Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

11. The following changes took place last year in Herald Companys balance sheet accounts: Asset and Contra-Asset Accounts Liabilities and Equity Accounts Cash $ 44

image text in transcribed

11.

The following changes took place last year in Herald Companys balance sheet accounts:
Asset and Contra-Asset Accounts Liabilities and Equity Accounts
Cash $ 44 I Accounts payable $ 21 I
Accounts receivable $ 12 D Accrued liabilities $ 10 D
Inventory $ 28 I Income taxes payable $ 13 I
Prepaid expenses $ 5 D Bonds payable $ 17 D
Long-term investments $ 28 D Common stock $ 43 I
Property, plant, and equipment $ 148 I Retained earnings $ 53 I
Accumulated depreciation $ 44 I

D = Decrease; I = Increase.

Long-term investments that had cost the company $51 were sold during the year for $46, and land that had cost $28 was sold for $74. In addition, the company declared and paid $33 in cash dividends during the year. Besides the sale of land, no other sales or retirements of plant and equipment took place during the year. Herald did not issue any bonds during the year or repurchase any of its own stock.

The companys income statement for the year follows:
Sales $ 601
Cost of goods sold 249
Gross margin 352
Selling and administrative expenses 279
Net operating income 73
Nonoperating items:
Loss on sale of investments $ (5)
Gain on sale of land 46 41
Income before taxes 114
Income taxes 28
Net income $ 86
The companys beginning cash balance was $104 and its ending balance was $148.
Required:

Use the direct method to convert the company's income statement to a cash basis. (Adjustment amounts that are to be deducted and Net cash "used in" operating activities should be indicated with a minus sign and all other amounts as positive values.)

Herald Companys Direct Method of Determining the Net Cash flows from Operating activities
Sales $
Adjustments to a cash basis:
(Click to select)Increase in accrued liabilitiesDecrease in inventoryIncrease in accounts receivableIncrease in prepaid expensesDecrease in income taxes payableDepreciationIncrease in accounts payableGain on sale of landDecrease in prepaid expensesIncrease in inventoryLoss on sale of investmentsDecrease in accrued liabilitiesDecrease in accounts payableDecrease in accounts receivableIncrease in income taxes payable $
Cost of goods sold
Adjustments to a cash basis:
(Click to select)DepreciationGain on sale of landIncrease in accounts receivableIncrease in accrued liabilitiesIncrease in income taxes payableDecrease in accounts receivableIncrease in inventoryIncrease in accounts payableDecrease in income taxes payableDecrease in prepaid expensesLoss on sale of investmentsDecrease in accrued liabilitiesDecrease in accounts payableDecrease in inventoryIncrease in prepaid expenses
(Click to select)Decrease in accounts payableGain on sale of landDecrease in accounts receivableDecrease in accrued liabilitiesLoss on sale of investmentsIncrease in prepaid expensesIncrease in inventoryDecrease in prepaid expensesIncrease in accounts receivableDecrease in inventoryDecrease in income taxes payableDepreciationIncrease in accounts payableIncrease in accrued liabilitiesIncrease in income taxes payable
Selling and administrative expenses
Adjustments to a cash basis:
(Click to select)Decrease in prepaid expensesIncrease in prepaid expensesGain on sale of landDecrease in accrued liabilitiesDecrease in income taxes payableLoss on sale of investmentsIncrease in accrued liabilitiesIncrease in accounts payableDepreciationDecrease in inventoryDecrease in accounts payableIncrease in income taxes payableDecrease in accounts receivableIncrease in accounts receivableIncrease in inventory
(Click to select)Increase in accounts receivableDepreciationIncrease in accounts payableDecrease in accrued liabilitiesDecrease in inventoryLoss on sale of investmentsIncrease in accrued liabilitiesIncrease in prepaid expensesDecrease in accounts receivableIncrease in inventoryDecrease in income taxes payableDecrease in accounts payableDecrease in prepaid expensesIncrease in income taxes payableGain on sale of land
(Click to select)Increase in accounts payableIncrease in accounts receivableIncrease in prepaid expensesLoss on sale of investmentsIncrease in income taxes payableDecrease in accrued liabilitiesDecrease in income taxes payableGain on sale of landIncrease in inventoryDecrease in accounts payableDecrease in inventoryIncrease in accrued liabilitiesDepreciationDecrease in accounts receivableDecrease in prepaid expenses
Income taxes
Adjustments to a cash basis:
(Click to select)Increase in accounts payableIncrease in income taxes payableIncrease in accrued liabilitiesIncrease in prepaid expensesDecrease in accrued liabilitiesLoss on sale of investmentsIncrease in inventoryDepreciationDecrease in income taxes payableIncrease in accounts receivableDecrease in accounts receivableDecrease in inventoryGain on sale of landDecrease in accounts payableDecrease in prepaid expenses
Net cash (Click to select)provided byused for operating activities $
The following changes took place last year in Herald Company's balance sheet accounts Liabilities and Equity Accounts Asset and Contra-Asset Acco unts Cash 44 Accounts payable 21 Accounts receivable 12 D Accrued liabilities 10 D nventory 28 Income taxes payable S 13 Prepaid expenses Bonds payable 17 D Long-term investments 28 D Common stock 43 Property, plant, and equipment S 148 Retained earnings 53 Accumulated depreciation 44 D 3 Decrease 3Increase. Long-term investments that had cost the company S51 were sold during the year for S46, and land that had cost $28 was sold for S74. In addition, the company declared and paid $33 in cash dividends during the year. Besides the sale of land, no other sales or retirements of plant and equipment took place during the year. Herald did not issue any bonds during the year or repurchase any of its own stock. The company's income statement for the year follows: Sales $601 Cost of goods sold 249 Gross 352 margin Selling and administrative expenses 279 Net operating income 73 Nonoperating items: Loss on sale of investments (5 Gain on sale of land 46 41 ncome before taxes 114 ncome taxes 28 Net income 86 The company's beginning cash balance was s 104 and its ending balance was S148 Required Use the direct method to convert the company's income statement to a cash basis. (Adjustment amounts that are to be deducted and Net cash "used in" operating activities should be indicated with a minus sign and all other amounts as positive values Herald Company' Direct Method of Determining the Net Cash flows from Operatin activities Sales Adjustments to a cash basis -12 s 589 Decrease in accounts receivable Cost of goods sold 249 Adjustments to a cash basis: Increase in accounts payable Decrease in inventor 28 Selling and administrative expenses 279 Adjustments to a cash basis: Increase in prepaid expenses Decrease in accrued liabilities Click to select ncome taxes Adjustments to a cash basis ncrease in income taxes payable Net cash (Click to select operating activities

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Clinical Audit In Primary Care Demonstrating Quality And Outcomes

Authors: Ruth Chambers, Gill Wakley

1st Edition

1857757092, 978-1857757095

More Books

Students also viewed these Accounting questions

Question

Compose the six common types of social business messages.

Answered: 1 week ago

Question

Describe positive and neutral messages.

Answered: 1 week ago