Required Information[The following information applies to the questions displayed below.]The following financial statements and additional information are reported.AssetsCashAt December 31Comparative Balance SheetsAccounts receivable, netInventoryPrepaid expensesTotal current assetsMachineryAccumulated depreciation-MachineryTotal assetsLiabilitiesAccounts payableSalaries payableIncome taxes payableTotal current liabilitiesNotes payable (long term)Total liabilitiesEquityCommon stock, no par valueRetained earningsTotal liabilities and equitySalesCost of goods soldGross profitOperating expenses (excluding depreciation)Depreciation expenseYear 2$ 96,10093,50082,8006,300278,708143,000(36,500)$ 385,200Income StatementFor Year Ended December 31, Year 2Other gains (losses)Gain on sale of machineryIncome before taxesIncome taxes expenseNet income.$ 44,0007,9005,30057,29949,000106,200258,00021,000$385,200Year 1$ 63,00070,000115,0009,200257,200134,000(18,500)$ 372,700$ 58,50018,8007,60084,90079,000163,900179,00029,800$ 372,700$.773,000430,000343,00086,00077,600179,4003,900183,30045,790$137,510Additional Informationa. A $30,000 note payable is retired at its $30.000 carrying (book) value in exchange for cash.b. The only changes affecting retained earnings are net income and cash dividends paid.c. New machinery is acquired for $76,600 cash.d. Received cash for the sale of machinery that had cost $67,600. yielding a $3,900 gain.e. Prepaid Expenses and Salaries Payable relate to Operating Expenses on the income statement.f. All purchases and sales of inventory are on credit. Required:(1) Prepare a statement of cash flows using the indirect method for the year ended December 31, Year 2.Note: Amounts deducted should be Indicated with a minus sign.Statement of Cash Flows (Indirect Method)For Year Ended December 31, Year 2Cash flows from operating activitiesNet incomeS 137,510Adjustments to reconcile net income to net cash provided by operating activitiesIncome statement items not affecting cashDepreciation expenseGain on sale of machineryChanges in current assets and current liabilitiesIncrease in accounts receivableDecrease in inventoryDecrease in prepaid expensesDecrease in accounts payableDecrease in salaries payableDecrease in income taxes payableNet cash provided by operating activitiesCash flows from investing activitiesCash paid for machineryNet cash used in investing activitiesCash flows from financing activitiesCash paid to retire notesCash received from stock issuanceCash paid for dividendsNet cash used in financing activitiesNet increase (decrease) in cashCash balance at prior year-endCash balance at current year-end77,600(3.900)(23,500)32,2002,900(14,500)(10,900)(2.300)(76,600)(30,000)79,000(146,310)$$$195,110(76,600)(97,310)21,20063,00084,200

Lets understand the basics.The cash flow statement is prepared to record the cash flow from various…

The following financial statements and additional information are reported. Comparative Balance Sheets Assets Cash At December 31 Accounts receivable, net Inventory Prepaid expenses Total current assets Machinery Accumulated depreciation-Machinery Total assets Liabilities Accounts payable Salaries payable Income taxes payable Total current liabilities Notes payable (long term) Total liabilities Year 2 $ 96,100 93,508 82,800 6,300 278,708 143,000 (36,500) $385,200 $ 44,000 7,900 5,300 57,208 49,000 186,200 Year 1 $ 63,000 70,000 115,000 9,200 257,200 134,000 (18,500) $ 372,700 $ 58,500 18,800 7,600 84,900 79,000 163,900

The following financial statements and additional information are reported. Comparative Balance Sheets Assets Cash At December 31 Accounts receivable, net Inventory Prepaid expenses Total current assets Machinery Accumulated depreciation-Machinery Total assets Liabilities Accounts payable Salaries payable Income taxes payable Total current liabilities Notes payable (long term) Total liabilities Year 2 $ 96,100 93,508 82,800 6,300 278,708 143,000 (36,500) $385,200 $ 44,000 7,900 5,300 57,208 49,000 186,200 Year 1 $ 63,000 70,000 115,000 9,200 257,200 134,000 (18,500) $ 372,700 $ 58,500 18,800 7,600 84,900 79,000 163,900

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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