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The following balances were gathered from Brandon Company’s general ledger. June

ID: 2466819 • Letter: T

Question

The following balances were gathered from Brandon Company’s general ledger.

June 30, 2014

June 30, 2015

Accounts receivable

$120,000

$132,000

Inventory

180,000

197,000

Accounts payable

43,000

54,000

Accrued liabilities

12,000

16,000

Income taxes payable

22,000

15,000

Sales

430,000

Cost of goods sold

270,000

Operating expenses (includes $15,000 depreciation)

112,000

Gain on sale of equipment

26,000

Income tax expense

17,000

Required: Using the indirect method, prepare the cash flows provided by operating activities section of Brandon’s statement of cash flows.


Question 3:

Berry Corporation reported the following cash transactions for last year.

Issued common stock at $72 per share

$180,000

Paid dividends to stockholders at year end

60,000

Received dividends from investments in other companies

32,000

Purchased bonds issued by City of Metropolis

50,000

Borrowed money from City Bank

25,000

Made payment to City Bank on loan

4,000

Purchased office equipment

12,000

Received interest payment on City of Metropolis bonds

2,000

Required:

a.      Prepare the investing section of Berry’s statement of cash flows.
b.      Prepare the financing section of Berry’s statement of cash flows.

June 30, 2014

June 30, 2015

Accounts receivable

$120,000

$132,000

Inventory

180,000

197,000

Accounts payable

43,000

54,000

Accrued liabilities

12,000

16,000

Income taxes payable

22,000

15,000

Sales

430,000

Cost of goods sold

270,000

Operating expenses (includes $15,000 depreciation)

112,000

Gain on sale of equipment

26,000

Income tax expense

17,000

Explanation / Answer

Solution :

OPERATING ACTIVITIES

Net income before tax**

            

     344,000

Depreciation

15000

GAIN ON SALE OF EQUIPMENT

-26000

Increase in Accounts Receivable

-12000

Increase in inventory

-17000

Increase in Accounts Payable

11000

Decrease in Income Tax Payable

-7000

Increase in Accrued liabilities

4000

cash flow from operating activities

312000

Sales

430000

COGS

-112000

GROSS PROFIT

318000

GAIN ON SALE OF EQUIPMENT

26000

Net income before tax**

344000

INVESTING ACTIVIES

dividends from investments

32000

Purchased City of Metropolis bonds

-50000

Purchased office equipment

-12000

Received interest payment on City of Metropolis bonds

2000

cash flow from Investing activities

-28000

FINANCING ACTIVITIES

common stock issued

180000

Dividend paid

-60000

Borrowed money from City Bank

25000

Made payment to City Bank on loan

-4000

cash flow from Financing activities

141000

OPERATING ACTIVITIES

Net income before tax**

            

     344,000

Depreciation

15000

GAIN ON SALE OF EQUIPMENT

-26000

Increase in Accounts Receivable

-12000

Increase in inventory

-17000

Increase in Accounts Payable

11000

Decrease in Income Tax Payable

-7000

Increase in Accrued liabilities

4000

cash flow from operating activities

312000

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