Question
A comparative balance sheet for Alcorn Company containing data for the last two years is as follows: Alcorn Company Comparative Balance Sheet This Year Last
A comparative balance sheet for Alcorn Company containing data for the last two years is as follows:
Alcorn Company
Comparative Balance Sheet
This
Year
Last
Year
Assets
Current assets:
Cash and cash equivalents
$
71,000
$
50,000
Accounts receivable
590,000
610,000
Inventory
608,000
420,000
Prepaid expenses
10,000
5,000
Total current assets
1,279,000
1,085,000
Property, plant, and equipment
2,370,000
1,800,000
Less accumulated depreciation
615,000
560,000
Net property, plant, and equipment
1,755,000
1,240,000
Long-term investments
80,000
130,000
Loans to subsidiaries
120,000
70,000
Total assets
$
3,234,000
$
2,525,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$
870,000
$
570,000
Accrued liabilities
25,000
42,000
Income taxes payable
133,000
118,000
Total current liabilities
1,028,000
730,000
Bonds payable
620,000
400,000
Total liabilities
1,648,000
1,130,000
Stockholders' equity:
Common stock
1,090,000
1,000,000
Retained earnings
496,000
395,000
Total stockholders' equity
1,586,000
1,395,000
Total liabilities and stockholders' equity
$
3,234,000
$
2,525,000
The following additional information is available about the company's activities during this year:
a.
The company declared and paid a cash dividend this year.
b.
Bonds with a principal balance of $380,000 were repaid during this year.
c.
Equipment was sold during this year for $70,000. The equipment had cost $130,000 and had $40,000 in accumulated depreciation on the date of sale.
d.
Long-term investments were sold during the year for $110,000. These investments had cost $50,000 when purchased several years ago.
e.
The subsidiaries did not repay any outstanding loans during the year.
f.
Alcorn did not repurchase any of its own stock during the year.
The company reported net income this year as follows:
Alcorn Company
Income Statement
Sales
$
3,000,000
Cost of goods sold
1,860,000
Gross margin
1,140,000
Selling and administrative expenses
930,000
Net operating income
210,000
Nonoperating items:
Gain on sale of investments
$
60,000
Loss on sale of equipment
20,000
40,000
Income before taxes
250,000
Income taxes
80,000
Net income
$
170,000
Required:
1. Prepare a worksheet like Exhibit 15-9 for Alcorn Products.
2. Using the indirect method, prepare a statement of cash flows for 2008.
3. What problems relating to the company's activities are revealed by the statement of cash flows that you have prepared? A comparative balance sheet for Alcorn Company containing data for the last two years is as follows:
Alcorn Company
Comparative Balance Sheet
This
Year
Last
Year
Assets
Current assets:
Cash and cash equivalents
$
71,000
$
50,000
Accounts receivable
590,000
610,000
Inventory
608,000
420,000
Prepaid expenses
10,000
5,000
Total current assets
1,279,000
1,085,000
Property, plant, and equipment
2,370,000
1,800,000
Less accumulated depreciation
615,000
560,000
Net property, plant, and equipment
1,755,000
1,240,000
Long-term investments
80,000
130,000
Loans to subsidiaries
120,000
70,000
Total assets
$
3,234,000
$
2,525,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$
870,000
$
570,000
Accrued liabilities
25,000
42,000
Income taxes payable
133,000
118,000
Total current liabilities
1,028,000
730,000
Bonds payable
620,000
400,000
Total liabilities
1,648,000
1,130,000
Stockholders' equity:
Common stock
1,090,000
1,000,000
Retained earnings
496,000
395,000
Total stockholders' equity
1,586,000
1,395,000
Total liabilities and stockholders' equity
$
3,234,000
$
2,525,000
The following additional information is available about the company's activities during this year:
a.
The company declared and paid a cash dividend this year.
b.
Bonds with a principal balance of $380,000 were repaid during this year.
c.
Equipment was sold during this year for $70,000. The equipment had cost $130,000 and had $40,000 in accumulated depreciation on the date of sale.
d.
Long-term investments were sold during the year for $110,000. These investments had cost $50,000 when purchased several years ago.
e.
The subsidiaries did not repay any outstanding loans during the year.
f.
Alcorn did not repurchase any of its own stock during the year.
The company reported net income this year as follows:
Alcorn Company
Income Statement
Sales
$
3,000,000
Cost of goods sold
1,860,000
Gross margin
1,140,000
Selling and administrative expenses
930,000
Net operating income
210,000
Nonoperating items:
Gain on sale of investments
$
60,000
Loss on sale of equipment
20,000
40,000
Income before taxes
250,000
Income taxes
80,000
Net income
$
170,000
Required:
1. Prepare a worksheet like Exhibit 15-9 for Alcorn Products.
2. Using the indirect method, prepare a statement of cash flows for 2008.
3. What problems relating to the company's activities are revealed by the statement of cash flows that you have prepared?
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Introduction to Managerial Accounting
Authors: Peter C. Brewer, Ray H Garrison, Eric Noreen
8th edition
1259917061, 978-1259917066
