Prepare a supplementary schedule of cash flows

Assignment Help Financial Management
Reference no: EM13670700

Research and find financial statements for two companies of your choosing. Drawing on information from this module and the course, analyze the statements and write an essay summarizing which of the two is a better investment. Include your reasons, using the course material evidence. Cite the financial statements and incorporate what you have learned in this course.

Calculate cash flows from operating, investing, and financing activities (direct method)

Compute the following cash flows for Express Service Company for the past year:

1. The beginning balance of Retained Earnings was $135,000, while the end of the year balance of Retained Earnings was $177,000. Net income for the year was $65,000. No dividends payable were on the balance sheet. How much was paid in cash dividends during the year?

2. The beginning and ending balances of the Common Stock account were $215,000 and $273,000, respectively. Where would the increase in Common Stock appear on the statement of cash flows?

3. The beginning and ending balances of the Treasury Stock account were $53,000 and $78,000, respectively. Where would the increase in Treasury Stock appear on the statement of cash flows?

4. The Property, Plant, & Equipment (net)increased by $12,000 during the year to have a balance of $152,000 at the end of the year. Depreciation for the year was $19,000.

Acquisitions of new plant assets during the year totaled $39,000. Plant assets were sold at a loss of $3,000.

a. What were the cash proceeds from the sale of plant assets?

b. What amount would be reported on the investing section

c. What amount, if any, would be reported on the operating section of the statement of cash flows?

Selected transaction data for the year ended March 31, 2010, include the following:

a. Net income, $77,000

b. Paid long-term note payable with cash, $59,600

c. Cash payments to employees, $43,000

d. Loss on sale of land, $9,600

e. Acquired equipment by issuing long-term note payable, $15,400

f. Cash payments to suppliers, $147,100

g. Cash paid for interest, $4,100

h. Depreciation expense on equipment, $13,900

j. Purchased long-term investment for cash, $3,200

k. Received cash for issuance of common stock, $2,200

I. Cash received from customers, $299,400

i. Paid short-term note payable by issuing common stock, $5,700 Paid cash dividends, $44,600

m. Cash paid for income taxes, $12,000

n. Sold land for cash, $51,900

o. Interest received (in cash), $1,000 P.

Requirements

1. Prepare the statement of cash flows for Barton Publication Company, Inc., for the year ended March 31, 2010, using the indirect method for operating cash flows. Include a schedule of noncash investing and financing activities. All of the current accounts except short-term notes payable result from operating transactions.

2. Also prepare a supplementary schedule of cash flows from operations using the direct method.

Barton Publication Company, Inc.
Balance Sheet
As of March 31, 2010 and 2009

 

2010

2009

Increase
(Decrease)

Current assets:

 

 

 

Cash..........................................................

$ 55,600

$ 14,700

$ 40,900

Accounts receivable..................................

51,400

53,300

(1,900)

Inventories.................................................

65,400

59,700

5,700

Prepaid expenses.......................................

3,700

5,100

(1,400)

Long-term investment.........................................

10,000

6,800

3,200

Equipment, net...................................................

71,700

70,200

1,500

Land...................................................................

35,500

97,000

(61,500)

Total assets.........................................................

293,300

$306,800

$(13,500)

Current liabilities:

 

 

 

Note payable, short-term...........................

$ 43,200

$ 48,900

$ (5,700)

Accounts payable......................................

4,300

3,500

800

Income tax payable...................................

13,700

15,500

(1,800)

Salary payable...........................................

9,200

12,400

(3,200)

Interest payable.........................................

8,200

7,400

800

Accrued liabilities.....................................

2,900

3,400

(500)

Long-term note payable.....................................

48,900
69,600

93,100
61,700

(44,200)

7,900

Common stock...................................................

Retained earnings ..............................................

Total liabilities and equity .................................

93,300

60,900

32,400

$293,300

$306,800

$(13,500)

 

Effect of decisions on ratios

Betsy Ross Flag Company's long-term debt agreements make certain demands on the business. For example, Ross may not purchase treasury stock in excess of the balance of retained earnings. Also, long-term debt may not exceed stockholders' equity, and the current ratio may not fall below 1.50. If Ross fails to meet any of those requirements, the company's lenders have the authority to take over management of the company.

Changes in consumer demand have made it hard for Ross to attract customers. Current lia-bilities have mounted faster than current assets, causing the current ratio to fall to 1.47. Before releasing financial statements, Ross's management is scrambling to improve the current ratio. The controller points out that an investment can be classified as either long-term or short-term, depending on management's intention. By deciding to convert an investment to cash within one year, Ross can classify the investment as short-term-a current asset. On the controller's recom-mendation, Ross's board of directors votes to reclassify long-term investments as short-term.

Requirements

1. What effect will reclassifying the investments have on the current ratio? Is Ross's true finan¬cial position stronger as a result of reclassifying the investments?

2. Shortly after the financial statements are released, sales improve and so, too, does the current ratio. As a result, Ross's management decides not to sell the investments it had reclassified as short-term. Accordingly, the company reclassifies the investments as long-term.

Has management behaved unethically? Give the reasoning underlying your answer.

2. Evaluate Inspired's cash flows for the year. Discuss each of the categories of cash flows in your response.

Prepare statements of cash flows (indirect and direct method) (Learning Objectives 1, 2, & 3) Barton Publication Company, Inc., has the following comparative balance sheet as of March 31, 2010.

Verified Expert

Reference no: EM13670700

Previous Q& A

  Can you think of most probable values of random events

The most probable value to roll on two dice is 7. The most probable number of heads in two coin flips is one head. Can you think of most probable values of random events?

  Discuss how to identify good investments

Describe the characteristics of oligopoly and monopolistic competition. Give an example of product market of oligopoly and monopolistic competition.

  Several measures of central tendency

several Measures of Central Tendency (averages). We usually use the mean. Where would we use other measures, such as the mode or the median?

  Implement lean systems

What steps did Versatile take that permitted them to implement Lean Systems and how can a services organization overcome obstacles that might prevent them from adopting Lean System principles?

  Evaluate the financial statements and the financial position

Evaluate the financial statements and the financial position of health care institutions and describe the overall planning process and the key components of the financial plan.

  Show what are the profit-maximizing price

What are the profit-maximizing price and quantity and what will be the profits at these price and output levels - what will be the profit-maximizing price, output, and profits? Who bears the burden of the tax? Why?

  Critically analyse the concept of risk

Critically evaluate the use of complex models of Project Risk and Procurement Management; systematically and creatively making sound judgements based on the systematic analysis

  Compute a one-way anova

Compute a one-way ANOVA - Determine the observed F value and determine the equation of the least squares regression line to predict y by x.

  Describe a production environment

Describe a production environment in which MRP would be useful. Describe a production environment in which MRP would not be useful and explain with an example the difference between dependent and independent demand.

  High school students should spend two years in the military

Steps of persuasion: establishing credibility, acknowledging the audience's position, constructing a rationale, transplanting root elements, and asking for a response.

Reviews

Write a Review

 

Similar Q& A

  Fullerton wine company is a retailer which sells

Fullerton Wine Company is a retailer which sells vintage wines. The company has established a policy of reordering inventory every 30 days.

  The following capital structure is taken from bata boots co

the following capital structure is taken from bata boots co. balance sheet for the fiscal year ended april 30 2005.

  Explain cash management system

Average daily remittances are $5 million, and "extended disbursement float" adds 3 days to the disbursement schedule, how much should the firm be willing to pay for a cash management system if the firm earns 10% on excess funds

  What is the new nal

What are the NAL and IRR of the lease and interpret each value - Assume now that the salvage value estimate is $300,000, but all other facts remain the same. What is the new NAL? The new IRR?

  Report on a company providing a clear audit trail

Prepare report on providing a clear audit trail to your company.  Prepare a portfolio of analytical reference materials including the financial reports for at least five years. This is your analytical permanent file for the chosen company.

  Describe how society''s interests can influence financial

Compare and contrast the potential liability of owners of proprietorships, partnerships (general partners), and corporations.

  What is her profit - loss

An investor writes (or sells) one put option contract. If the price of gold in the spot market at the maturity date of the option is $1095, what is her profit-loss - The spot rate for the euro when the forward contract matures is $1.50/€. What is h..

  Explain what is the expected return of stock g

What are the expected returns of each of the four individual assets using CAPM if the line equations is plotted with an intercept of 3.0% (risk-free rate) and a market premium of 10.5% (slope of the line)? What is the expected return of stock G, H,..

  New modes of trade finance

How well-suited is PayPal, or some variation of online payment solution, to the PAD business and model and what are the pros and cons related to traditional bank-provided trade finance, and open account solutions?

  What can be said about first-order autocorrelation

What can be said about first-order autocorrelation given the Durbin-Watson value of 1.8911 calculated from the three factor model residuals?

  Select a company for analysis this company should be quoted

select a company for analysis. this company should be quoted on one of the principal international exchanges. it can be

  Important factors for making a capital structure decision

What important factors, in addition to quantitative factors, should a firm consider when it is making a capital structure decision? How do these factors play in the decision?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd