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Concept explainers
(Supplement 12B) Preparing a Statement of
Golf Universe is a regional and online golf equipment retailer. The company reported the following for the current year:
• Purchased a long-term investment for cash, $15,000.
• Paid cash dividend, $12,000.
• Sold equipment for $6,000 cash (cost, $21.000;
• Issued shares of no-par stock, 500 shares at $12 cash per share.
• Net income was $20,200.
• Depreciation expense was $3,000.
Its comparative
Required:
1. Following Supplement 12B, complete a T-account worksheet to be used to prepare the statement of cash flows for the current year.
2. Based on the T-account worksheet, prepare the statement of cash flows for the current year in proper format.
![Check Mark](/static/check-mark.png)
(a)
Concept introduction:
Cash flow statements: It shows the inflow and outflow of cash along with the reasons, during a particular period of time. All the cash transactions are categorized in three types of activities i.e., operating, investing and financing activities.
To show:
The t-shape accounts for all the items.
Explanation of Solution
T-shape accounts for non-cash items:
Accounts Receivable | |||
Particulars | $ (debit) | Particulars | $ (credit) |
Beginning Bal | 22,000 | ||
Increase | 0 | ||
Ending Balance | 22,000 |
Inventory | |||
Particulars | $ (debit) | Particulars | $ (credit) |
Beginning Bal | 68,000 | ||
Increase | 7,000 | ||
Ending Balance | 75,000 |
Investment | |||
Particulars | $ (debit) | Particulars | $ (credit) |
Beginning Bal | 0 | ||
Purchased | 15,000 | ||
Ending Balance | 15,000 |
Equipment | |||
Particulars | $ (debit) | Particulars | $ (credit) |
Beginning Bal | 114,500 | ||
Disposal | 21,000 | ||
Ending Balance | 93,500 |
Accumulated Depreciation | |||
Particulars | $ (debit) | Particulars | $ (credit) |
Beginning Bal | 32,000 | ||
Decrease | 12,000 | ||
Ending Balance | 20,000 |
Accounts Payable | |||
Particulars | $ (debit) | Particulars | $ (credit) |
Beginning Bal | 17,000 | ||
Decrease | 3,000 | ||
Ending Balance | 14,000 |
Salaries and Wages Payable | |||
Particulars | $ (debit) | Particulars | $ (credit) |
Beginning Bal | 2,500 | ||
Decrease | 1,500 | ||
Ending Balance | 1,000 |
Income Tax Payable | |||
Particulars | $ (debit) | Particulars | $ (credit) |
Beginning Bal | 3,000 | ||
Decrease | 1,500 | ||
Ending Balance | 4,500 |
Notes Payable (long-term) | |||
Particulars | $ (debit) | Particulars | $ (credit) |
Beginning Bal | 54,000 | ||
Increase | 0 | ||
Ending Balance | 54,000 |
Common Stock | |||
Particulars | $ (debit) | Particulars | $ (credit) |
Beginning Bal | 100,000 | ||
Decrease | 6,000 | ||
Ending Balance | 106,000 |
Retained Earnings | |||
Particulars | $ (debit) | Particulars | $ (credit) |
Beginning Bal | 16,500 | ||
Dividend | 12,000 | Net Income | 20,200 |
Ending Balance | 24,700 |
T-shape accounts for cash account:
Particulars | $ (debit) | Particulars | $ (credit) |
Operating Activities | |||
Net Income | 20,200 | Inventory | 7,000 |
Depreciation Expense | 3,000 | Accounts Payable | 3,000 |
Income tax payable | 1,500 | Salaries and Wages Payable | 1,000 |
Net Cash flow from operating 13,700 | |||
Investing Activities | |||
Sold Equipment | 6,000 | Purchased Investments | 15,000 |
Net cash used by Investing | 9,000 | ||
Financing | |||
Proceed from issue of stock | 6,000 | Paid Dividends | 12,000 |
Net Cash used by Financing Activities | 6,000 | ||
Net decrease in cash | 1,300 | ||
Beginning Cash | 20,500 | ||
Ending cash | 19,200 |
![Check Mark](/static/check-mark.png)
(b)
Concept introduction:
Cash flow statements: It shows the inflow and outflow of cash along with the reasons, during a particular period of time. All the cash transactions are categorized in three types of activities i.e., operating, investing and financing activities.
To prepare:
The cash flow statement.
Explanation of Solution
Particulars | $ |
Operating Activities: | |
Net Income | 20,200 |
Depreciation | 3,000 |
Cashflow from operating activities before working capital changes | 23,200 |
(-) Increase in inventory | (7,000) |
(-) Decrease in Accounts Payable | (3,000) |
(-) Decrease in Wages and Salaries Payable | (1,000) |
(+) Increase in Income tax payable | 1,500 |
Cashflow from operating activities | 13,700 |
Investing Activities: | |
(+) Cash proceeds from sale of equipment | 6,000 |
(-) Purchase of investments | (15,000) |
Cashflow used in investing activities | (9,000) |
Financing Activities: | |
Proceeds from issue of stock | 6,000 |
(-) Paid dividends | (12,000) |
Cashflow used in financing activities | (6,000) |
Net decrease in cash | (1,300) |
Beginning Cash | 20,500) |
Ending Cash | 19,200 |
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Chapter 12 Solutions
Managerial Accounting
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- On December 31, 2018, Blackpink Company, a financing institution lent ₱15,000,000 to YG Corp. due 3 years after. The loan is supported by an 12% note receivable. Based on the company’s initial estimates the present value of the 12 months expected credit loss (ECL) discounted at 10% is at 2,000,000. The probability of default (PD) is at 7%. Blackpink Company was able to collect interest as it became due at the end of 2019. There was no evidence of significant increase in credit risk by the end 2019 and that the receivable is determined to have “low credit risk”. There were no changes in its initial estimate of the 12 months expected credit loss either. By the end of 2020, Blackpink Company was able to collect interest as it became due. Based on available forward-looking information (determinable without undue cost or effort), however, there is evidence that there was a significant increase in credit risk by the end of 2020. Blackpink Company therefore had to change its basis…arrow_forwardNeed correct answer general accounting questionarrow_forwardCalculate Federal Income Tax Withholding Using the Percentage Method (Pre-2020 Form W-4) Publication 15-T. round to two decimal places at each calculationarrow_forward
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