Answer the following questions for the directors: True or false, does the statement of cash flows explains the difference between net income and the change in the cash balance? True or false, investors and management use the statement of cash flows to evaluate a firm's profitability? True or false, the financing activities section of the statement of cash flows includes paying dividends and paying off loans? True or false, the financing activities section of the statement of cash flows reflects the cash flows that affect current assets and liabilities? True or false, buying property, plant and equipment would be considered a cash outflow from financing? True or false, the financing section of the statement of cash flows reflects transactions in the equity accounts and the long-term liability accounts? True or false, suppose Auga Company Ltd just started business and was looking for additional capital in order to purchase a property to build their headquarters. If they found an investor who was willing to sell them land worth $500,000 in exchange for stock in the company, would this transaction be shown in the investing activities section of the statement of cash flows? 2. Reconstruct the company’s comparative balance sheet for 2020/2021 using the information and compute and show the missing figures to include the appropriate sign as a positive or negative figure. 3. Prepare a complete statement of cash flows for 2021 using the indirect method using the information. Auga Company Ltd. Comparative Balance Sheet December 31, 2020 and 2021 2021 2020 Increase/(Decrease) Assets Cash 238,000 215,200 ? Accounts Receivable 303,200 259,300 ? Inventories 358,300 348,200 ? Prepaid expenses 35,350 43,100 ? Intangible assets 205,000 205,000 ? Plant assets, net 1,105,000 910,000 ? Total Assets 2,244,850 1,980,800 Liabilities Accounts payable 254,300 240,000 ? Accrued liabilities 415,300 410,000 ? Income tax payable 115,000 135,400 ? Long-term notes payable 845,400 910,500 ? Stockholders' Equity Common Stock 295,500 275,300 ? Retained earnings 345,600 295,400 ? Treasury stock (26,250) (285,800) ? Total liabilities and stockholders' equity 2,244,850 1,980,800 Auga Company Ltd. Income Statement Year Ended December 31,2021 Revenues and gains: Sales revenue 2,224,000 Gain on sale of plant assets 115,500 Total revenues and gains 2,339,500 Expenses Cost of goods sold 1,305,000 Depreciation expense 165,400 Other operating expense 405,400 Total expenses 1,875,800 Income before income taxes 463,700 Income tax expense 265,000 Net Income 198,700 Notes Acquisition of plant asset during 2021 600,900 Sale proceeds from sale of plant asset 356,000 Receipt for issuance of notes payable 384,900 Payment for note payable 450,000 Dividend paid 148,500 Book value of equipment sold 240,500

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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  1. Answer the following questions for the directors:
  2. True or false, does the statement of cash flows explains the difference between net income and the change in the cash balance?
  3. True or false, investors and management use the statement of cash flows to evaluate a firm's profitability?
  4. True or false, the financing activities section of the statement of cash flows includes paying dividends and paying off loans?
  5. True or false, the financing activities section of the statement of cash flows reflects the cash flows that affect current assets and liabilities?
  6. True or false, buying property, plant and equipment would be considered a cash outflow from financing?
  7. True or false, the financing section of the statement of cash flows reflects transactions in the equity accounts and the long-term liability accounts?
  8. True or false, suppose Auga Company Ltd just started business and was looking for additional capital in order to purchase a property to build their headquarters. If they found an investor who was willing to sell them land worth $500,000 in exchange for stock in the company, would this transaction be shown in the investing activities section of the statement of cash flows?

 

2. Reconstruct the company’s comparative balance sheet for 2020/2021 using the information and compute and show the missing figures to include the appropriate sign as a positive or negative figure.

3. Prepare a complete statement of cash flows for 2021 using the indirect method using the information.

 

Auga Company Ltd.

Comparative Balance Sheet

December 31, 2020 and 2021

 

2021

2020

Increase/(Decrease)

        Assets

 

 

 

   Cash

     238,000

        215,200

 ?

   Accounts Receivable

     303,200

        259,300

 ?

   Inventories

     358,300

        348,200

 ?

   Prepaid expenses

       35,350

           43,100

 ?

   Intangible assets

     205,000

        205,000

 ?

Plant assets, net

 1,105,000

        910,000

 ?

Total Assets

 2,244,850

     1,980,800

 

      Liabilities

 

 

 

   Accounts payable

     254,300

        240,000

 ?

   Accrued liabilities

     415,300

        410,000

 ?

   Income tax payable

     115,000

        135,400

 ?

Long-term notes payable

     845,400

        910,500

 ?

      Stockholders' Equity

 

 

 

Common Stock

     295,500

        275,300

 ?

Retained earnings

     345,600

        295,400

 ?

Treasury stock

     (26,250)

       (285,800)

 ?

Total liabilities and stockholders' equity

 2,244,850

     1,980,800

 

Auga Company Ltd.

Income Statement

Year Ended December 31,2021

Revenues and gains:

 

 

   Sales revenue

 2,224,000

 

   Gain on sale of plant assets

     115,500

 

      Total revenues and gains

 

     2,339,500

Expenses

 

 

   Cost of goods sold

 1,305,000

 

   Depreciation expense

     165,400

 

   Other operating expense

     405,400

 

      Total expenses

 

     1,875,800

Income before income taxes

 

        463,700

Income tax expense

 

        265,000

Net Income

 

        198,700

 

Notes

   

Acquisition of plant asset during 2021

 

        600,900

Sale proceeds from sale of plant asset

 

        356,000

Receipt for issuance of notes payable

 

        384,900

Payment for note payable

 

        450,000

Dividend paid

 

        148,500

Book value of equipment sold

 

        240,500

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