Prepare statement of cash flows for year using direct method

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Q1. The following information is for Redwood Inc. for the year ended December 31, 2016. Redwood had a cash and cash equivalents balance of $5,200 on January 1, 2016.

Cash received from:

Customers $ 1,900

Interest on investments 200

Sale of land 100

Sale of common stock 600

Issuance of debt securities 2,000

Cash paid for:

Interest on debt $ 300

Income tax 80

Debt principal reduction 1,500

Purchase of equipment 4,100

Purchase of inventory 1,000

Dividends on common stock 200

Operating expenses 500

Required: Prepare a statement of cash flows for the year using the direct method for operating activities.

Q2. Beavy Construction Company was the low bidder on a construction project to build an earthen dam for $1,800,000. The project was begun in 2015 and completed in 2016. Cost and other data are presented below:

 

2015

2016

Costs incurred during the year

$450,000

$1,100,000

Estimated costs to complete

1,050,000

0

Billings during the year

400,000

1,400,000

Cash collections during the year

300,000

1,500,000

Required: Assume that Beavy recognizes revenue on this contract over time according to percentage of completion.

a. Compute the amount of gross profit recognized during 2015 and 2016.

b. Prepare all journal entries to record costs, billings, collections, and profit recognition.

Assume that Beavy recognizes revenue upon completion of the project.

c. Compute the amount of gross profit recognized during 2015 and 2016.

d. Prepare all journal entries to record costs, billings, collections, and profit recognition.

Reference no: EM132049754

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