AC 313 Statement of Cash Flows Assessment (50 Points) 260 (7) 46 Presented below are the balance sheets of Spitfire Corporation as of December 31, Year 1 and Year 2, and the income statement for the year ended December 31, Year 2. The Income Statement for the year ended December 31, Year 2 as well as additional information from the accounting records are on the next page. All dollars are in thousands. Spitfire Corporation Balance Sheets December 31, Year 1 and Year 2 Assets Year 1 Year 2 Cash $ 90 $ 152 Accounts receivable 269 Less: Allowance for doubtful accounts Prepaid insurance Inventory Long-term investment Land 170 170 Buildings and equipment 296 Less: Accumulated depreciation (109) Trademark Total Assets $ 1.045 $1.099 Liabilities & Stockholders' Equity Accounts payable $ 37 Salaries payable Deferred tax liability Lease liability Bonds Payable 120 Less: Discount on bonds Common Stock 300 Paid-In Capital -in excess of par Preferred Stock 80 Retained Earnings Total Liabilities & Stockholders' Equity $ 1.099 30 S 52 384 Spitfire Corporation Income Statement For the Year Ended December 31, Year 2 $ 400 14 Net sales revenue Investment revenue Operating Expenses: Cost of Goods Salaries expense Depreciation expense Trademark amortization Bad debts expense Insurance expense Bond interest expense Operating Income Other Income (Expense): Loss on sale of building Gain on sale of investments Pre-Tax Income from Continuing Operations Less: Income Tax Expense: Net Income 340 $ 73 $(30) (24) $ 50 $ 24 Additional Information: 1. A building that originally cost $44 million, and which was one-fourth depreciated, was destroyed by fire. Some undamaged parts were sold for $3 million 2. Investment revenue includes Spitfire Corporation's $8 million share of the net income of Beta Corporation, an equity method investee. 3. $40 million par value of common stock was sold for $70 million, and $80 million of preferred stock was sold at par. 4. A long-term investment in bonds, originally purchased for $32 million, was sold for $38 million 5. Pretax accounting income exceeded taxable income causing the deferred income tax liability to increase by $4 million. 6. The right to use a building was acquired with a seven-year lease agreement: present value of lease payments, $80 million. Annual lease payments of $10 million are paid at January 1st of each year starting in Year 2. 7. $150 million of bonds were retired at maturity 8. Shareholders were paid cash dividends of $20 million. Required: Use the EXCEL worksheet template provided. There are three tabs- 1. Direct Method Statement of Cash Flows (SCF). This should be the formal Statement of Cash Flows (see your textbook.) 2. Spreadsheet for preparing the SCFs. This is where you use the spreadsheet method as a tool for preparing the statement. Show ALL your work either with t-accounts, summary entries, or a combination of both. 3. Cash flows from Operating Activities - CFOs Indirect Method A. In the tab labeled Direct Method SCFs, prepare a complete statement of cash flows for Spitfire Corporation using the direct method of reporting cash flows from operating activities for the year ended December 31, Year 2. Show your work in the second tab labeled Spreadsheet for SCFs. Use the spreadsheet method as a tool with supporting t-accounts, summary entries or a combination of both. For both the direct and indirect method you will need to analyze the impact the Allowance for doubtful accounts has on accounts receivable and cash. (25 points) B. In the third tab, prepare the operating activities section only for the statement of cash flows for Ace Corporation using the indirect method for the year ended December 31, Year 2. (25 points) Please follow the Basic Formatting Guidelines for Excel Documents located in the Writing and Excel Assignments folder
