (#8) (50) DIVIDENDS (#9) (20) (10) INVESTING ACTIVITIES SELL EQUIPMENT (#10) 3 BUY EQUIPMENT (#11) (75) (72) NET DECREASE IN (75) CASH DECREASE IN CASH (75) REPORTED ON B/S (#12) Harris Co. LTD. Comparative Balance Sheets Account 31-Dec 1-Jan Difference Assets Cash $ 24,000 $ 20,000 $ 4,000 Accounts Receivable $ 58,000 $ 52,000 $ 6,000 (4) Inventory $ 81,000 $ 79,000 $ 2,000 (5) Land
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