The comparative balance sheets for 2016 and 2015 are givenbelow for Surmise Company. Net income for 2016 was $82million. SURMISE COMPANY Comparative Balance Sheets December 31, 2016 and 2015 ($ in millions) 2016 2015 Assets Cash $ 88 $ 37 Accounts receivable 90 108 Less: Allowance for uncollectible accounts (24) (3) Prepaid expenses 18 17 Inventory 139 116 Long-term investment 141 100 Land 102 102 Buildings and equipment 400 275 Less: Accumulated depreciation (140) (110) Patent 26 28 $ 840 $ 670 Liabilities Accounts payable $ 24 $ 44 Accrued liabilities (2) 21 Notes payable 50 0 Lease liability 125 0 Bonds payable 66 136 Shareholdersâ Equity Common stock 70 50 Paid-in capitalâexcess of par 263 205 Retained earnings 244 214 $ 840 $ 670 Required: Prepare the statement of cash flows of Surmise Company for theyear ended December 31, 2016. Use the indirect method to presentcash flows from operating activities because you do not havesufficient information to use the direct method. You will need tomake reasonable assumptions concerning the reasons for changes insome account balances. A spreadsheet or T-account analysis will behelpful. (Enter your answers in millions (i.e., 10,000,000 shouldbe entered as 10). Amounts to be deducted should be indicated witha minus sign.) rev: 05_13_2015_QC_CS-15794 ReferenceseBook & Resources Financial StatementsLearning Objective: 21-04 Determine cashflows from operating activities by the indirect method. Difficulty: 3 HardLearning Objective: 21-08 Prepare astatement of cash flows with the aid of a spreadsheet orT-accounts. Check my work
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| The comparative balance sheets for 2016 and 2015 and the statement of income for 2016 are given below for Wright Company. Additional information from Wright's accounting records is provided also. |
| WRIGHT COMPANY Comparative Balance Sheets December 31, 2016 and 2015 ($ in 000s) | ||||
| 2016 | 2015 | |||
| Assets | ||||
| Cash | $ | 109 | $ | 70 |
| Accounts receivable | 110 | 115 | ||
| Short-term investment | 52 | 24 | ||
| Inventory | 115 | 110 | ||
| Land | 82 | 100 | ||
| Buildings and equipment | 615 | 480 | ||
| Less: Accumulated depreciation | (163) | (115) | ||
| $ | 920 | $ | 784 | |
| Liabilities | ||||
| Accounts payable | $ | 35 | $ | 43 |
| Salaries payable | 6 | 8 | ||
| Interest payable | 7 | 5 | ||
| Income tax payable | 7 | 11 | ||
| Notes payable | 0 | 27 | ||
| Bonds payable | 234 | 180 | ||
| Shareholders' Equity | ||||
| Common stock | 355 | 280 | ||
| Paid-in capitalâexcess of par | 161 | 140 | ||
| Retained earnings | 115 | 90 | ||
| $ | 920 | $ | 784 | |
| WRIGHT COMPANY Income Statement For Year Ended December 31, 2016 ($ in 000s) | ||||
| Revenues: | ||||
| Sales revenue | $ | 460 | ||
| Expenses: | ||||
| Cost of goods sold | $ | 210 | ||
| Salaries expense | 67 | |||
| Depreciation expense | 48 | |||
| Interest expense | 17 | |||
| Loss on sale of land | 4 | |||
| Income tax expense | 64 | 410 | ||
| Net income | $ | 50 | ||
| Additional information from the accounting records: | |
| a. | Land that originally cost $18,000 was sold for $14,000. |
| b. | The common stock of Microsoft Corporation was purchased for $28,000 as a short-term investment not classified as a cash equivalent. |
| c. | New equipment was purchased for $135,000 cash. |
| d. | A $27,000 note was paid at maturity on January 1. |
| e. | On January 1, 2016, bonds were sold at their $54,000 face value. |
| f. | Common stock ($75,000 par) was sold for $96,000. |
| g. | Net income was $50,000 and cash dividends of $25,000 were paid to shareholders. |
| Required: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Prepare the statement of cash flows of Wright Company for the year ended December 31, 2016. Present cash flows from operating activities by the direct method. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands (i.e., 5,000 should be entered as 5).) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Portions of the financial statements for Parnell Company are provided below.
| PARNELL COMPANY Income Statement For the Year Ended December 31, 2016 ($ in 000s) |
| Revenues and gains: | |||||
| Sales | $710 | ||||
| Gain on sale of buildings | 12 | $ | 722 | ||
| Expenses and loss: | |||||
| Cost of goods sold | $255 | ||||
| Salaries | 111 | ||||
| Insurance | 31 | ||||
| Depreciation | 114 | ||||
| Interest expense | 41 | ||||
| Loss on sale of machinery | 12 | 564 | |||
| Income before tax | 158 | ||||
| Income tax expense | 79 | ||||
| Net income | $ | 79 | |||
| PARNELL COMPANY Selected Accounts from Comparative Balance Sheets December 31, 2016 and 2015 ($ in 000s) | ||||
| Year | ||||
| 2016 | 2015 | Change | ||
| Cash | $125 | $109 | $16 | |
| Accounts receivable | 315 | 225 | 90 | |
| Inventory | 330 | 416 | (86 | ) |
| Prepaid insurance | 67 | 79 | (12 | ) |
| Accounts payable | 201 | 126 | 75 | |
| Salaries payable | 120 | 102 | 18 | |
| Deferred income tax liability | 78 | 61 | 17 | |
| Bond discount | 185 | 209 | (24 | ) |
| Required: | |
| 1. | Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using the direct method. (Enter your answers in thousands (i.e., 5,000 should be entered as 5). Amounts to be deducted should be indicated with a minus sign.) 2. Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using the indirect method. (Enter your answers in thousands (i.e., 5,000 should be entered as 5). Amounts to be deducted should be indicated with a minus sign.) |
24. Jones Co. invests $10,000 @ 10% per year, compounded annually for six years. 4 points The PV of 1 is .7903 and the amount or future value of 1 is 1.7716. $_________
25. Jones Co. wants $25,000 in 6 years. The PV of 1 is .7903 and the amount of 1 is 1.7716. 4 points How much should he invest in Year 1? ____________
26. Assume you invest 1,000 each year for 5 years? How much will be in the fund on 12/31 Year 5? The FV of an annuity is 5.5256 and the PV of an annuity is 5.8019. 3 pts
$_________
28. The following is a comparative balance sheet for Top Ten Clothiers Inc. for the years 2016 and 2015: 14 points
| Top Ten Clothiers Inc. Comparative Balance Sheet December 31, 2016 and 2015 | ||
| Assets | 2016 | 2015 |
| Cash .................................. | $ 43,000 | $ 240,000 |
| Accounts receivable ................... | 390,000 | 210,000 |
| Inventory ............................. | 360,000 | 450,000 |
| Long-term investments ................. | 0 | 120,000 |
| Total assets ........................ | $ 793,000 | $1,020,000 |
| Liabilities and Equities | ||
| Accounts payable ...................... | $ 150,000 | $ 240,000 |
| Operating expenses payable ............ | 48,000 | 30,000 |
| Bonds payable ......................... | 140,000 | 200,000 |
| Common stock .......................... | 250,000 | 250,000 |
| Retained earnings ..................... | 205,000 | 300,000 |
| Total liabilities and equities ...... | $ 793,000 | $1,020,000 |
The income statement for the year ended December 31, 2016, follows:
| Top Ten Clothiers Income Statement For the Year Ended December 31, 2016 | ||
| Sales | $1,120,000 | |
| Cost of goods sold: | ||
| Beginning inventory, January 1, 2016 | $ 450,000 | |
| Purchases ........................... | 660,000 | |
| Cost of goods available ............. | $1,110,000 | |
| Less ending inventory, December 31, 2016 ............................... | 360,000 | 750,000 |
| Gross profit on sales ................. | $ 370,000 | |
| Operating expenses ... | 360,000 | |
| Operating income ...................... | $ 10,000 | |
| Other revenues and expenses: | ||
| Loss on sale of long-term investment | (15,000) | |
| Net loss .............................. | $ (5,000) | |
After paying cash dividends, the decrease in retained earnings totaled $95,000. Management is alarmed by the shrinkage in the company's cash position during 2016. Prepare a partial statement of cash flows for 2016 using the direct method.
| Top Ten Clothiers Inc. Statement of Cash Flows For the Year Ended December 31, 2016 | ||
| Cash flows from operating activities: | ||
| Cash receipts from customers ......? | $ ,000 | |
| Cash payments for: | ||
| Finished Goods Inventory ...... ? | ||
| Operating expenses except 18,000 were in cash.. | ,000 | ,000 |
| Net cash used in operating activities . | $ | |
| Sales .......................................... | $ ,000 |
| Accounts Receivable, beginning ................. | |
| Accounts Receivable, ending .................... | |
| Cash collected from customers ................ | $ |
| Purchases ...................................... | $ ,000 |
| Accounts Payable, beginning .................... | |
| Accounts Payable, ending ....................... | |
| Cash payments for inventory .................... | $ ,000 |
