solve in 15 minutes The comparative balance sheets for 2021 and 2020 and the statement of income for 2021 are given below for Wright Company. Additional information from Wright's accounting records is provided also. WRIGHT COMPANY Comparative Balance Sheets December 31, 2021 and 2020 ($ in thousands) 2021 2020 Assets Cash $ 116 $ 95 Accounts receivable 136 140 Short-term investment 47 14 Inventory 137 135 Land 102 125 Buildings and equipment 695 530 Less: Accumulated depreciation (193 ) (140 ) $ 1,040 899 Liabilities Accounts payable $ 40 $ 48 Salaries payable 2 6 Interest payable 8 5 Income tax payable 5 10 Notes payable 0 33 Bonds payable 296 230 Shareholders’ Equity Common stock 390 330 Paid-in capital—excess of par 187 165 Retained earnings 112 72 $ 1,040 $ 899 WRIGHT COMPANY Income Statement For Year Ended December 31, 2021 ($ in thousands) Revenues: Sales revenue $ 580 Expenses: Cost of goods sold $ 260 Salaries expense 59 Depreciation expense 53 Interest expense 16 Loss on sale of land 5 Income tax expense 87 480 Net income $ 100 Additional information from the accounting records: Land that originally cost $23,000 was sold for $18,000. The common stock of Microsoft Corporation was purchased for $33,000 as a short-term investment not classified as a cash equivalent. New equipment was purchased for $165,000 cash. A $33,000 note was paid at maturity on January 1. On January 1, 2021, bonds were sold at their $66,000 face value. Common stock ($60,000 par) was sold for $82,000. Net income was $100,000 and cash dividends of $60,000 were paid to shareholders. Required: Prepare the statement of cash flows of Wright Company for the year ended December 31, 2021. Present cash flows from operating activities by the direct method. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands (i.e., 10,000 should be entered as 10).)
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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The comparative
WRIGHT COMPANY Comparative Balance Sheets December 31, 2021 and 2020 ($ in thousands) |
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2021 | 2020 | |||||||
Assets | ||||||||
Cash | $ | 116 | $ | 95 | ||||
136 | 140 | |||||||
Short-term investment | 47 | 14 | ||||||
Inventory | 137 | 135 | ||||||
Land | 102 | 125 | ||||||
Buildings and equipment | 695 | 530 | ||||||
Less: |
(193 | ) | (140 | ) | ||||
$ | 1,040 | 899 | ||||||
Liabilities | ||||||||
Accounts payable | $ | 40 | $ | 48 | ||||
Salaries payable | 2 | 6 | ||||||
Interest payable | 8 | 5 | ||||||
Income tax payable | 5 | 10 | ||||||
Notes payable | 0 | 33 | ||||||
Bonds payable | 296 | 230 | ||||||
Shareholders’ Equity | ||||||||
Common stock | 390 | 330 | ||||||
Paid-in capital—excess of par | 187 | 165 | ||||||
112 | 72 | |||||||
$ | 1,040 | $ | 899 | |||||
WRIGHT COMPANY Income Statement For Year Ended December 31, 2021 ($ in thousands) |
||||||
Revenues: | ||||||
Sales revenue | $ | 580 | ||||
Expenses: | ||||||
Cost of goods sold | $ | 260 | ||||
Salaries expense | 59 | |||||
Depreciation expense | 53 | |||||
Interest expense | 16 | |||||
Loss on sale of land | 5 | |||||
Income tax expense | 87 | 480 | ||||
Net income | $ | 100 | ||||
Additional information from the accounting records:
- Land that originally cost $23,000 was sold for $18,000.
- The common stock of Microsoft Corporation was purchased for $33,000 as a short-term investment not classified as a cash equivalent.
- New equipment was purchased for $165,000 cash.
- A $33,000 note was paid at maturity on January 1.
- On January 1, 2021, bonds were sold at their $66,000 face value.
- Common stock ($60,000 par) was sold for $82,000.
- Net income was $100,000 and cash dividends of $60,000 were paid to shareholders.
Required:
Prepare the statement of
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