Financial statements of Harlan Mining Co. for 2015 and 2014 are provided below.
ID: 2763683 • Letter: F
Question
Financial statements of Harlan Mining Co. for 2015 and 2014 are provided below.
BALANCE SHEETS
12/31/15 12/31/14
Cash $306,000 $ 144,000
Accounts receivable 270,000 162,000
Inventory 288,000 360,000
Property, plant and equipment $456,000 $720,000
Less accumulated depreciation (240,000) 216,000 (228,000) 492,000
$1,080,000 $1,158,000
Accounts payable $ 132,000 $ 72,000
Income taxes payable 264,000 294,000
Bonds payable 270,000 450,000
Common stock 162,000 162,000
Retained earnings 252,000 180,000
$1,080,000 $1,158,000
INCOME STATEMENT
For the Year Ended December 31, 2015
Sales revenue $6,300,000
Cost of sales 5,364,000
Gross profit 936,000
Selling expenses $450,000
Administrative expenses 144,000 594,000
Income from operations 342,000
Interest expense 54,000
Income before taxes 288,000
Income taxes 72,000
Net income $ 216,000
The following additional data were provided:
1. Dividends for the year 2015 were $144,000.
2. During the year, equipment was sold for $180,000. This equipment cost $264,000 originally and had a book value of $216,000 at the time of sale. The loss on sale was incorrectly charged to cost of sales.
3. All depreciation expense is in the selling expense category.
Create a Statement of Cash Flows
Explanation / Answer
Journal entry for the sale A/C Titles Debit Credit Cash 180000 Acc. Depn 48000 Loss on sale(Plug-in Fig.) 36000 Equipment 264000 Acc.Depn. A/c. Acc.depn. Written back on eqp.sold 48000 Op/Bal. 228000 Ending Balance 240000 Depn. For the year (Plug-in fig.) 60000 288000 288000 Equipment A/c Debit Credit Op.balance 264000 Acc.depn. 48000 Sale value 180000 Loss on sale 36000 264000 264000 Statement of Cash flows for the Year ended Dec.31,2015 Operating activities Net Income for the Year 216000 Add: Adjustments for non-cash items Depreciation for the Year 60000 Loss on sale of equipment 36000 96000 312000 Add: Decrease in Inventory(360000-288000) 72000 Less: Increase in Accounts Receivables(270000-162000) -108000 Add: Increase in Accounts Payables(132000-72000) 60000 Less: Decrease in I/T Payables(264000-294000) -30000 -6000 Cash generated from operating activities 306000 Investing activities Sale proceeds of Equipment 180000 Cash generated from Investing activities 180000 Financing activities Retirement of bonds(450000-270000) -180000 Dividends paid -144000 Cash used in financing activities -324000 Net Cash generated 162000 Add: Opening Cash balance 144000 Closing cash balance 306000
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