ACC 331 Chapter Notes - Chapter 4: Earnings Before Interest And Taxes, Income Statement, Retained Earnings

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1 Nov 2018

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Chapter 4 questions 1-8, 13: the income statement is a change statement. The income statement summarizes the pro t generating activities that occurred during a particular reporting period. The income statement measures the change in shareholder"s equity from one period to the next. Retained earnings are a part of shareholder"s equity. Retained earnings measure the changes in net income since the company"s inception. Essentially, the income statement shows the changes in a company"s comprehensive income over time. Comprehensive income includes net income as well as other gains and losses. Brie y explain why it is important to segregate income from continuing operations from other transactions a ecting net income. Revenue, expenses, gains, and losses arising from operations are included in income from continuing operations. The accounts included in this category help investors and creditors understand the company"s ability to generate cash in the future. These accounts also assess which components of net income are likely to continue in the future.

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IKIBAN INC. Comparative Balance Sheets June 30, 2015 and 2014
	2015			2014
Assets
Cash	$	96,500		$	56,200
Accounts receivable, net		69,300			51,400
Inventory		66,600			96,800
Prepaid expenses		5,100			6,400

Total current assets		237,500			210,800
Equipment		135,200			120,000
Accum. depreciationâEquipment		(28,900	)		(10,500	)

Total assets	$	343,800		$	320,300

Liabilities and Equity
Accounts payable	$	26,900		$	32,200
Wages payable		7,100			16,700
Income taxes payable		2,500			4,100

Total current liabilities		36,500			53,000
Notes payable (long term)		42,000			70,000

Total liabilities		78,500			123,000
Equity
Common stock, $5 par value		240,000			189,000
Retained earnings		25,300			8,300

Total liabilities and equity	$	343,800		$	320,300

IKIBAN INC. Income Statement For Year Ended June 30, 2015
Sales			$	673,000
Cost of goods sold				407,000

Gross profit				266,000
Operating expenses
Depreciation expense	$	53,000
Other expenses		66,900

Total operating expenses				119,900

				146,100
Other gains (losses)
Gain on sale of equipment				2,600

Income before taxes				148,700
Income taxes expense				59,480

Net income			$	89,220

a. A $28,000 note payable is retired at its $28,000 carrying (book) value in exchange for cash.

b. The only changes affecting retained earnings are net income and cash dividends paid.

c. New equipment is acquired for $63,800 cash.

d. Received cash for the sale of equipment that had cost $48,600, yielding a $2,600 gain.

e. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.

f. All purchases and sales of inventory are on credit.

IKIBAN, INC.
Statement of Cash Flows (Indirect Method)
For Year Ended June 30, 2015
Cash flows from operating activities

Adjustments to reconcile net income to net cash provided by operating activities
Income statement items not affecting cash



Changes in current operating assets and liabilities







		$0
Cash flows from investing activities



		0
Cash flows from financing activities




		0
Net increase (decrease) in cash		$0
Cash balance at prior year-end
Cash balance at current year-end		$0

Cash Flow on Total Assets Ratio
Choose Numerator:	/	Choose Denominator:	=	Cash Flow on Total Assets Ratio
	/		=	Cash flow on total assets ratio
	/		=

(2) Compute the company's cash flow on total assets ratio for its fiscal year 2015.

copperwildebeest615

IKIBAN INC.
Comparative Balance Sheet
June 30, 2018, and 2017

	2018	2017
Assets
Cash	$73,100	$68,000
Accounts Receivable, net	$101,000	$75,000
Inventory	$87,800	$122,500
Prepaid Expenses	$6,800	$10,200
Total Current Assets	$268,700	$275,700
Equipment	$148,000	$139,000
Accum. Depreciation - Equipment	($39,000)	($21,000)
Total Assets	$377,700	$393,700

Liabilities and Equity
Accounts Payable	$49,000	$66,000
Wages Payable	$8,400	$19,800
Income Taxes Payable	$5,800	$8,600
Total current liabilities	$63,200	$94,400
Notes Payable (long-term)	$54,000	$84,000
Total liabilities	$117,200	$178,400
Equity
Common stock, $5 par value	$268,000	$184,000
Retained Earnings	($7,500)	$31,300
Total liabilities and equity	$377,700	$393,700

IKIBAN INC.
Income Statement
For Year Ended June 30, 2018

Sales		$798,000
Cost of goods sold		$435,000
Gross Profit		$363,000
Operating Expenses:
Depreciation Expenses	$82,600
Other Expenses	$91,000	$173,600
Total operating expenses		$189,400
Other gains (losses):
Gain on sale of equipment		$4,400
Income before taxes		$193,800
Income taxes expenses		$46,290
Net Income		$147,510

Additional Information:

a. A $30,000 note payable is retired at its $30,000 carrying (book) value in exchange for cash.

b. The only changes affecting retained earnings are net income and cash dividends paid.

c. New equipment is acquired for $81,600 cash.

d. Received cash for the sale of equipment that had cost $72,600, yielding a $4,400 gain.

e. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.

f. All purchases and sales of inventory are on credit.

Required:

1. Prepare the Cash Flow Statement using the indirect method.

2. Compute the Cash Flow on Total Assets ratio in 2018.

violetfrog999

the chief accountant for grandveiw corporation provides you withthe companys 2016 stateent of cash flows and income statement theacountant has asked for your help with some missing figures in thecomopanys comprehensive balance sheets these financial statementsare shown next ($ in millions)

Grandveiw corp

statement of cash flows

for the year ended decemeber 31 2016

cash flows from operating activities

Collection from customer 71

payment to supplier (30)

Payment of general an administrative expenses (18)

payment of income taxes (9)

net cash from operatingactivites 14

cash flows from investing activites:

sale ofinvestments 65

Cash flows from financing activites:

issuance of common stock 10

Payment of divedends (3)

net cash flows from financingactivites 7

net increase incash 86

âGrandveiw corporation

income statement

for the year ended dec 31 2016

salesrevenue 80

cogs 32

grossprofit 48

operatingexpenses

General and admin. depreciation 18

Deprec. 10

total operatingexpenses 28

operatingincome 20

other income

gain on sale ofinvest. 15

income b4 taxes 35

income taxexpense 7

netincome 2

grandveiw corp

balance sheets

At dec 31 2016

assets 2016 2015

cash 145 ?

a/r ? 84

investments - 50

inventory 60 ?

property plant equipment 150 150

less accumulated dep. (65) ?

total assets? ?

liab. and shareholders equity

accounts payable to suplliers 40 30

payable for selling and admin. expenses 9 9

income tax payable 22 ?

common stock 240 230

retained earnings ? 47

total liabilites and shareholdersequity ? ?

Required:

1. calculate missing amounts

2. Prepare the operating activites section of Grandveiw 2016statement of cash fllows using the indirect method.

Show all your work!

taupewombat834

ACC 331 Chapter Notes - Chapter 4: Earnings Before Interest And Taxes, Income Statement, Retained Earnings

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