Miracle Tool, Inc., sells a single product (a combinationscrewdriver, pliers, hammer, and crescent wrench) exclusivelythrough television advertising. The comparative income statementsand balance sheets are for the past two years.
Additional Information
The following information regarding the companyâs operations in2018 is available from the companyâs accounting records.
Early in the year, the company declared and paid a $4,000 cashdividend.
During the year, marketable securities costing $15,000 were soldfor $14,000 cash, resulting in a $1,000 nonoperating loss.
The company purchased plant assets for $20,000, paying $2,000 incash and issuing a note payable for the $18,000 balance.
During the year, the company repaid a $10,000 note payable, butincurred an additional $18,000 in long-term debt as described inTransaction 3.
The owners invested $15,000 cash in the business as a conditionof the new loans described in Transaction 4.
MIRACLE TOOL, INC. COMPARATIVE INCOME STATEMENT FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2018 2017 2018 Sales $ 500,000 $ 350,000 Less: Cost of goods sold 200,000 140,000 Gross profit on sales $ 300,000 $ 210,000 Less: Operating expenses(including depreciation
of $34,000 in 2017 and $35,000 in 2018) 260,000 243,000 Loss on sale of marketablesecurities â0â 1,000 Net income (loss) $ 40,000 $ (34,000 )
MIRACLETOOL, INC.
COMPARATIVE BALANCE SHEETS December31, 2017 2018 Assets Cash and cash equivalents $ 10,000 $ 60,000 Marketable securities 20,000 5,000 Accounts receivable 40,000 23,000 Inventory 120,000 122,000 Plant and equipment (net ofaccumulated depreciation) 300,000 285,000 Totals $ 490,000 $ 495,000 Liabilities &Stockholders' Equity Accounts payable $ 50,000 $ 73,000 Accrued expenses payable 17,000 14,000 Note payable 245,000 253,000 Capital stock (no parvalue) 120,000 135,000 Retained earnings 58,000 20,000 Totals $ 490,000 $ 495,000
Required:
a. Prepare a worksheet for a statement of cashflows.
b. Prepare a statement of cash flows for 2018by the indirect method.
Miracle Tool, Inc., sells a single product (a combinationscrewdriver, pliers, hammer, and crescent wrench) exclusivelythrough television advertising. The comparative income statementsand balance sheets are for the past two years.
Additional Information
The following information regarding the companyâs operations in2018 is available from the companyâs accounting records.
Early in the year, the company declared and paid a $4,000 cashdividend.
During the year, marketable securities costing $15,000 were soldfor $14,000 cash, resulting in a $1,000 nonoperating loss.
The company purchased plant assets for $20,000, paying $2,000 incash and issuing a note payable for the $18,000 balance.
During the year, the company repaid a $10,000 note payable, butincurred an additional $18,000 in long-term debt as described inTransaction 3.
The owners invested $15,000 cash in the business as a conditionof the new loans described in Transaction 4.
| MIRACLE TOOL, INC. | ||||||||
| COMPARATIVE INCOME STATEMENT | ||||||||
| FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2018 | ||||||||
| 2017 | 2018 | |||||||
| Sales | $ | 500,000 | $ | 350,000 | ||||
| Less: Cost of goods sold | 200,000 | 140,000 | ||||||
| Gross profit on sales | $ | 300,000 | $ | 210,000 | ||||
| Less: Operating expenses(including depreciation of $34,000 in 2017 and $35,000 in 2018) | 260,000 | 243,000 | ||||||
| Loss on sale of marketablesecurities | â0â | 1,000 | ||||||
| Net income (loss) | $ | 40,000 | $ | (34,000 | ) | |||
| MIRACLETOOL, INC. COMPARATIVE BALANCE SHEETS | |||||||||||
| December31, | |||||||||||
| 2017 | 2018 | ||||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | 10,000 | $ | 60,000 | |||||||
| Marketable securities | 20,000 | 5,000 | |||||||||
| Accounts receivable | 40,000 | 23,000 | |||||||||
| Inventory | 120,000 | 122,000 | |||||||||
| Plant and equipment (net ofaccumulated depreciation) | 300,000 | 285,000 | |||||||||
| Totals | $ | 490,000 | $ | 495,000 | |||||||
| Liabilities &Stockholders' Equity | |||||||||||
| Accounts payable | $ | 50,000 | $ | 73,000 | |||||||
| Accrued expenses payable | 17,000 | 14,000 | |||||||||
| Note payable | 245,000 | 253,000 | |||||||||
| Capital stock (no parvalue) | 120,000 | 135,000 | |||||||||
| Retained earnings | 58,000 | 20,000 | |||||||||
| Totals | $ | 490,000 | $ | 495,000 | |||||||
Required:
a. Prepare a worksheet for a statement of cashflows.
b. Prepare a statement of cash flows for 2018by the indirect method.
Related questions
| 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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Soft Touch Company was started several years ago by two golf instructors. The companyâs comparative balance sheets and income statement are presented below, along with additional information.
| Current Year | Previous Year | |||||
| Balance Sheet at December 31 | ||||||
| Cash | $ | 13,740 | $ | 8,250 | ||
| Accounts Receivable | 2,400 | 3,600 | ||||
| Equipment | 12,100 | 11,000 | ||||
| Accumulated DepreciationâEquipment | (3,110 | ) | (2,600 | ) | ||
| $ | 25,130 | $ | 20,250 | |||
| Accounts Payable | $ | 1,100 | $ | 2,100 | ||
| Salaries and Wages Payable | 1,040 | 1,550 | ||||
| Note Payable (long-term) | 3,100 | 1,000 | ||||
| Common Stock | 11,000 | 11,000 | ||||
| Retained Earnings | 8,890 | 4,600 | ||||
| $ | 25,130 | $ | 20,250 | |||
| Income Statement | ||||||
| Service Revenue | $ | 75,400 | ||||
| Salaries and Wages Expense | 68,500 | |||||
| Depreciation Expense | 510 | |||||
| Income Tax Expense | 2,100 | |||||
| Net Income | $ | 4,290 | ||||
| Additional Data: |
| a. | Bought new golf clubs using cash, $1,100. |
| b. | Borrowed $2,100 cash from the bank during the year. |
| c. | Accounts Payable includes only purchases of services made on credit for operating purposes. Because there are no liability accounts relating to income tax, assume that Income Tax Expense was fully paid in cash. |
| Required: | |
| 1. | Prepare the statement of cash flows for the current year ended December 31 using the indirect method. (Amounts to be deducted should be indicated with a minus sign.) |
| A comparative balance sheet for Riabko Company containing data for the last two years is as follows: |
| Riabko Company Comparative Balance Sheet | ||||
| This Year | Last Year | |||
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 96,000 | $ | 70,000 |
| Accounts receivable | 640,000 | 672,500 | ||
| Inventory | 638,000 | 445,000 | ||
| Prepaid expenses | 30,000 | 17,500 | ||
| Total current assets | 1,404,000 | 1,205,000 | ||
| Property, plant, and equipment | 2,495,000 | 1,900,000 | ||
| Less accumulated depreciation | 645,000 | 582,500 | ||
| Net property, plant, and equipment | 1,850,000 | 1,317,500 | ||
| Long-term investments | 132,500 | 205,000 | ||
| Loans to subsidiaries | 145,000 | 82,500 | ||
| Total assets | $ | 3,531,500 | $ | 2,810,000 |
| Liabilities and Stockholders' equity | ||||
| Current liabilities | ||||
| Accounts payable | $ | 910,000 | $ | 595,000 |
| Accrued liabilities | 40,000 | 64,500 | ||
| Income taxes payable | 165,500 | 138,000 | ||
| Total current liabilities | 1,115,500 | 797,500 | ||
| Bonds payable | 745,000 | 475,000 | ||
| Total liabilities | 1,860,500 | 1,272,500 | ||
| Stockholdersâ equity: | ||||
| Common stock | 1,140,000 | 1,025,000 | ||
| Retained earnings | 531,000 | 512,500 | ||
| Total stockholdersâ equity | 1,671,000 | 1,537,500 | ||
| Total liabilities and stockholders' equity | $ | 3,531,500 | $ | 2,810,000 |
| The following additional information is available about the companyâs activities during this year: | |
| a. | The company declared and paid a cash dividend this year. |
| b. | Bonds with a principal balance of $405,000 were repaid during this year. |
| c. | Equipment was sold during this year for $82,500. The equipment had cost $180,000 and had $70,000 in accumulated depreciation on the date of sale. |
| d. | Long-term investments were sold during the year for $160,000. These investments had cost $72,500 when purchased several years ago. |
| e. | The subsidiaries did not repay any outstanding loans during the year. |
| f. | Riabko did not repurchase any of its own stock during the year. |
| The company reported net income this year as follows: |
| Riabko Company Income Statement | ||||
| Sales | $ | 3,500,000 | ||
| Cost of goods sold | 2,170,000 | |||
| Gross margin | 1,330,000 | |||
| Selling and administrative expenses | 1,062,500 | |||
| Net operating income | 267,500 | |||
| Non operating items: | ||||
| Gain on sale of investments | $ | 87,500 | ||
| Loss on sale of equipment | 27,500 | 60,000 | ||
| Income before taxes | 327,500 | |||
| Income taxes | 105,000 | |||
| Net income | $ | 222,500 | ||
| Required: | |
| 1. | Using the indirect method, prepare a statement of cash flows for this year |
