Repaired a partial statement of cash flows for kitchenware

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Reference no: EM131287372

Q.1 Determining the Financial Statement Effects of Dividend's

Uno Company has outstanding 52,000 common shares and 25,000, $2, preferred shares. On December 1, 2014 the board of directors voted to distribute a $2 cash dividend per preferred share and a 5 percent common stock dividend n the common shares. AT the date of declaration, the common share was selling a $40, and the preferred share at 25. The dividends are to be paid, or issued, on February 15, 2015. The company's fiscal ear of December 31.

Required:

Explain the comparative effects of the two dividends on the assets, liabilities, and shareholders; equity (a) through December 31, 2014.
(b) on February 15,2015, and

Comparative Effects Explained

Item

Cash Dividend

Stock Dividend on Common

(1). Through Dec. 31, 2014

Assets, etc.

Q. 2/ Preparing the Shareholders' Equity Section after Selected Transactions

Preferred shares, no par value, cumulative, 4000 shares issued

Common shares, no par value, 125,000 shares issued

Retained earnings

$200,000

2,500,000

1,600,000

The following transactions occurred during the year

March 10 Purchased a building for $3,000,000. The seller agreed to receive 20,000 preferred shares and 15,00 common shares of Gennar in exchange for the building. The preferred shares were trading in the market at $50 per share on that day.

July 1 Declared a semi-annual cash dividend of $1.00 per common share and the required amount of dividends on preferred shares, payable on August 1, 2014, to shareholders of record on July 21,2014. The annual dividend of $2 per preferred share had not been paid in either 2013, or 2014.

August 1 Paid the cash dividend declared on July 1 to both common and preferred shareholders.

December 31 Determined that net earnings for the year were $385,000.

Required:

1/ Prepared journal entries to record the above transactions.
2/ Prepared the Shareholders' Equity section of Gennar's statement of financial position as at December 31.
Q.3/ Comparing Stock and Cash Dividends.

Ritz Company had the following shares outstanding and retained earnings at December 31, 2015:

Preferred shares, 8% (par value $25; outstanding, 9000 shares)

Common shares (outstanding, 5,000 shares)

Retained Earnings

$225,000

800,000

720,000

Considering the distribution of a cash dividend to the two groups of shareholders. No dividends were declared during 2013 or 2014. Three independent cases are assumed:
Case A: The preferred shares are non- cumulative; the totalamount of dividends is $25,000.
Case B: The preferred shares are cumulative; the total amount of dividends is $36,000.
Case C: Same as case B, except the amount id $77.500.

Required:

1. Computer the amount of dividends, in total and per share, payable to each class of shareholders for each case. Show computations.

2. Assume that the company issued a 10 percent common stock dividend on the outstanding common shares only, including an explanation of the differences.

Amount of Dollar Increase (Decrease)
Item	Cahs Dividend-Case C	Stock Dividend
Assets	$.........................	$........................
Liabilities	$.........................	$.........................
Shareholders' Equity	$.........................	$.........................

Q.4/ Prepared the Statement of Cash flows with Sale of Equipment

Wong, the sole shareholder and manager of Kitchenware Inc., has approached you and asked you to prepare a statement of cash flows for her company. The company sells kitchen utensils that are used in most households. Won is worried about the meeting that has scheduled in two weeks with a lending officer of her bank. It is times for a renew of the company's loan from the bank.

Mar provided you with the following condensed financial statements for the fiscal years ended December 1, 2013 and 2014. She assures you that the financial statements are free of any omissions' or misstatements, and that they conform to IFRS.

KITCHENWARE INC.

Statements of Earnings

For the year ended Dec.31
	2014	2013
Sales Revenue	980,000	880,000

Cost of Sales	-640,000	-560,000

Gross Profit	340,000	320,000


Operating expenses:
	-15,000	-12,000
Depreciation
	(298,800)	-288,000
Selling and general
	26,000	20,000
Earnings from Operations
	-9,600	3,200
Interest Expense
	-1,200	0
Loss on sale of furniture
	800	0
Gain on sale of investments
	16,000	16,800
Earnings before income taxes
	-4,000	-4,200
Income tax expense (@25%)
	12,000	12,600
Net Earnings

Additional information:

(a) During 2014, the company sold old furniture with an original coast of $5,000 and $3,200 of accumulated depreciation up to the date of sale.
(b) During 2014, the company sold one of the non-current investments that had cost $1,000. The gain on this sale is reported on the statement of earnings.
(c) The company considers short-term investments as cash equivalents.

Required:

1. Repaired a partial statement of cash flows for Kitchenware Inc. (USE THE INDIRECT METHOD) showing the operation activities section for the year ended December 31, 2014. The company uses the indirect method to report cash flows from operations.

2. Compute the following amounts:
(a) Cash collected from customers, assuming that 90% of the sales are on credit.
(b) Cash paid to trade suppliers of merchandise.
(c) Cash received for sale of old furniture.

3. Prepare the investing activities section of the statement of cash flows for Kitchenware Inc. for the year ended December 31, 2014

4. Compute and explain (a) the quality of earnings ratio, and
(b) free cash flow.

5. Wong proposal the furniture and fixtures be depreciated over a longer period. This change will decrease depreciation expense by $2,000 in 2013 and by $4000 in 2014. As professional accountant, would this proposed change be acceptable to you? Explain!

Need help on this stuff. With your explanation

Reference no: EM131287372

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