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).
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