ACCT207 Study Guide - Final Guide: Common Stock, Accrual, Deferral
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Erroneous Statement of Cash Flows
Ryan Company's bookkeeper prepared the following 2016 statement of cash flows:
Flows of Cash Statement December 31, 2016 | |||
Sources (Inflows) of Cash | |||
Net Source from Operations | |||
Net income | $47,800 | ||
Add: Cash receipt from sale of land | 6,500 | ||
Inflow from issuing 10% bonds payable | 25,000 | ||
Depreciation expense | 13,200 | ||
Reduction in inventory | 1,900 | ||
Less: Outflow to buy equipment | (16,400) | ||
Increase in prepaid expenses | (700) | ||
Cash (principal) paid on long-term note | (9,500) | ||
ordinary gain | (2,000) | ||
Total source from operations | $65,800 | ||
Other Sources (Inflows) of Cash | |||
Loss on sale of land | $2,300 | ||
Increase in accounts payable | 1,000 | ||
Cash from issuing preferred stock | 38,700 | ||
Patent amortization expense | 2,100 | ||
Total other sources of cash | 44,100 | ||
Sources (Financing) Not Affecting Cash | |||
Issuance of common stock for patent | 11,000 | ||
Total inflows of cash | $120,900 | ||
Uses (Outflows) of Cash | |||
To purchase building | $(62,000) | ||
Increase in accounts receivable | (7,800) | ||
For acquiring marketable securities | (7,100) | ||
Decrease in income taxes payable | (1,400) | ||
Total uses of cash | (78,300) | ||
Uses (Investing) Not Affecting Cash | |||
Acquisition of patent by issuing common stock | (11,000) | ||
Net inflow before dividends | $ 31,600 | ||
Less: Cash dividends | (24,000) | ||
Net increase in cash | $7,600 | ||
Cash, January 1, 2016 | 15,300 | ||
Cash, December 31, 2016 | $22,900 |
After a thorough investigation, you have determined that the amounts of the items listed on the statement are correct. However, you notice several items that are incorrectly classified and reported.
Required
Prepare a corrected 2016 statement of cash flows for the Ryan Company. Use the minus sign to indicate cash outflows, a decrease in cash or cash payments.
Operating Activities
________________ __________
Adjustment for non cash income items:
________________ __________
________________ __________
________________ __________
________________ __________
Adjustments for cash flow effects from working capital items:
________________ __________
________________ __________
________________ __________
________________ __________
________________ __________
Net cash provided by operating activities ____________
Investing Activities:
________________ __________
________________ __________
________________ __________
________________ __________
Net cash used for investing activities _________
Financing Activities:
________________ __________
________________ __________
________________ __________
________________ __________
Net cash provided by financing activies _________
Net increase in cash _________
Cash, january 1, 2016 _________
Cash, december 31, 2016 _________
Investing and Financing Activities not Affecting Cash
Investing Activities:
Acquistion of patent by issuing commons stock ______________
Financing Activities:
Issuance of common stock for patent ____________
Statement of Changes in Financial Position
A. From the perspective of an investor, determine whether or notyou would invest in Target Corporation based onthe company's statement of changes in financial position (SCFP).Support your opinion.
B. Review Target Corporation's SCFP for any concerns that mayneed to be addressed. As controller of Target Corporation, preparea memo to your CEO, giving a summary report for possiblerecommendations.
Cash flow statement
Period Ending | 1/28/2017 | 1/30/2016 | |
Cash Flow Statement | |||
Net Income | $2,737,000 | $3,363,000 | |
Cash Flow-Operating Activities | |||
Depreciation | $2,298,000 | $2,213,000 | |
Net Income Adjustments | $508,000 | ($812,000) | |
Changes in Operating Activities | |||
Accounts Receivable | $0 | $0 | |
Changes in Inventories | $293,000 | ($316,000) | |
Other Operating Activities | $36,000 | $227,000 | |
Liabilities | ($543,000) | $579,000 | |
Net Cash Flow-Operating | $5,436,000 | $5,958,000 | |
Cash flows-Investing Activities | |||
Capital Expenditures | ($1,547,000) | ($1,438,000) | |
Investments | $28,000 | $24,000 | |
Other Investing Activities | $46,000 | $1,922,000 | |
Net Cash Flows-Investing | ($1,473,000) | $508,000 | |
Cash Flows-Financing Activities | |||
Sale and Purchase of Stock | ($3,485,000) | ($3,183,000) | |
Net Borrowings | ($664,000) | ($85,000) | |
Other Financing Activities | $0 | $0 | |
Net Cash Flows-Financing | ($5,497,000) | ($4,630,000) | |
Effect of Exchange Rate | $0 | $0 | |
Net Cash Flow | ($1,534,000) | $1,836,000 | |
Financial Ratios | |||
Liquidity Ratios | |||
Current Ratio | 94% | 112% | |
Quick Ratio | 29% | 44% | |
Cash Ratio | 20% | 32% | |
Profitability Ratio | |||
Gross Margin | 30% | 30% | |
Operating Margin | 7% | 7% | |
Pre-Tax Margin | 6% | 7% | |
Profit Margin | 4% | 5% |
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