ACCT 1201 Chapter Notes - Chapter 12: Treasury Stock, Promissory Note, Cash Flow
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26 Jan 2015
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A short-term, highly liquid investment with an original maturity of less than 3 months: relationship to the balance sheet and income statement. Cash= liaiblities+ stockholder s" equity noncash assets of cash of cash if: if: source. Cash flows from operating activities: cash inflow from operating activities: Cash interests and cash dividends received from investments in other companies: cash outflow from operating activities: Reports the components as gross receipts and gross payments. Net income +/ adjustments for non-cash items: steps of using indirect method. Step 1: adjust net income for depreciation and amortization expense and gains and losses on sale of investing assets such as property, plant, and equipment and investments. Gains on sales of property, plant, and equipment are subtracted and losses on such sales are added to convert net income to cash flow from operating activities. Step 2: adjust net income for changes in assets and liabilities marked as operating (o)
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Pronghorn Inc., a greeting card company, had the following statements prepared as of December 31, 2017.
PRONGHORN INC. | ||||||
12/31/17 | 12/31/16 | |||||
Cash | $6,100 | $6,900 | ||||
Accounts receivable | 62,500 | 51,000 | ||||
Short-term debt investments (available-for-sale) | 34,800 | 18,100 | ||||
Inventory | 39,600 | 60,200 | ||||
Prepaid rent | 4,900 | 4,000 | ||||
Equipment | 154,500 | 130,100 | ||||
Accumulated depreciationâequipment | (34,800 | ) | (25,300 | ) | ||
Copyrights | 46,300 | 50,400 | ||||
Total assets | $313,900 | $295,400 | ||||
Accounts payable | $46,000 | $40,200 | ||||
Income taxes payable | 4,000 | 6,000 | ||||
Salaries and wages payable | 8,100 | 4,000 | ||||
Short-term loans payable | 8,000 | 10,000 | ||||
Long-term loans payable | 59,700 | 69,000 | ||||
Common stock, $10 par | 100,000 | 100,000 | ||||
Contributed capital, common stock | 30,000 | 30,000 | ||||
Retained earnings | 58,100 | 36,200 | ||||
Total liabilities & stockholdersâ equity | $313,900 | $295,400 |
PRONGHORN INC. | ||||
Sales revenue | $339,075 | |||
Cost of goods sold | 175,000 | |||
Gross profit | 164,075 | |||
Operating expenses | 119,900 | |||
Operating income | 44,175 | |||
Interest expense | $11,300 | |||
Gain on sale of equipment | 2,000 | 9,300 | ||
Income before tax | 34,875 | |||
Income tax expense | 6,975 | |||
Net income | $27,900 |
Additional information:
1. | Dividends in the amount of $6,000 were declared and paid during 2017. | |
2. | Depreciation expense and amortization expense are included in operating expenses. | |
3. | No unrealized gains or losses have occurred on the investments during the year. | |
4. | Equipment that had a cost of $19,900 and was 70% depreciated was sold during 2017. |
Prepare a statement of cash flows using the indirect method.
Statement of Cash Flows | |||||||
Angela's Cleaning Consortium | Seymour-Johnson, Inc. | ||||||
Comparative Balance Sheet | Income Statement | ||||||
December 31, 2020 and 2019 | For the Year Ended December 31, 2020 | ||||||
2020 | 2019 | Net sales | $ 386,000 | ||||
ASSETS | Cost of goods sold | (212,000) | |||||
Current assets | Gross profit | 174,000 | |||||
Cash | $ 66,500 | $ 62,000 | Operating expenses | ||||
Accounts receivable | 95,000 | 113,000 | Salaries and wages expense | (66,000) | |||
Merchandise inventory | 172,000 | 165,000 | Depreciation expense | (25,000) | |||
Total current assets | 333,500 | 340,000 | Other operating expenses | (28,000) | |||
Long-term investments | Income from operations | 55,000 | |||||
Investment in Walking Dead Co. | - | 50,000 | Other revenues and gains | ||||
Property, buildings, and equipment | 507,000 | 304,000 | Interest revenue | 15,000 | |||
Less: Accumulated depreciation | (59,500) | (42,000) | Dividend revenue | 9,700 | |||
Total assets | $ 781,000 | $ 652,000 | Gain on disposal of plant assets | 12,000 | |||
Liabilities and Stockholders' Equity | Other expenses and losses | ||||||
Current liabilities | Interest expense | (15,000) | |||||
Accounts payable | $ 144,000 | $ 175,000 | Income before income taxes | 76,700 | |||
Accrued liabilities | 17,000 | 47,000 | Income tax expense | (14,000) | |||
Total current assets | 161,000 | 222,000 | Net Income | $ 62,700 | |||
Long-term Liabilities | |||||||
Notes payable, long-term | 160,000 | 90,000 | |||||
Totalliabilities | 321,000 | 312,000 | |||||
Stockholders' equity | |||||||
Common stock | 370,000 | 250,000 | |||||
Retained earnings | 140,000 | 90,000 | |||||
Treasury stock | (50,000) | - | |||||
TotalStockholdersâ Equity | 460,000 | 340,000 | |||||
Total Liabilities & Stockholders' Equity | $ 781,000 | $ 652,000 | |||||
Additional Information: | |||||||
A. Sold plant assets with a cost of$75,000 and accumulated depreciation of $7,500, | |||||||
yielding again of disposal of plant assets of $12,000. | |||||||
B. Purchased plant assets by payingcash. | |||||||
C. Issued Notes Payable for Cash. | |||||||
D. Sold investment in Walking Dead Coat cost (zero gain/loss). | |||||||
E. Issued Common Stock for Cash. | |||||||
F. Purchased Treasury Stock for Cash. | |||||||
Requirements: | |||||||
Prepare, in good form, a Statement of Cash Flowsusing the indirect method. |