Floral Stores, Inc., sells electronics and appliances. The excerpts that follow are adapted from Floral's financial statements for 2018 and 2017. March 31, Balance Sheet (dollars in millions) 2018 2017 Assets Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,980 $6,901 Property, plant, and equipment. . . . . . . . . . . . . . . . . . . . 4,837 4,199 Less: Accumulated depreciation. . . . . . . . . . . . . . . . . . . . . 2,126 1,720 Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 559 517 Year Ended March 31, Statement of Cash Flows (dollars in millions) 2018 2017 Operating activities: Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,150 $983 Noncash items affecting net income: Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . 471 459 Gain on sale of property, plant and equipment. . . . (109) 0 Investing activities: Additions to property, plant, and equipment. . . . . . . . . . (720) (621) Sale of property, plant, and equipment. . . . . . . . . . . . . . . 126 0 Requirement 1. How much was Floral's cost of plant assets at March 31, 2018? How much was the book value of plant assets? Show computations. (Enter amounts in millions as provided in the problem statement.) The cost of plant assets at March 31, 2018 is $ 4,837 million. Determine the formula and enter the amounts to calculate the book value of plant assets at March 31, 2018. Cost - Accumulated depreciation = Book value $4,837 - $2,126 = $2,711 Requirement 2. The financial statements provide three pieces of evidence that Floral purchased plant assets and goodwill during fiscal year 2018. What are they? 1. The balance sheet shows an increase in property, plant, and equipment 2. The balance sheet shows an increase in goodwill 3. The statement of cash flows reports additions to property, plant, and equipment Requirement 3. T-accounts for Property, Plant, and Equipment; Accumulated Depreciation; and Goodwill have been prepared for you. Fill in the T-accounts with information from the comparative balance sheets and cash flow statements. Label each increase or decrease and give its dollar amount. (Abbreviation used: Accum. Depr. = Accumulated Depreciation. Enter amounts in millions as provided in the problem statement.) Begin by completing the T-account for Property, Plant, and Equipment. Property, Plant, and Equipment 3/31/2017 Balance 4,199 Cost of assets sold in 2018 82 Purchases during 2018 720 3/31/2018 Balance 4,837 Next, complete the T-account for Accumulated Depreciation. Accumulated Depreciation 3/31/2017 Balance 1,720 Accum. depr.—assets sold 2018 65 Depreciation during 2018 471 3/31/2018 Balance 2,126 Finally, complete the T-account for Goodwill. Goodwill 3/31/2017 Balance 517 Purchased during 2018 42 3/31/2018 Balance 559
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
This might look complicated but I am trying to find the equation to calculate the cost of assets sold in 2018 and Accum. depr.—assets sold 2018. How did it get 65 and 82? Thank you
Floral
Stores, Inc., sells electronics and appliances. The excerpts that follow are adapted from
Floral's
financial statements for
2018
and
2017.
March 31,
2018
2017
Assets
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,980
$6,901
Property, plant, and equipment. . . . . . . . . . . . . . . . . . . .
4,837
4,199
Less:
2,126
1,720
559
517
Year Ended
March 31,
Statement of
2018
2017
Operating activities:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,150
$983
Noncash items affecting net income:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . .
471
459
Gain on sale of property, plant and equipment. . . .
(109)
0
Investing activities:
Additions to property, plant, and equipment. . . . . . . . . .
(720)
(621)
Sale of property, plant, and equipment. . . . . . . . . . . . . . .
126
0
Requirement 1. How much was
Floral's
cost of plant assets at
March
31,
2018?
How much was the book value of plant assets? Show computations. (Enter amounts in millions as provided in the problem statement.)
|
The cost of plant assets at March 31, 2018 is |
$ |
4,837 |
million. |
Determine the formula and enter the amounts to calculate the book value of plant assets at
March
31,
2018.
|
Cost |
- |
Accumulated depreciation |
= |
Book value |
|
$4,837 |
- |
$2,126 |
= |
$2,711 |
Requirement 2. The financial statements provide three pieces of evidence that
Floral
purchased plant assets and goodwill during fiscal year
- 2018.
What are they?
|
1. |
The balance sheet shows an increase in property, plant, and equipment |
|
2. |
The balance sheet shows an increase in goodwill |
|
3. |
The statement of cash flows reports additions to property, plant, and equipment |
Requirement 3. T-accounts for Property, Plant, and Equipment; Accumulated Depreciation; and Goodwill have been prepared for you. Fill in the T-accounts with information from the comparative balance sheets and cash flow statements. Label each increase or decrease and give its dollar amount. (Abbreviation used: Accum. Depr. = Accumulated Depreciation. Enter amounts in millions as provided in the problem statement.)
Begin by completing the T-account for Property, Plant, and Equipment.
|
Property, Plant, and Equipment |
|||
|
3/31/2017 Balance |
4,199 |
Cost of assets sold in 2018 |
82 |
|
Purchases during 2018 |
720 |
|
|
|
|
|
|
|
|
3/31/2018 Balance |
4,837 |
|
|
Next, complete the T-account for Accumulated Depreciation.
|
Accumulated Depreciation |
|||
|
|
|
|
|
|
|
|
3/31/2017 Balance |
1,720 |
|
Accum. depr.—assets sold 2018 |
65 |
Depreciation during 2018 |
471 |
|
|
|
3/31/2018 Balance |
2,126 |
Finally, complete the T-account for Goodwill.
|
Goodwill |
|||
|
|
|
|
|
|
3/31/2017 Balance |
517 |
|
|
|
Purchased during 2018 |
42 |
|
|
|
3/31/2018 Balance |
559 |
|
|
Requirement 4. Prepare the
- 2018.
(Record debits first, then credits. Exclude explanations from journal entries. Enter amounts in millions as provided in the problem statement.)
|
Journal Entry |
|||
|
Date |
Accounts |
Debit |
Credit |
|
Millions |
|||
|
Accumulated Depreciation |
65 |
|
|
|
|
Cash |
126 |
|
|
Property, Plant, and Equipment |
|
82 |
|
|
Gain on Sale of Assets |
|
109 |
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