ACCT 220 Chapter Notes - Chapter 4: Retained Earnings, Consumer Protection, Income Statement

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sangriawoodchuck313

7 Oct 2016

School

Bloomsburg University

Department

Accounting

Course

ACCT 220

Professor

Mark Law

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Document Summary

180): a balance sheet in which items are classified into subgroups to facilitate financial analysis and management decision making. Normal operating cycle: the average period of time between the use of cash to buy goods for resale or to provide services and the subsequent collection of cash from customers. 181): the land, buildings, equipment, vehicles, furniture, and fixtures that a firm uses in its operations; often referred to as pp&e. 183): a format of the classified balance sheet in which assets are displayed on the left side and liabilities and stockholders" equity are displayed on the right side. Long-term liabilities: debt obligations not due to be repaid within the normal operating cycle or one year, whichever is longer. Report form: a format of the classified balance sheet where assets are displayed on the top and liabilities and stockholders" equity are displayed below the assets.

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Required information

[The following information applies to the questions displayed below.]

Comparative financial statements for Weaver Company follow:

Weaver Company Comparative Balance Sheet at December 31
	This Year			Last Year
Assets
Cash	$	-2		$	11
Accounts receivable		305			230
Inventory		157			195
Prepaid expenses		8			5
Total current assets		468			441
Property, plant, and equipment		509			431
Less accumulated depreciation		(86	)		(70	)
Net property, plant, and equipment		423			361
Long-term investments		27			34
Total assets	$	918		$	836
Liabilities and Stockholders' Equity
Accounts payable	$	301		$	224
Accrued liabilities		70			79
Income taxes payable		72			65
Total current liabilities		443			368
Bonds payable		200			172
Total liabilities		643			540
Common stock		161			202
Retained earnings		114			94
Total stockholdersâ equity		275			296
Total liabilities and stockholders' equity	$	918		$	836

Weaver Company Income Statement For This Year Ended December 31
Sales				$	751
Cost of goods sold					448
Gross margin					303
Selling and administrative expenses					223
Net operating income					80
Nonoperating items:
Gain on sale of investments	$	6
Loss on sale of equipment		(2	)		4
Income before taxes					84
Income taxes					23
Net income				$	61

During this year, Weaver sold some equipment for $18 that had cost $30 and on which there was accumulated depreciation of $10. In addition, the company sold long-term investments for $13 that had cost $7 when purchased several years ago. Weaver paid a cash dividend this year and the company repurchased $41 of its own stock. This year Weaver did not retire any bonds.

Required:

1. Using the indirect method, determine the net cash provided by/used in operating activities for this year.

2. Using the information in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for this year. (List any deduction in cash and cash outflows as negative amounts.)

blackcod263

EXERCISE 15-8 Selected Financial Ratios (L015-2, LO15-3, L015-4] The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash.. Accounts receivable, net ................ Merchandise inventory ................. Prepaid expenses ..................... Total current assets ...................... Property and equipment, net ............... Total assets $ 6,500 35,000 70,000 3,500 115,000 185,000 $300,000 $ 50,000 80,000 130,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities .......... Bonds payable, 10% .......... Total liabilities ................. Stockholders' equity: Common stock, $5 per value ............. Retained earnings .... Total stockholders' equity ................. Total liabilities and equity ................. $ 30,000 140,000 170,000 $300,000 Castile Products, Inc. Income Statement For the Year Ended December 31 Sales .... Cost of goods sold .......... Gross margin ............ Selling and administrative expenses ....... Net operating income ........ Interest expense......................... Net income before taxes ........... Income taxes (30%) Net income .......... $420,000 292,500 127,500 89,500 38,000 8,000 30,000 9,000 $ 21,000 Account balances at the beginning of the year were: accounts receivable, $25,000; and inven- tory, $60,000. All sales were on account. Required: Compute the following financial data and ratios: 1. Working capital. 2. Current ratio. 3. Acid-test ratio. 4. Debt-to-equity ratio. 5. Times interest earned ratio. 6. Average collection period. 7. Average sale period. 8. Operating cycle.

Required information

[The following information applies to the questions displayed below.]

Comparative financial statements for Weaver Company follow:

Weaver Company Comparative Balance Sheet at December 31
	This Year			Last Year
Assets
Cash	$	2		$	12
Accounts receivable		308			230
Inventory		157			194
Prepaid expenses		9			5
Total current assets		476			441
Property, plant, and equipment		514			436
Less accumulated depreciation		(86	)		(72	)
Net property, plant, and equipment		428			364
Long-term investments		26			32
Total assets	$	930		$	837
Liabilities and Stockholders' Equity
Accounts payable	$	302		$	225
Accrued liabilities		73			77
Income taxes payable		71			65
Total current liabilities		446			367
Bonds payable		195			172
Total liabilities		641			539
Common stock		162			201
Retained earnings		127			97
Total stockholdersâ equity		289			298
Total liabilities and stockholders' equity	$	930		$	837

Weaver Company Income Statement For This Year Ended December 31
Sales				$	753
Cost of goods sold					445
Gross margin					308
Selling and administrative expenses					222
Net operating income					86
Nonoperating items:
Gain on sale of investments	$	7
Loss on sale of equipment		(1	)		6
Income before taxes					92
Income taxes					23
Net income				$	69

During this year, Weaver sold some equipment for $19 that had cost $30 and on which there was accumulated depreciation of $10. In addition, the company sold long-term investments for $13 that had cost $6 when purchased several years ago. Weaver paid a cash dividend this year and the company repurchased $39 of its own stock. This year Weaver did not retire any bonds.

Required:

1. Using the indirect method, determine the net cash provided by/used in operating activities for this year. Please provide the whole Statement of Cash Flows (using Indirect Method) for Weaver Company.

chocolatecattle336

ACCT 220 Chapter Notes - Chapter 4: Retained Earnings, Consumer Protection, Income Statement

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