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Prepare the cash flow statement by the indirect method
Course:- Accounting Basics
Reference No.:- EM132337025




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Accounting Assignment Problems -

Problem 1 - The 2017 comparative income statement and balance sheet of Flowell Design Ltd. follow:

Flowell Design Ltd. Income Statement For the Year Ended June 30, 2017

Revenues:

 

 

Sales revenue

 

$275,000

Interest revenue

 

13,600

Total revenues

 

270,600

Expenses:

 

 

Cost of goods sold

$76,600

 

Salaries expense

27,800

 

Amortization expense

4,000

 

Other operating expenses

10,500

 

Interest expense

16,600

 

Income tax expense

27,800

 

Total expenses

 

163,300

Net income

 

$107,300

 

Flowell Design Ltd. Balance Sheet June 30, 2017 and 2016

 

2017

2016

Current assets

 

 

Cash and cash equivalents

$7,200

$6,300

Accounts receivable

31,600

26,900

Interest receivable

1,900

700

Inventories

33,600

57,200

Prepaid expenses

2,500

1,900

Plant and equipment, net

66,500

49,400

Land

103,000

54,000

Total assets

$246,300

$196,400

Current liabilities

 

 

Accounts payable

$31,400

$28,800

Interest payable

4,400

4,900

Salaries payable

3,100

6,600

Other accrued liabilities

13,700

16,000

Income tax payable

8,900

7,700

Long-term liabilities

 

 

Notes payable

75,000

95,000

Shareholders' equity

 

 

Common shares

68,300

34,700

Retained earnings

41,500

2,700

Total liabilities and shareholders' equity

$246,300

$196,400

Flowell Design Ltd. had no non-cash financing and investing transactions during 2017. During the year, there were no sales of land or plant and equipment, and no issuances of notes payable.

Required -

1. Prepare the 2017 cash flow statement, formatting operating activities by the direct method.

2. Evaluate the 2017 cash flow for this company.

Problem 2 - Use the Flowell Design Ltd. Data from problem 1.

Required -

1. Prepare the 2017 cash flow statement by the indirect method. If your instructor also assigned problem 1, prepare only the operating activities section of the statement.

2. Evaluate the 2017 cash flow for this company.  

Note - For requirement 1, do only the statement heading and the operating activities section.

Problem 3 - Main Street Antiques Ltd.'s comparative balance sheet at December 31, 2017, and its 2017 income statement are as follows:

Main Street Antiques Ltd. Balance Sheet December 31, 2017 and 2016

 

2017

2016

Current assets

 

 

Cash

$188,000

$43,000

Accounts receivable

370,000

241,500

Interest receivable

14,500

18,000

Inventories

343,000

301,000

Prepaid expenses

18,500

14,000

Long-term investment

50,500

26,000

Plant and equipment, net

422,500

368,000

Land

212,000

480,000

 

$1,619,000

$1,491,500

Current liabilities

 

 

Notes payable, short-term

$67,000

$90,500

Accounts payable

234,500

201,500

Income tax payable

69,000

72,500

Accrued liabilities

41,000

48,500

Interest payable

18,500

14,500

Salaries payable

4,500

13,000

Long-term note payable

237,000

$470,500

Common shares

319,500

256,000

Retained earnings

628,000

324,500

 

$1,619,000

$1,491,500

 

Main Street Antiques Ltd. Income Statement For the year Ended December 31, 2017

Net sales

 

$1,327,000

Cost of goods sold

 

402,000

Gross margin

 

925,000

Operating expenses:

 

 

Salaries expense

$194,000

 

Amortization expense

27,000

 

Other expenses

210,000

431,000

Operating income

 

494,000

Other revenues and expenses:

 

 

Revenues and gains:

 

 

Interest revenue

 

53,000

Expenses and losses:

 

 

Interest expense

(30,500)

 

Loss on sale of land

(33,500)

(64,000)

Income before income taxes

 

483,000

Income tax expense

 

49,500

Net income

 

$433,500

Other information for the year ended December 31, 2017:

a. Acquired equipment by issuing a long term note payable, $76,500, and paying $5,000 cash.

b. Purchased a long-term investment for cash.

c. Received cash for issuance of common shares, $40,000.

d. Only cash dividends were issued during the year.

e. Paid short-term note payable by issuing common shares.

Required -

1. Prepare the cash flow statement of Main Street Antiques Ltd. for the year ended December 31, 2017, using the direct method to report operating activities. Also prepare a note to the financial statements providing a summary of non-cash investing and financing activities. All current accounts, except short-term notes payable, result from operating transactions.

2. Prepare a supplementary schedule showing cash flows from operations by the indirect method.

Attachment:- Assignment Template.rar




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