Natalie has prepared the balance sheet and income statement of Cookie & Coffee C
ID: 2590598 • Letter: N
Question
Natalie has prepared the balance sheet and income statement of Cookie & Coffee Creations Inc. and would like you to prepare the cash flow statement. The comparative balance sheet of Cookie & Coffee Creations Inc. at October 31, 2018 for the years 2018 and 2017 and the income statement for the year ended October 31, 2018, are presented below.COOKIE & COFFEE CREATIONS INC.
Balance Sheet
October 31, Assets 2018 2017 Cash $22,324 $5,550 Accounts receivable 3,250 2,710 Inventory 7,897 7,450 Prepaid expenses 5,800 6,050 Equipment 102,000 75,500 Accumulated depreciation— equipment (25,200 ) (9,100 ) Total assets $116,071 $88,160 Liabilities and Stockholders’ Equity 2018 2017 Accounts payable $1,150 $2,450 Income taxes payable 9,251 7,200 Dividends payable 27,000 27,000 Salaries and wages payable 7,250 1,280 Interest payable 188 0 Note payable 10,000 0 Preferred stock, no par, $6 cumulative, 3,000 and 2,800 shares issued, respectively 15,000 14,000 Common stock, $1 par—25,180 shares issued and outstanding 25,180 25,180 Additional paid-in capital—treasury stock 250 250 Retained earnings 20,802 10,800 Total liabilities and stockholders’ equity $116,071 $88,160 COOKIE & COFFEE CREATIONS INC.
Income Statement
Year Ended October 31, 2018 Sales $485,625 Cost of goods sold 222,694 Gross profit 262,931 Operating expenses Salaries and wages expense $147,979 Depreciation expense 17,600 Other operating expenses 48,186 213,765 Income from operations 49,166 Other expenses Interest expense $413 Loss on disposal of plant assets 2,500 2,913 Income before income tax 46,253 Income tax expense 9,251 Net income $37,002
Additional information:
1. Equipment (cost $4,500 and book value $3,000) was disposed of at the beginning of the year for $500 cash and replaced with new equipment purchased for $4,000 cash. 2. Additional equipment was bought for $14,000 on November 1, 2017. A $12,000 note payable was signed. The terms provide for equal semi-annual installment payments of $2,000 on May 1 and November 1 of each year, plus interest of 5% on the outstanding principal balance. 3. Other equipment was bought for $13,000 cash. 4. Dividends were declared on the preferred and common stock on October 15, 2018, to be paid on November 15, 2018. 5. Accounts payable relate only to merchandise creditors. 6. Prepaid expenses relate only to other operating expenses.
Explanation / Answer
Cookie & Coffee Creations Inc. Statement of Cash Flow For the year ended October 31,2018 1) Cash flows from operating activities Net income after tax $ 37,002.00 Adjustments to net income Depreciation=($25200-$9100) $ 16,100.00 Loss on sale of Equipment $ 2,500.00 Increase in accounts receivable=($3250-$2710) $ (540.00) Increase in inventories=($7897-$7450) $ (447.00) Decrease in Prepaid Insurance=($5800-$6050) $ 250.00 Decrease in accounts payable=($1150-$2450) $ (1,300.00) Increase in Salaries & Wages Payable=($7250-$1280) $ 5,970.00 Increase in Taxes Payable=($9251-$7200) $ 2,051.00 Increase in Interest Payable=($188-0) $ 188.00 $ 24,772.00 Net cash provided by operating activities=(A) $ 61,774.00 Cash flows from investing activities Purchase of fixed Assets($4000+$13000+$2000) $ (19,000.00) Net cash provided by investing activities =(B) $ (19,000.00) Cash flows from financing activities Issue of Preference shares $ 1,000.00 Dividends Paid to common and Equity shareholders $ (27,000.00) Net cash provided by financing activities=(C ) $ (26,000.00) Change in cash=(A)+(B)+(C ) $ 16,774.00 Cash, beginning balance $ 5,550.00 Cash, ending balance $ 22,324.00 Equipment Particular Amount Particular Amount To Bal b/d $ 75,500.00 By Cash $ 500.00 To Cash $ 4,000.00 By Loss on sale of equipment $ 2,500.00 To Cash $ 13,000.00 By Depreciation on sale of Equipent $ 1,500.00 To Cash $ 2,000.00 By Bal C/d $ 102,000.00 To Note payable $ 12,000.00 $ 106,500.00 $ 106,500.00 Acumulated Depreciation Particular Amount Particular Amount By Bal C/d $ 25,200.00 By Bal B/d $ 9,100.00 By Depreciation $ 16,100.00 $ 25,200.00 $ 25,200.00 Opening Retained Earnings $ 10,800.00 Add: Net Income $ 37,002.00 Total $ 47,802.00 Less: Dividend Paid $ 27,000.00 Ending Retained Earnings $ 20,802.00
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