ACCT 1A Lecture Notes - Lecture 32: Current Liability, Promissory Note, Retained Earnings

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rosebuffalo981

18 Aug 2020

School

Irvine Valley College

Department

Accounting

Course

ACCT 1A

Professor

seilo

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Document Summary

Reporting and interpreting cash flows from financing activities. Financing activities are associated with generating capital from creditors and. This section reflects changes in two current liabilities, (1) notes payable to owners financial institutions (often called short-term debt) and current portion of long-term debt and (2) non-current liabilities and shareholders" equity accounts. Financing activities are associated with generating capital from creditors and owners, such as: 1) proceeds from issuance of short- and long-term debt: This represents cash received from borrowing from banks and other financial institutions and from issuance of long-term debt (ex: notes) to the public. If the debt is issued for other than cash (ex: issued directly to a supplier of equipment to pay for a purchase), it is not included in the statement. 2) principal payments on short- and long-term debt: Cash outflows associated with debt include the periodic repayment of principal as well as interest payments. 3) proceeds from the issuance of shares:

Related Questions

Following are comparative balance sheets for Millco, Inc., atJanuary 31 and February 28, 2011:

MILLCO, INC. Balance Sheets February 28 and January 31, 2011
Assets	February 28			January 31
Cash	$	42,000		$	37,000
Accounts receivable		64,000			53,000
Merchandise inventory		81,000			94,000

Total current assets	$	187,000		$	184,000
Plant and equipment:
Production equipment		166,000			152,000
Less: Accumulated depreciation		(24,000	)		(21,000)

Total assets	$	329,000		$	315,000

Liabilities
Accounts payable	$	37,000		$	41,000
Short-term debt		44,000			44,000
Other accrued liabilities		21,000			24,000

Total current liabilities	$	102,000		$	109,000
Long-term debt		33,000			46,000

Total liabilities	$	135,000		$	155,000

Owners' Equity
Common stock, no par value, 40,000 shares authorized, 30,000 and28,000 shares issued, respectively	$	104,000		$	96,000
Retained earnings:
Beginning balance	$	64,000		$	43,000
Netincome for month		36,000			29,000
Dividends		(10,000	)		(8,000)

Ending balance	$	90,000		$	64,000

Total owners' equity	$	194,000		$	160,000

Total liabilities and owners' equity	$	329,000		$	315,000

Required:

(a)

Calculate the change that occurredin cash during the month. You may assume that the change in eachbalance sheet amount is due to a single event (for example, thechange in the amount of production equipment is not the result ofboth a purchase and sale of equipment). (Hints: What is thepurpose of the statement of cash flows? How is this purposeaccomplished?) Because the retained earnings section of thebalance sheet is, in and of itself, an analysis of the change inthe retained earnings account for the month, the row for net incomeand dividends should be entered as the February amount and not thechange. Use the space to the right of the January 31 data to enterthe difference between the February 28 and January 31 amounts ofeach balance sheet item. (Negative amount should beindicated by a minus sign. Leave no cells blank - be certain toenter "0" wherever required.Omit the "$" sign in yourresponse.)

MILLCO, INC. Balance Sheets February 28 and January 31, 2011
Assets	February 28			January 31			Change
Cash	$	42,000		$	37,000
Accounts receivable		64,000			53,000
Merchandise inventory		81,000			94,000

Total current assets	$	187,000		$	184,000
Plant and Equipment:
Production equipment		166,000			152,000
Less: Accumulated depreciation		(24,000	)		(21,000	)

Total assets	$	329,000		$	315,000

Liabilities:
Accounts payable	$	37,000		$	41,000
Short-term debt		44,000			44,000
Other accrued liabilities		21,000			24,000

Total current liabilities	$	102,000		$	109,000
Long-term debt		33,000			46,000

Total liabilities	$	135,000		$	155,000

Owners' Equity
Common stock, no par value, 40,000 shares authorized, 30,000 and 28,000 shares issued, respectively	$	104,000		$	96,000

Retained earnings:
Beginning balance	$	64,000		$	43,000
Netincome for month		36,000			29,000
Dividends		(10,000	)		(8,000	)

Ending balance	$	90,000		$	64,000

Total owners' equity	$	194,000		$	160,000

Total liabilities and owners' equity	$	329,000		$	315,000

(b)	Prepare a statement of cash flowsthat explains above changes? (Negative amount should beindicated by a minus sign.Omit the "$" sign in yourresponse.)

MILLCO, INC. Statement of Cash Flows For the Month Ended February 28, 2011
Cashflows from operating activities:
Netincome	$
Add(deduct) items not affecting cash:
depreciation expense
decrease in merchendise inventory
increase in accounts recievable
decrease in other accured liabilities
decrease in accounts payable

Netcash provided by operating activities		$
Cashflows from investing activities:
Purchases of production equipment
Cashflows from financing activities:
saleof common stock	$
payment of long term debt
payment of divedends

Netcash flows used by financing activities

Netincrease in cash for the year		$

blushgoldfish745

Following are comparative balance sheets for Millco, Inc., at January 31 and February 28, 2011: MILLCO, INC.Balance SheetsFebruary 28 and January 31, 2011 Assets February 28 January 31 Cash $ 42,000 $ 37,000 Accounts receivable 64,000 53,000 Merchandise inventory 81,000 94,000 Total current assets $ 187,000 $ 184,000 Plant and equipment: Production equipment 166,000 152,000 Less: Accumulated depreciation (24,000 ) (21,000) Total assets $ 329,000 $ 315,000 Liabilities Accounts payable $ 37,000 $ 41,000 Short-term debt 44,000 44,000 Other accrued liabilities 21,000 24,000 Total current liabilities $ 102,000 $ 109,000 Long-term debt 33,000 46,000 Total liabilities $ 135,000 $ 155,000 Owners' Equity Common stock, no par value, 40,000 shares authorized, 30,000 and 28,000 shares issued, respectively $ 104,000 $ 96,000 Retained earnings: Beginning balance $ 64,000 $ 43,000 Net income for month 36,000 29,000 Dividends (10,000 ) (8,000) Ending balance $ 90,000 $ 64,000 Total owners' equity $ 194,000 $ 160,000 Total liabilities and owners' equity $ 329,000 $ 315,000 Required:(a) Calculate the change that occurred in cash during the month. You may assume that the change in each balance sheet amount is due to a single event (for example, the change in the amount of production equipment is not the result of both a purchase and sale of equipment). (Hints: What is the purpose of the statement of cash flows? How is this purpose accomplished?) Because the retained earnings section of the balance sheet is, in and of itself, an analysis of the change in the retained earnings account for the month, the row for net income and dividends should be entered as the February amount and not the change. Use the space to the right of the January 31 data to enter the difference between the February 28 and January 31 amounts of each balance sheet item. (Negative amount should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required.Omit the "$" sign in your response.) MILLCO, INC.Balance SheetsFebruary 28 and January 31, 2011 Assets February 28 January 31 Change Cash $ 42,000 $ 37,000 Accounts receivable 64,000 53,000 Merchandise inventory 81,000 94,000 Total current assets $ 187,000 $ 184,000 Plant and Equipment: Production equipment 166,000 152,000 Less: Accumulated depreciation (24,000 ) (21,000 ) Total assets $ 329,000 $ 315,000 Liabilities: Accounts payable $ 37,000 $ 41,000 Short-term debt 44,000 44,000 Other accrued liabilities 21,000 24,000 Total current liabilities $ 102,000 $ 109,000 Long-term debt 33,000 46,000 Total liabilities $ 135,000 $ 155,000 Owners' Equity Common stock, no par value, 40,000 shares authorized, 30,000 and 28,000 shares issued, respectively $ 104,000 $ 96,000 Retained earnings: Beginning balance $ 64,000 $ 43,000 Net income for month 36,000 29,000 Dividends (10,000 ) (8,000 ) Ending balance $ 90,000 $ 64,000 Total owners' equity $ 194,000 $ 160,000 Total liabilities and owners' equity $ 329,000 $ 315,000 (b) Prepare a statement of cash flows that explains above changes? (Negative amount should be indicated by a minus sign.Omit the "$" sign in your response.)MILLCO, INC.Statement of Cash FlowsFor the Month Ended February 28, 2011 Cash flows from operating activities: Net income $ Add (deduct) items not affecting cash: Net cash by operating activities $ Cash flows from investing activities: Purchases of production equipment Cash flows from financing activities: $ Net cash flows by financing activities Net in cash for the year $

apricothound714

Data Table

Outdoor Adventure Company
Comparative Balance Sheet
December 31, 2019 and 2018
		2019	2018
Assets
Current Assets:
	Cash	$1,398,330	$14,790
	Short-term Investments, net	29,000	0
	Accounts Receivable, net	1,600	6,300
	Merchandise Inventory	400	0
	Office Supplies	70	300
	Prepaid Rent	0	2,000
Property, Plant, and Equipment:
	Land	615,000	75,000
	Building	944,000	94,000
	Canoes	13,920	13,920
	Office Furniture and Equipment	140,000	0
	Accumulated DepreciationâPP&E	(31,920)	(1,740)
Total Assets		$3,110,400	$204,570
Liabilities
Current Liabilities:
	Accounts Payable	$6,420	$4,400
	Utilities Payable	550	250
	Telephone Payable	640	290
	Wages Payable	3,700	1,200
	Notes Payable	18,000	0
	Interest Payable	630	30
	Unearned Revenue	650	450
Long-Term Liabilities:
	Notes Payable	6,720	6,720
	Mortgage Payable	725,000	0
	Bonds Payable	1,000,000	0
	Discount on Bonds Payable	(1,140)	0
Total Liabilities		1,761,170	13,340
Stockholders' Equity
Paid-In Capital:
	Preferred Stock	60,000	0
	Paid-In Capital in Excess of ParâPreferred	480,000	0
	Common Stock	229,000	189,000
	Paid-In Capital in Excess of ParâCommon	240,000	0
Retained Earnings		340,230	2,230
Total Stockholders' Equity		1,349,230	191,230
Total Liabilities and Stockholders' Equity		$3,110,400	$204,570

1.	Theincome statement for 20192019 included the following items:
	a.	Net income, $ 435 comma 000$435,000
	b.	Depreciation expense for the year, $ 30 comma 180$30,180.
	c.	Amortization on the bonds payable, $ 380$380.
2.	There were no disposals of property, plant and equipment duringthe year. All acquisitions of PP&E were for cash except theland, which was acquired by issuing preferred stock.
3.	Thecompany issued bonds payable with a face value of $ 1 comma 000 comma 000$1,000,000 , receiving cash of $ 998 comma 480$998,480.
4.	Thecompany distributed 8 comma 0008,000 shares of common stock in a stock dividend when the market valuewas $ 9.00$9.00 per share. All other dividends were paid in cash.
5.	The common stock, except for the stock dividend, was issued forcash.
6.	Thecash receipt from the notes payable in 20192019 is considered a financing activity because it does not relate tooperations.

Net Cash Provided by (Used for) Investing Activities

(990,000)

Cash Flows From Financing Activities:
Cash Receipt from Issuance of Common Stock
Cash Receipt from Issuance of Notes Payable
Cash Receipt from Issuance of Mortgage Payable
Cash Receipt from Issuance of Bonds Payable
Cash Payment of Dividends
Net Cash Provided by (Used for) Financing Activities

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ACCT 1A Lecture Notes - Lecture 32: Current Liability, Promissory Note, Retained Earnings

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