Acct312 Intermediate Accounting: Week 7 Homework (P21-5 and P21-6)

Acct312 Intermediate Accounting Week 7 Homework (P21-5 and P21-6) P21-5 Statement of cash flows; direct method Comparative balance sheets for 2013 and 2012 and a statement of income for 2013 are given below for Metagrobolize Industries. Additional information from the accounting records of Metagrobolize also is provided. METAGROBOLIZE INDUSTRIES Comparative Balance Sheets December 31, 2013 and 2012 ($ in 000s) 2013 2012 Assets Cash 600 375 Accounts receivable 600 450 Inventory 900 525 Land 675 600 Building 900 900 Less: Accumulated depreciation (300) (270) Equipment 2,850 2,250 Less: Accumulated depreciation (525) (480) Patent 1,200 1,500 $6,900 $5,850 Liabilities Accounts payable 750 450 Accrued expenses payable 300 225 Lease liability--land 150 - Shareholders' Equity Common stock 3,150 3,000 Paid-in capital---excess of par 750 675 Retained earnings 1,800 1,500 Revenues Sales revenue 2,645 Gain on sale of land 90 2,735 Expenses Cost of goods sold 600 Depreciation expense--building 30 Depreciation expense--equipment 315 Loss on sale of equipment 15 Amortization of patent 300 Operating expenses 500 1,760 Net income $975 Additional information from the accounting records: a. During 2013, equipment with a cost of $300,000 (90% depreciated) was sold. b. The statement of shareholders’ equity reveals reductions of $225,000 and $450,000 for stock dividends and cash dividends, respectively. Required: Prepare the statement of cash flows of Metagrobolize for the year ended December 31, 2013. Present cash flows from operating activities by the direct method. (You may omit the schedule to reconcile net income to cash flows from operating activities.) P21-6 Cash flows from operating activities (direct method) derived from an income statement and cash flows from operating activities (indirect method) The income statement and a schedule reconciling cash flows from operating activities to net income are provided below ($ in millions) for Mike Roe Computers. MIKE ROE COMPUTERS Reconciliation of Net Income Income Statement To Net Cash Flows from Operating Activites For the Year Ended December 31, 2013 Sales 150 Net income 13 Cost of goods sold (90) Adjustments for noncash effects: Gross margin 60 Decrease in accounts receivable 3 Salaries expense 20 Gain on sales of equipment (12) Insurance expense 10 Increase in inventory (6) Depreciation expense 5 Increase in accounts payable 9 Bad debt expense 2 Increase in salaries payable 3 Interest expense 6 (43) Depreciation expense 5 Gain and losses: Increase in allowance for uncollectibles 2 Gain on sale of equipment 12 Decrease in bond discount 3 Loss on sale of land (3) 9 Decrease in prepaid insurance 2 Income before tax 26 Loss on sale of land 3 Income tax expense (13) Increase in income tax payable 6 Net income $13 Net cash flows from operating activities $31 Required: 1. Calculate each of the following amounts for Mike Roe Computers: a. Cash received from customers during the reporting period. b. Cash paid to suppliers of goods during the reporting period. c. Cash paid to employees during the reporting period. d. Cash paid for interest during the reporting period. e. Cash paid for insurance during the reporting period. f. Cash paid for income taxes during the reporting period. 2. Prepare the cash flows from operating activities section of the statement of cash flows (direct method).