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Financial Summary and Cash Flow Analysis

The document provides financial statements for a company in 2010 and 2009 including a balance sheet, income statement, and additional information. It then asks to prepare a cash flow statement using the direct method. The cash flow statement shows: 1) Net cash from operating activities was $172,000, calculated from cash collected from accounts receivable, payments to accounts payable, operating expenses, interest, and income tax. 2) No other cash flow activities are included in the summary.

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39 views3 pages

Financial Summary and Cash Flow Analysis

The document provides financial statements for a company in 2010 and 2009 including a balance sheet, income statement, and additional information. It then asks to prepare a cash flow statement using the direct method. The cash flow statement shows: 1) Net cash from operating activities was $172,000, calculated from cash collected from accounts receivable, payments to accounts payable, operating expenses, interest, and income tax. 2) No other cash flow activities are included in the summary.

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انا و البحر
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:‫الفهم‬ ‫نفس تمرين المحاضرة بشكل مختصر لزيادة‬

Asset ‫ من ال‬accumulated depreciation ‫تم تجريد‬

2010 2009
Assets:
Cash 55000 33000
Accounts receivable 20000 30000
Merchandise inventory 15000 10000
Prepaid expenses 5000 1000
Land 130000 20000
building 149000 35000
Equipment 24000 9000
Total assets 398000 138000
Liabilities:
Accounts payable 28000 12000
Income tax payable 6000 8000
Bonds payable 130000 20000
Stockholder’s equity:
Common stock 70000 50000
Retained earnings 164000 48000
398000 138000

Income statement

revenues 507000
Cost of goods sold 150000
Operating expenses 111000
depreciation 9000
Loss on sale of equipment 3000
Interest expenses 42000 315000
Income before income tax 192000
Income tax 47000
Net income 145000

Additional information for 2010:


1. The company declared and paid a $29,000 cash dividend.
2. Issued $110,000 of long-term bonds in direct exchange for land.
3. A building costing $120,000 was purchased for cash. Equipment
costing $25,000 was also purchased for cash.
4. The company sold equipment with a book value of $7,000 (cost
$8,000, less accumulated depreciation $1,000) for $4,000 cash.
5. Issued common stock for $20,000 cash.
6. Depreciation expense was comprised of $6,000 for building and
$3,000 for equipment.

Answer according to direct method:

Collection from account receivable = credit sales – Δ (account receivable)

= 507000 – (20000 – 30000)

= 507000 +10000 = 517000

Payments to account payable

= cost of goods sold + Δ (inventory) – Δ (account payable)

= 150000 + (15000 – 10000) – (28000 – 12000)

= 150000 + 5000 – 16000 = 139000

Payments of operating expenses

= 111000 + Δ (prepaid expenses) - Δ (accrued expenses)

= 111000 + (5000 – 1000) – zero = 115000

Payments of Interest expenses

= 42000 + Δ (prepaid interest expenses) – Δ (accrued interest expenses)

= 42000 + zero – zero = 42000

Payments of Income tax

= 47000 + Δ (prepaid income tax expenses) – Δ (accrued income tax


expenses)
= 47000 + zero – (6000 – 8000) = 47000 + 2000 = 49000

Cash flow statement


Operating activities:
Collection from account receivable 517000
Payments to account payable (139000)
Payments of operating expenses (115000)
Payments of Interest expenses (42000)
Payments of Income tax (49000) (345000)
Net cash flow from operating activities 172000

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