Championship Boxing, Inc. is a small manufacturer of cardboard boxes of all size
ID: 2553560 • Letter: C
Question
Championship Boxing, Inc. is a small manufacturer of cardboard boxes of all sizes. You have reported for your first day of work, and the company is in an uproar. Yearly financial statements are being prepared, but a computer malfunction of the company’s new BOX-9000 computer has inadvertently erased parts of the company’s balance sheet, along with almost all related data except the company’s statement of cash flows. The IT department is working to retrieve earlier backups, but estimates that the reconstruction of the data will take about 24 hours.
Unfortunately, financial statements are to be presented at a stockholders’ meeting in one hour. The company uses the indirect method to prepare its statement of cash flows (rather than the direct method), so your new supervisor believes the missing data for the balance sheet can be prepared using the statement of cash flows. You are assigned this task, since you were top student in your business school class. Meanwhile, the supervisor will go to the stockholders’ meeting and give some introductory remarks.
In addition to the statement of cash flows, the following data survived the computer mishap:
There was a $96,000 debit to Retained Earnings for cash dividends declared.
Your supervisor has provided you with the following statement of cash flows, prepared using the indirect method. Recall that the statement of cash flows consists of three sections: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Review the statement, and then proceed to the next panel.
Championship Boxing, Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y8
1
Cash flows from operating activities:
2
Net income
$186,540.00
3
Adjustments to reconcile net income to net cash flow from operating activities:
4
Depreciation
18,400.00
5
Gain on sale of investments
(50,000.00)
6
Changes in current operating assets and liabilities:
7
Increase in accounts receivable
(25,390.00)
8
Increase in inventories
(33,350.00)
9
Increase in accounts payable
41,100.00
10
Decrease in accrued expenses payable
(12,470.00)
11
Net cash flow from operating activities
$124,830.00
12
Cash flows from investing activities:
13
Cash received from sale of investments
$280,000.00
14
Cash paid for purchase of land
(326,000.00)
15
Cash paid for purchase of equipment
(152,000.00)
16
Net cash flow used for investing activities
(198,000.00)
17
Cash flows from financing activities:
18
Cash received from sale of common stock
$187,500.00
19
Cash paid for dividends
(91,200.00)
20
Net cash flow from financing activities
96,300.00
21
Change in cash
$23,130.00
22
Cash at the beginning of the year
585,920.00
23
Cash at the end of the year
$609,050.00
Championship Boxing, Inc.
Comparative Balance Sheet
December 31, 20Y8 and 20Y7
1
Dec. 31, 20Y8
Dec. 31, 20Y7
2
Assets
3
Cash
$585,920.00
4
Accounts receivable (net)
230,950.00
5
Inventories
618,420.00
6
Investments
0.00
7
Land
0.00
8
Equipment
705,200.00
9
Accumulated depreciation-equipment
(166,400.00)
10
Total assets
11
12
Liabilities
13
Accounts payable (merchandise creditors)
$391,800.00
14
Accrued expenses payable (operating expenses)
41,150.00
15
Dividends payable
19,200.00
16
Total liabilities
$498,050.00
17
18
Stockholders’ Equity
19
Common stock, $4 par
100,000.00
20
Paid-in capital in excess of par
280,000.00
21
Retained earnings
1,291,020.00
22
Total stockholders’ equity
$1,858,520.00
23
Total liabilities and stockholders’ equity
A. The investments were sold for $280,000 cash. B. Equipment was acquired for $152,000 cash. C. Land was acquired for $326,000 cash. D. There were no disposals of equipment during the year. E. 12,500 shares of common stock were sold for cash during the year. F.There was a $96,000 debit to Retained Earnings for cash dividends declared.
Explanation / Answer
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1 Dec. 31, 20Y8 Dec. 31, 20Y7 2 Assets 3 Cash $609,050 $585,920.00 4 Accounts receivable (net) 230,950.00 205560 (230950-25390) 5 Inventories 651770 618,420.00 (618420+33350) 6 Investments 0 230000 (280000-50000) 7 Land 326000 0 8 Equipment 705,200.00 553200 (705200-152000) 9 Accumulated depreciation-equipment -166,400.00 -148000 (166400-18400) 10 Total assets $2,356,570 $2,045,100 11 12 Liabilities 13 Accounts payable (merchandise creditors) 432900 $391,800.00 (391800+41100) 14 Accrued expenses payable (operating expenses) 41,150.00 53620 (41150+12470) 15 Dividends payable 24000 19,200.00 (19200+96000-91200) 16 Total liabilities $498,050.00 $464,620.00 17 18 Stockholders’ Equity 19 Common stock, $4 par 150000 100,000.00 100000+(12500*4) 20 Paid-in capital in excess of par 417500 280,000.00 280000+(187500-(12500*4)) 21 Retained earnings 1,291,020.00 1200480 x+186540-96000=1291020 22 Total stockholders’ equity $1,858,520.00 1,580,480.00 23 Total liabilities and stockholders’ equity $2,356,570.00 $2,045,100.00Related Questions
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