Reference no: EM131642943
Assignment
1. Open the Guidance Report and rework the problem with the changed numbers noted on the guidance report and place your answers on the guidance report.
2. Submit the guidance report using the Assignment Submission tab.
Complete the following problems and exercises:
Chapter One Exercise 2
Chapter One Exercise 3
Chapter One Exercise 6
Chapter One Problem 2
Chapter One Problem 3
Exercise 2. Indirect calculation of operating cash flows
Video Corporation's balance sheet revealed the following account balance information:
Account Dec. 31, 20X6 Dec. 31, 20X5
Accounts receivable $52,000 $57,000
Merchandise inventory 75,000 68,000
Accounts payable 21,000 19,500
The accrual-basis net income was $107,000. In computing net income, the company recorded $12,600 of depreciation expense; there were no gains or losses from investing and financing activities.
On the basis of the preceding information, calculate Video's cash flows from operating activities by using the indirect method.
Exercise. Indirect calculation of operating cash flows
Specialty Services Inc. reported a net income of $110,000 for the year just ended, which includes an $18,000 gain on the sale of long-term investments. The following data were obtained from comparative balance sheets:
Oct. 31, 20X2 Oct. 31, 20X1
Trade accounts receivable $245,000 $203,000
Merchandise inventory 230,000 308,000
Accumulated depreciation:
Equipment 120,000 65,000
Accounts payable 190,000 124,000
Accrued liabilities 38,000 73,000
There were no purchases or disposals of equipment during the year. The long-term investment had a carrying (book) value of $77,000 and was sold for cash on June 15.
On the basis of the preceding information, determine the cash provided by operating activities from November 1, 20X1 through October 31, 20X2. The firm uses the indirect method of statement preparation.
Chapter One Exercise 6. Equipment transaction and cash flow reporting
The property, plant, and equipment section of ProComp Inc.'s comparative balance sheet follows:
Dec. 31, 20X4 Dec. 31, 20X3
Property, plant, & equipment
Land $94,000 $94,000
Equipment 652,000 527,000
Less: Accumulated depreciation (316,000) (341,000)
New equipment purchased during 20X4 totaled $280,000. The 20X4 income statement disclosed equipment depreciation expense of $41,000 and a $9,000 loss on the sale of equipment.
a. Determine the cost and accumulated depreciation of the equipment sold during 20X4.
b. Determine the selling price of the equipment sold.
c. Show how the sale of equipment would appear on a statement of cash flows prepared by using the indirect method.
Problem. Operating activities: Direct and indirect methods
The 20X5 income statement of Office Products Inc. follows:Operating activities: Direct and indirect methods The 20X5 income statement of Office Products Inc. follows:
OFFICE PRODUCTS INC.
Income Statement
for the Year Ended December 31, 20X5
Net sales $980,000
Cost of goods sold
Beginning inventory $235,000
Net purchases 720,000
Goods available for sale $955,000
Less: Ending inventory 260,000
Cost of goods sold 695,000
Gross profit $285,000
Expenses
Selling & administrative $149,000
Depreciation 54,000 203,000
$82,000
Other revenue (expense)
Interest expense $(18,000)
Gain on sale of equipment 26,000 8,000
Income before income taxes $90,000
Income taxes 27,000
Net income $63,000
The following additional information was obtained from the general ledger and management personnel:
1. Accounts payable related to the purchases of merchandise decreased during 20X5 by $32,800. In contrast, accounts receivable increased by $23,700.
2. Prepaid expenses and wages payable increased throughout 20X5 by $2,400 and $5,600, respectively.
3. The balance in the income taxes payable account on January 1 was $4,900; the December 31 balance was $4,100.
4. The company financed a $78,000 equipment purchase by signing a note payable that is due in 20X8.
Instructions
a. Prepare the operating activities section of the statement of cash flows by using the direct method.
b. Prepare the operating activities section of the statement of cash flows by using the indirect method.
Chapter One Problem 3. Cash flow information: Direct and indirect methods
The comparative year-end balance sheets of Sign Graphics Inc. revealed the following activity in the company's current accounts:
Increase
20x5 20x4 (decrease)
Current assets
Cash $55,400 $35,200 $20,200
Accounts receivable
(net) 83,800 88,000 (4,200)
Inventory 243,400 233,800 9,600
Prepaid expenses 25,400 24,200 1,200
Current liabilities
Accounts payable $123,600 $140,600 $(17,000)
Taxes payable 43,600 49,200 (5,600)
Interest payable 9,000 6,400 2,600
Accrued liabilities 38,800 60,400 (21,600)
Note payable 44,000 - 44,000
The accounts payable were for the purchase of merchandise. Prepaid expenses and accrued liabilities relate to the firm's selling and administrative expenses. The company's condensed income statement follows:
SIGN GRAPHICS INC.
Income Statement
for the Year Ended December 31, 20X5
Sales $713,800
Less: Cost of goods sold 323,000
Gross profit $390,800
Less: Selling & administrative expenses $186,000
Depreciation expense 17,000
Interest expense 27,000 230,000
Add: Gain on sale of land $160,800
21,800
Income before taxes $182,600
Income taxes 36,800
Net income $145,800
Other data:
1. Long-term investments were purchased for cash at a cost of $74,600.
2. Cash proceeds from the sale of land totaled $76,200.
3. Store equipment of $44,000 was purchased by signing a short-term note payable. Also, a $150,000 telecommunications system was acquired by issuing 3,000 shares of preferred stock.
4. A long-term note of $49,400 was repaid.
5. Twenty thousand shares of common stock were issued at $5.19 per share.
6. The company paid cash dividends amounting to $128,600.
Instructions
a. Prepare the operating activities section of the company's statement of cash flows,
assuming use of
1) the direct method.
2) the indirect method.
b. Prepare the investing and financing activities sections of the statement of cash flows.
Attachment:- Guidance Report.xlsx