Question 33 785The Statement of Cash Flows> Problems Group ALearning Objectives 1, 2P14-32A Identifving the purpose and preparing the statement of cash flows-indirect methodAmerican Rare Coins (ARC) was formed on January 1, 2018. Additional data for theyear follow:2. Net Income $266,4004. Net Cash Used by Op.Act. S(48,000)a. On January 1, 2018, ARC issued no par common stock for $450,000.b. Early in January, ARC made the following cash payments:1. For store fixtures, $53,0002. For merchandise inventory, $340,0003. For rent expense on a store building, $20,000c. Later in the year, ARC purchased merchandise inventory on account for $239,000.Before year-end, ARC paid $139,000 of this accounts payable.d. During 2018, ARC sold 2,400 units of merchandise inventory for $275 each.Betore year-end, the company collected 85% of this amount. Cost of goodssold for the year was $250,000, and ending merchandise inventory totaled$329,000.e. The store employs three people. The combined annual payroll is $96,000, of whichARC still owes $3,000 at year-end.f. At the end of the year, ARC paid income tax of $17,000. There are no incometaxes payable.g. Late in 2018, ARC paid cash dividends of $44,000.h. For store fixtures, ARC uses the straight-line depreciation method, over five years,with zero residual value.Requirements1. What is the purpose of the statement of cash flows?2. Prepare ARC's income statement for the year ended December 31, 2018. Use thesingle-step format, with all revenues listed together and all expenses listed together.3. Prepare ARC's balance sheet at December 31, 2018.4. Prepare ARC's statement of cash flows using the indirect method for the yearended December 31, 2018.P14-33A Preparing the statement of cash flows-indirect methodLearning Objective 2Accountants for Morganson, Inc. have assembled the following data for the yearended December 31, 2018:Net Cash Used for Inv.Act. $(15,500)20182017Current Assets:Cash$ 99,400$ 25,000Accounts Receivable64,10069,700Merchandise Inventory83,00075,000Current Liabilities:Accounts Payable57,60055,200Income Tax Payable14,80016,800 784 chapter 14Transaction Data for 2018:$ 38,000Payment of notes payable$ 46,100$Issuance of common stock for çash50,00024,000Payment of cash dividendsDepreciation expenseIssuance of notes payable to borrow cash62,00074,000Purchase of equipment with cashGain on sale of building119,0004,500Acquisition of land by issuing long-term notes payable54,000Net income68,500Book value of building soldPrepare Morganson's statement of cash flows using the indirect method. Include anaccompanying schedule of non-cash investing and financing activities.Learning Objective 2P14-34A Preparing the statement of cash flows-indirect method withnon-cash transactionsThe 2018 income statement and comparative balance sheet of Rolling Hills, Inc.Net Cash Prov. by Op.Act. $125,100follow:ROLLING HILLS, INC.Income StatementYear Ended December 31, 2018Net Sales Revenue$ 440,000Cost of Goods Sold209,200Gross Profit230,800Operating Expenses:Salaries Expense$ 77,400Depreciation Expense-Plant AssetsOther Operating Expenses14,400Total Operating Expenses10,200Operating Income102,000Other Income and (Expenses):128 200Interort D

1. schedule for changes in working capital 2018 2017 Increase/ Decrease Accounts Receivable 64,100.00 69,700.00 5,600.00 Merchandise Inventory 83,000.00 75,000.00 (8,000.00) Accounts Payable 57,600.00 55,200.00 2,400.00 Income Tax Payable 14,800.00 16,800.00 (2,000.00) 2. sale of building includes gain from from the sale of Building : 54000 + 4500 = 58500 3. Acquisition of land by issuing long term notes payable, here there is no exchange of cash . it is not relevant for cash flow statement 4. Net increase/ decrease in cash : Aggregate of cash used/ provided by operating activities, investing activities and financing activities 5. cash at end : Net increase/ Decrease of cash + cash at the beginningAccountants for Morganson inc Cash Flow statement (Indirect Method) For the year ended December 2018 Particulars $ $ $ Cash Flows From Operating Activities Net income 68,500.00 Adjustments: Depreciation Expense 24,000.00 Gain from sale of Building (4,500.00) Schedule for changes in Working Capital Decrease in Accounts Receivable 5,600.00 Increase in Accounts Payable 2,400.00 Less: Increase in Merchandise Inventory (8,000.00) Decrease in Income Tax Payable (2,000.00) 17,500.00 Net cash Provided by Operating Activities 86,000.00 Cash flows from Investing Activities cash received from sale of building 58,500.00 Purchase of Equipment for cash (74,000.00) Net cash used in investing Activities (15,500.00) Cash flows from Financing Activities Issuance of common stock for cash 38,000.00 Issuance of Notes Payable 62,000.00 Payment of notes Payable (46,100.00) Payment of cash Dividend (50,000.00) Net cash provided by financing activities 3,900.00 Net increase(decrease) in cash 74,400.00 cash in the beginning 25,000.00 cash at the end 99,400.00

Business

Accounting

Transaction Data for 2018: $ 38,000 Payment of notes payable $ 46,100 Issuance of common stock for çash 24,000 Payment of cash dividends 50,000 Depreciation expense 74,000 Issuance of notes payable to borrow cash Purchase of equipment with cash Acquisition of land by issuing long-term notes payable 62,000 119,000 Gain on sale of building 4,500 ook value of building sold 54,000 Net income 68,500 Prepare Morganson's statement of cash flows using the indirect method. Include an accompanying schedule of non-cash investing and financing activitio

Transaction Data for 2018: $ 38,000 Payment of notes payable $ 46,100 Issuance of common stock for çash 24,000 Payment of cash dividends 50,000 Depreciation expense 74,000 Issuance of notes payable to borrow cash Purchase of equipment with cash Acquisition of land by issuing long-term notes payable 62,000 119,000 Gain on sale of building 4,500 ook value of building sold 54,000 Net income 68,500 Prepare Morganson's statement of cash flows using the indirect method. Include an accompanying schedule of non-cash investing and financing activitio

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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Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.

Question

Question 33

785
The Statement of Cash Flows
> Problems Group A
Learning Objectives 1, 2
P14-32A Identifving the purpose and preparing the statement of cash flows-
indirect method
American Rare Coins (ARC) was formed on January 1, 2018. Additional data for the
year follow:
2. Net Income $266,400
4. Net Cash Used by Op.
Act. S(48,000)
a. On January 1, 2018, ARC issued no par common stock for $450,000.
b. Early in January, ARC made the following cash payments:
1. For store fixtures, $53,000
2. For merchandise inventory, $340,000
3. For rent expense on a store building, $20,000
c. Later in the year, ARC purchased merchandise inventory on account for $239,000.
Before year-end, ARC paid $139,000 of this accounts payable.
d. During 2018, ARC sold 2,400 units of merchandise inventory for $275 each.
Betore year-end, the company collected 85% of this amount. Cost of goods
sold for the year was $250,000, and ending merchandise inventory totaled
$329,000.
e. The store employs three people. The combined annual payroll is $96,000, of which
ARC still owes $3,000 at year-end.
f. At the end of the year, ARC paid income tax of $17,000. There are no income
taxes payable.
g. Late in 2018, ARC paid cash dividends of $44,000.
h. For store fixtures, ARC uses the straight-line depreciation method, over five years,
with zero residual value.
Requirements
1. What is the purpose of the statement of cash flows?
2. Prepare ARC's income statement for the year ended December 31, 2018. Use the
single-step format, with all revenues listed together and all expenses listed together.
3. Prepare ARC's balance sheet at December 31, 2018.
4. Prepare ARC's statement of cash flows using the indirect method for the year
ended December 31, 2018.
P14-33A Preparing the statement of cash flows-indirect method
Learning Objective 2
Accountants for Morganson, Inc. have assembled the following data for the year
ended December 31, 2018:
Net Cash Used for Inv.
Act. $(15,500)
2018
2017
Current Assets:
Cash
$ 99,400
$ 25,000
Accounts Receivable
64,100
69,700
Merchandise Inventory
83,000
75,000
Current Liabilities:
Accounts Payable
57,600
55,200
Income Tax Payable
14,800
16,800

784 chapter 14
Transaction Data for 2018:
$ 38,000
Payment of notes payable
$ 46,100
$
Issuance of common stock for çash
50,000
24,000
Payment of cash dividends
Depreciation expense
Issuance of notes payable to borrow cash
62,000
74,000
Purchase of equipment with cash
Gain on sale of building
119,000
4,500
Acquisition of land by issuing long-term notes payable
54,000
Net income
68,500
Book value of building sold
Prepare Morganson's statement of cash flows using the indirect method. Include an
accompanying schedule of non-cash investing and financing activities.
Learning Objective 2
P14-34A Preparing the statement of cash flows-indirect method with
non-cash transactions
The 2018 income statement and comparative balance sheet of Rolling Hills, Inc.
Net Cash Prov. by Op.
Act. $125,100
follow:
ROLLING HILLS, INC.
Income Statement
Year Ended December 31, 2018
Net Sales Revenue
$ 440,000
Cost of Goods Sold
209,200
Gross Profit
230,800
Operating Expenses:
Salaries Expense
$ 77,400
Depreciation Expense-Plant Assets
Other Operating Expenses
14,400
Total Operating Expenses
10,200
Operating Income
102,000
Other Income and (Expenses):
128 200
Interort D

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