AFM101 Lecture Notes - Lecture 8: Free Cash Flow, Accrual, Cash Flow
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Golden Corp., a merchandiser, recently completed its 2015operations. For the year, (1) all sales are credit sales, (2) allcredits to Accounts Receivable reflect cash receipts fromcustomers, (3) all purchases of inventory are on credit, (4) alldebits to Accounts Payable reflect cash payments for inventory, (5)Other Expenses are all cash expenses, and (6) any change in IncomeTaxes Payable reflects the accrual and cash payment of taxes. Thecompanyâs balance sheets and income statement follow.
GOLDEN CORPORATION Comparative Balance Sheets December 31, 2015 and 2014 | ||||||
2015 | 2014 | |||||
Assets | ||||||
Cash | $ | 175,000 | $ | 120,000 | ||
Accounts receivable | 82,000 | 66,000 | ||||
Inventory | 605,000 | 528,000 | ||||
Total current assets | 862,000 | 714,000 | ||||
Equipment | 334,000 | 303,000 | ||||
Accum. depreciationâEquipment | (157,000 | ) | (106,000 | ) | ||
Total assets | $ | 1,039,000 | $ | 911,000 | ||
Liabilities and Equity | ||||||
Accounts payable | $ | 82,000 | $ | 73,000 | ||
Income taxes payable | 32,000 | 27,000 | ||||
Total current liabilities | 114,000 | 100,000 | ||||
Equity | ||||||
Common stock, $2 par value | 594,000 | 572,000 | ||||
Paid-in capital in excess of par value, commonstock | 195,000 | 162,000 | ||||
Retained earnings | 136,000 | 77,000 | ||||
Total liabilities and equity | $ | 1,039,000 | $ | 911,000 | ||
GOLDEN CORPORATION Income Statement For Year Ended December 31, 2015 | |||||
Sales | $ | 1,802,000 | |||
Costof goods sold | 1,088,000 | ||||
Gross profit | 714,000 | ||||
Operating expenses | |||||
Depreciation expense | $ | 51,000 | |||
Other expenses | 496,000 | 547,000 | |||
Income before taxes | 167,000 | ||||
Income taxes expense | 22,000 | ||||
Netincome | $ | 145,000 | |||
Additional Information on Year 2015Transactions | |
a. | Purchased equipment for $31,000 cash. |
b. | Issued 11,000 shares of common stock for $5 cash per share. |
c. | Declared and paid $86,000 in cash dividends. |
Required: | |
Prepare a complete statement of cash flows; report its cashinflows and cash outflows from operating activities according tothe indirect method. (Amounts to be deducted should beindicated with a minus sign.) | |
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