Concept Introduction:
Requirement 1a:
To prepare:
The completed balance sheet of Hoeman Inc, for the year ended December 31st, 2016 and 2017.
Answer to Problem 9.27P
Below is the completed balance sheet of Hoeman Inc. for the year ended December 31st, 2016 and December 31st, 2017:
| HOEMAN INC. Comparative Balance Sheets at December 31, 2017 and 2016 | ||
| Assets | 2017($) | 2016($) |
| Current Assets: | ||
| Cash | $26,000 | $23,000 |
| 62,000 | 67,000 | |
| Inventory | 78,000 | 88,000 |
| Total current assets | $166,000 | $178,000 |
| Land | $70,000 | 70,000 |
| Buildings | 207,500 | 145,000 |
| Less: | (60,000) | (52,500) |
| Total land, buildings and equipment | 217,500 | 162,500 |
| Total assets | 383,500 | 340,500 |
| Liabilities | ||
| Current liabilities: | ||
| Accounts payable | $83,500 | $98,500 |
| Notes Payable | 77,500 | 62,000 |
| Total current liabilities | $161,000 | 160,500 |
| Long-term debt | $96,000 | 69,500 |
| Common stock | $25,000 | $22,500 |
| 101,500 | 88,000 | |
| Total stockholders' equity | $126,500 | $110,500 |
| Total liabilities and stockholders' equity | $383,500 | $340,500 |
Explanation of Solution
The missing amounts in balance sheet items are computed with the given additional information as below:
Accounts Receivables:
Accounts Receivables for December 31st, 2016:
Decrease in accounts receivables for the year:
Accounts Receivables for December 31st, 2017
Accounts Receivables for December 31st, 2017=
Land:
Land at December 31st, 2016:
Land at December 31st, 2017:
The cost of land remains the same for the current year as it was not affected by any transactions and book value should be considered.
Buildings:
Buildings at December 31st, 2016:
Cost of new buildings for 2017:
Buildings=
Buildings=
Accounts Payable:
Total current liabilities for December 31st, 2017:
Notes payable:
Accounts payable for December 31st, 2017 is computed by using the formula,
Accounts Payable
Accounts payable for December 31st, 2017=
Retained earnings:
Retained earnings for December 31st, 2016:
Net income for 2017:
Dividends paid during the year 2017:
The retained earnings for the year end 2017 is computed by using the below formula:
Ending retained earnings=
Ending retained earnings=
Retained earnings for December 31st, 2017 is
Long-term debt:
The long-term debt for the year end 2017 is computed by using the formula,
Total liabilities and stockholder's equity:
Total current liabilities:
Using the above formula,
Long-term debt
Note: Total liabilities and stockholder's equity is $383,500 considering the balance sheet equation:
Conclusion:
Hence total assets of $383,500 is considered to be the total liabilities and stockholder's equity.
Concept Introduction:
Statement of
Requirement 1b:
To prepare:
The statement of cash flow of Hoeman Inc. for the year ended December 31st, 2017.
Answer to Problem 9.27P
| Hoeman Inc. Statement of cash flows for the year ended December 31st, 2017 | ||
| Cash flows from Operating activities: | $ | $ |
| Net income | 47,000 | |
| Adjustments to reconcile net income to net cash provided by operating activities | ||
| 60,000 | ||
| (Increase)/Decrease in current assets: | ||
| Accounts Receivables | 5,000 | |
| Inventory | 10,000 | |
| Increase/(Decrease) in current liabilities: | ||
| Accounts payable | (15,000) | |
| Notes payable | 15,500 | |
| Net cash provided by operating activities | 122,500 | |
| Cash flows from investing activities: | ||
| Purchase of new buildings | (62,500) | |
| Net cash used in investing activities | (62,500) | |
| Cash flow from financing activities: | ||
| Payment of dividends | (33,500) | |
| Net cash used in financing activities | (33,500) | |
| Net increase in cash | 26,500 | |
Explanation of Solution
The general rule of preparing indirect cash flow statement states the following things:
- If asset account increases, deduct the amount from net income.
- If asset account decreases, add the amount to net income.
- If liability account increases, add the amount to net income.
- If liability account decreases, deduct the amount from net income.
Accounts Receivables:
Accounts receivables for the year end December 31st, 2017 is decreased by $5,000 and hence it is added to the net income.
Inventory:
Inventory for the year end 2016:
Inventory for the year end 2017:
This indicates the decrease in the inventory for the year end 2017 by $10,000 and hence it is added to the net income.
Accounts Payable:
Accounts payable for the year end 2016:
Accounts payable for the year end 2017:
This indicates the decrease in accounts payable for the year end 2017 by $15,000 and hence it is deducted from net income.
Notes payable:
Notes payable for the year end 2016:
Notes payable for the year end 2017
This indicates the increase in notes payable for the year end 2017 of $15,500 and hence it is added to the net income.
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Chapter 9 Solutions
Accounting: What the Numbers Mean
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