1. On the basis of the following data for Grant Co. for 2010 and the preceding y
ID: 2384847 • Letter: 1
Question
1. On the basis of the following data for Grant Co. for 2010 and the preceding year ended December 31, 2009, prepare a statement of cash flows. Use the indirect method of reporting cash flows from operating activities. Assume that equipment costing $125,000 was purchased for cash and equipment costing $85,000 with accumulated depreciation of $65,000 was sold for $15,000; that the stock was issued for cash; and that the only entries in the retained earnings account were net income of $56,000 and cash dividends declared of $18,000.
Year Year
2010 2009
Cash $90,000 $ 78,000
Accounts receivable (net) 78,000 85,000
Inventories 106,500 $90,000
Equipment $410,000 $370,000
Accumulated depreciation (150,000) (158,000)
$534,500 $465,000
--------------------------------------------------------------------------------------------
Accounts payable (merchandise creditors) $ 53,500 $ 55,000
Cash dividends payable 5,000 4,000
Common stock, $10 par 200,000 170,000
Paid-in capital in excess of par--
common stock 62,000 60,000
Retained earnings 214,000 176,000
tOTAL $534,500 $465,000
2 The following data are available from the accounting records of Suwanee Co. for the month ended May 31, 2003. 17,000 units were manufactured and sold during the accounting period at a price of $60 per unit. There was no beginning inventories and all units were completed (no work in process).
Cost
Total Cost
Number of Units
Unit Cost
Manufacturing costs:
Variable
$442,000
17,000
$26
Fixed
170,000
17,000
10
Total
$612,000
$36
Selling and administrative expenses:
Variable ($2 per unit sold)
$34,000
Fixed
32,000
Total
$66,000
(a)
Prepare a variable costing income statement.
(b)
Prepare an absorption costing income statement.
Cost
Total Cost
Number of Units
Unit Cost
Manufacturing costs:
Variable
$442,000
17,000
$26
Fixed
170,000
17,000
10
Total
$612,000
$36
Selling and administrative expenses:
Variable ($2 per unit sold)
$34,000
Fixed
32,000
Total
$66,000
Explanation / Answer
Seller Co.
Statement of Cash Flows
For Year Ended December 31, 2008
Cash flows from operating activities:
Net income, per income statement
$ 51,000
Add: Depreciation
$57,000
Decrease in accounts receivable
7,000
Loss on sale of equipment
5,000
69,000
$120,000
Deduct: Increase in inventories
16,500
Decrease in accounts payable
1,500
18,000
Net cash flow from operating activities
$102,000
Cash flows from investing activities:
Cash from sale of equipment
$ 15,000
Less: Cash paid for purchase of equipment
125,000
Net cash flow used for investing activities
(110,000)
Cash flows from financing activities:
Cash received from sale of common stock
$32,000
Less: Cash paid for dividends
12,000*
Net cash flow provided by financing activities
20,000
Increase in cash
$ 12,000
Cash at the beginning of the year
78,000
Cash at the end of the year
$90,000
*$13,000 + $4,000 - $5,000 = $12,000
Please post the next question as separate.
Seller Co.
Statement of Cash Flows
For Year Ended December 31, 2008
Cash flows from operating activities:
Net income, per income statement
$ 51,000
Add: Depreciation
$57,000
Decrease in accounts receivable
7,000
Loss on sale of equipment
5,000
69,000
$120,000
Deduct: Increase in inventories
16,500
Decrease in accounts payable
1,500
18,000
Net cash flow from operating activities
$102,000
Cash flows from investing activities:
Cash from sale of equipment
$ 15,000
Less: Cash paid for purchase of equipment
125,000
Net cash flow used for investing activities
(110,000)
Cash flows from financing activities:
Cash received from sale of common stock
$32,000
Less: Cash paid for dividends
12,000*
Net cash flow provided by financing activities
20,000
Increase in cash
$ 12,000
Cash at the beginning of the year
78,000
Cash at the end of the year
$90,000
*$13,000 + $4,000 - $5,000 = $12,000
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