The SCQ Corporation manufactures specialty medical tools ranging from $10,000 to
ID: 2484142 • Letter: T
Question
The SCQ Corporation manufactures specialty medical tools ranging from $10,000 to$15,000 per unit. The tools are used in hospitals, clinics, and the home hospitality market. SCQ Corporation has contracted with YOUCPA to assist in creating its cash flow statement. In the past, its income statement and balance sheet have been prepared by the internal accountant. It would like you to assist in preparing the cash flows using both the direct and indirect method. Sales and balance sheet information for the years 2009–2010 are below:
Balance Sheet SCQ Corporation For period ending 12/31/2010 Assets 2010 2009 Liabilities 2010 2009
2010 2009
Cash 150 100
Account receivable 600 400
Accounts payable 400 300
Inventory 750 500
Accrued taxes payable 200 100
Current assets 1,500 1,000
Current liabilities 600 400
Land 50 50
Equipment 1,300 1,200
Note payable 330 300
Less: Acc. depreciation 700 600
Deferred taxes 35 20
Net fixed assets 600 600
Equity:
Total fixed assets 650 650
Common stock 640 500
Paid-in capital 80 80
Retain earnings 465 350
Total equity 1,185 930
Total assets 2,150 1,650
Total equity and liabilities 2,150 1,650
Income Statement SCQ Corporation For period ending 12/31/ 2010 Items 2010 2009
Revenue 1,000 900
Cost of goods sold 400 350
Gross profit 600 550
Wages expense 110 100
Interest expense 50 40
Depreciation expense 100 90
Insurance expense 50 50
Other misc. expenses 90 80
Total expenses 400 360
Operating income 200 190
Taxes:
Deferred taxes 15 20
Taxes expense 70 67
Net income after taxes 115 103
Additions to retains earnings 115 103
The information below can be used to complete the direct method of cash flow: Cash flows from operating activities 2010
Cash receipts
Received from sales of goods 930
Paid for inventory 400
Paid for employees 110
Paid for interest 50
Paid for taxes 70
Paid for other expenses 320
Cash paid for equipment 100
Cash received for common stock 120
Cash received from note payable 30
Assignment Guidelines: Indirect method cash flow/cash flow statement: What is the operational cash flow? What is the investing cash flow? What is the financing cash flow? Direct method cash flow: What is the operational cash flow? What is the investing cash flow? What is the financing cash flow? What are the differences in the cash flow concepts and procedures between the direct and indirect methods?
Explanation / Answer
Indirect method:
Direct Method: Cash Flow From Operating activities: Cash Receipts: Received from sale of goods 930 Cash payments: Paid for inventory -400 Paid to employees -110 Paid for other exp. -320 Cash flow before adjusting Tax payment 100 Tax payments -70 30 Cash flow from investing activities Purchase of equipment -100 Cash flow from financing activities Cash received from common stock 120 Cash received in excess of par value 20 Cash received from notes 30 Interest paid -50 120 Increase in cash during the year 50 Add: opening balance of cash 100 Closing balance of cash 150Related Questions
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