Problem 23-4 Michaels Company had the following information available at the end
ID: 2479097 • Letter: P
Question
Problem 23-4 Michaels Company had the following information available at the end of 2014.
MICHAELS COMPANY
COMPARATIVE BALANCE SHEETS
AS OF DECEMBER 31, 2014 AND 2013
2014 2013
Cash $10,100 $3,570
Accounts receivable 20,590 13,450
Short-term investments 21,500 31,410
Inventory 41,110 36,540
Prepaid rent 2,410 13,800
Prepaid insurance 2,830 910
Supplies 1,190 810
Land 124,860 173,170
Buildings 350,250 350,250
Accumulated depreciation—buildings (105,470 ) (88,380)
Equipment 524,930 400,270
Accumulated depreciation—equipment (130,770 ) (113,460 )
Patents 45,220 51,240
Total assets $908,750 $873,580
Accounts payable $22,090 $31,740
Income taxes payable 5,620 4,390
Salaries and wages payable 5,720 3,030
Short-term notes payable 10,450 10,450
Long-term notes payable 60,100 70,310
Bonds payable 400,560 400,560
Premium on bonds payable 15,103 26,750
Common stock 240,330 219,530
Paid-in capital in excess of par—common stock 25,447 17,600
Retained earnings 123,330 89,220
Total liabilities and stockholders’ equity $908,750 $873,580
MICHAEL S COMPANY
INCOME STATEMENT AND DIVIDEND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2014
Sales revenue $1,160,650
Cost of goods sold 748,580 412,070
Gross margin
Operating expenses
Selling expenses $79,450
Administrative expenses 156,740
Depreciation/Amortization expense 40,420
Total operating expenses 276,610
Income from operations 135,460
Other revenues/expenses
Gain on sale of land 8,130
Gain on sale of short-term investment 4,210
Dividend revenue 3,000
Interest expense (52,640 ) (37,300 )
Income before taxes 98,160
Income tax expense 39,690
Net income 58,470
Dividends to common stockholders (24,360 )
To retained earnings $34,110
Prepare a statement of cash flows for Michaels Company using the direct method accompanied by a reconciliation schedule. Assume the short-term investments are classified as available-for-sale. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Explanation / Answer
Working Notes
Cash Flow from operating Activities Cash received from customers (Note 1) 1153510 Dividends received 3000 1156510 Cash Payments Cash Paid to suppliers (Note-2) 762800 Cash Paid for operating expenses (Note-3) 224410 Taxes Paid (Note 4) 38460 Interest Paid (Note 5) 64287 -1089957 Net Cash Provided by operating activities 66553 Cash Flow from Investing Activities Sale of short term investments (31410-21500+4210) 14120 Sale of Land (173170-124860+8130) 56440 Purchase of Equipment (524930-400270) -124660 Net Cash used by investing activities -54100 Cash Flows from Financing Activities Proceeds from issuance of Common Stock (240330+25447-219530-17600) 28647 Less: Principal Payment on Long Term Debt (70310-60100) -10210 Less: Dividends Paid -24360 Net Cash Used by Financing Activities -5923 Net Increase in Cash 6530 Cash January 1, 2014 3570 Cash December 31, 2014 10100Related Questions
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