Test Your Knowledge ComparativeBalance Sheet For the Year Ended 2017 and 2016 20
ID: 2582249 • Letter: T
Question
Test Your Knowledge
ComparativeBalance Sheet
For the Year Ended 2017 and 2016
2017 2016
Assets
Cash $156,500 $115,000
Marketable Securities 34,000 22,000
Accounts Receivable 8,000 10,000
Inventory 27,000 15,000
Prepaid expenses 1,500 2,000
Plant assets 80,000 100,000
Accumul deprec (29,000) (30,000)
Total Assets $278,000 $234,000
Liabilities & Owner's Equity
Accounts payable $7,000 $4,000
Note payable short-term 26,000 12,000
Interest payable 4,000 3,000
Income tax payable 9,000 6,000
Bonds payable 42,000 50,000
Common stock 145,000 135,000
Retained earnings 45,000 24,000
Total liabilities & OE $278,000 $234,000
1. Sold plant assets for $ 60,000. Their book was $ 53,000.
2. Marketable securities sold for $ 15,000
3. Purchased plant assets by paying 22,000 down and financing the remainder using a short-term note.
Sales $100,000
Cost of goods sold 40,000
Gross Profit $60,000
Operating expenses
Depreciation exp $8,000
General exp 10,000 $18,000
Operating income 42,000
Other revenue and expenses
Gain on sale of plant assets $7,000
Loss on sale of marketable securities (2,000)
Interest exp (3,000) 2,000
Income from continuing operations 44,000
Income tax 17,600
Net income $26,400
Prepare cash flow analysis using indirect method. Prepare cash flow analysis for operations using indirect method.
(Direct method is extra credit only)
Explanation / Answer
Cashflow statement under indirect method Cash flow from operating activities: Net income 26400 Adjustments: Depreciation 8000 Gain on sale of plant assets -7000 Loss on sale of marketable securities 2000 Decrease in accounts receivable 2000 Increase in inventory -12000 Decrease in prepaid expenses 500 Increase in accounts payable 3000 Increase in interest payable 1000 Increase in Income tax payable 3000 500 Cash generated from operations (A) 26900 Cash flow from investing activities: Sale of marketable securities 15000 purchase of marketable securities (Note:2) -29000 Sale of plant assets 60000 Purchase of plant assets -22000 (B) 24000 Cash flow from financing activities: Repayment of bond (50000-42000) -8000 Issue of common stock (145000-135000) 10000 Dividend paid (Note:1) -5400 Repayment of note payable (Note:3) -6000 © -9400 Increase in cash (A)+(B)+© 41500 Add:Beginning balance of cash 115000 Ending balance of cash 156500 Notes: 1. Dividend paid will be the balancing figure in retained earnings account Beginning balance 24000 Add:Net income 26400 50400 Less:Ending balance 45000 Dividend paid 5400 2. Analysis of marketable securities account will reveal the marketable securities purchased Beginning balance 22000 Less:Book value of marketable securities sold (15000+2000) 17000 5000 Less:ending balance 34000 Purchased -29000 3.Analysis of accumulated depreciation Beginning balance 30000 Add:Current year depreciation 8000 38000 Less:ending balance 29000 Depreciation related to plant assets sold 9000 Analysis of Plant assets Beginning balance 100000 Less:Original value of assets sold (53000+9000) 62000 38000 Less:ending balance 80000 Purchased -42000 By cash 22000 By note 20000 Analysis of note payable Beginning balance 12000 Add:Issue towards purchase of plant assets 20000 32000 Less:ending balance 26000 Repaid notes 6000
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