Question
Bernie's Ltd. Income Statement For the Year ended December 31, 20X5 Income: Sales 682,000 Dividends 22,000 Interest 29,000 Gain on sale of PPE (Property Plant
Bernie's Ltd. | |
Income Statement | |
For the Year ended December 31, 20X5 | |
Income: | |
Sales | 682,000 |
Dividends | 22,000 |
Interest | 29,000 |
Gain on sale of PPE (Property Plant & Equipment) | 19,000 |
Total income | 752,000 |
Expenses: | |
Cost of goods sold | 360,000 |
Depreciation | 43,000 |
Wages | 134,000 |
Interest | 38,000 |
Other expenses | 41,000 |
Total expenses | 616,000 |
Net income before income tax expense | 136,000 |
Income tax expense | 36,000 |
Net income after income tax expense | 100,000 |
Additional information:
PPE purchases during 20X5 were $735,000
Issuance of mortgage payable during 20X5 $226,000
The company follows ASPE.
All prepaid expenses at the beginning of the year expired during 20X5.
$5,000 was accrued for operating expenses at year end.
Bernie's Ltd. | ||
Balance sheet | ||
As at December 31, | 20X5 | 20X4 |
Assets | ||
Cash | 57,000 | 101,000 |
Accounts receivable | 224,000 | 192,000 |
Inventory | 323,000 | 330,000 |
Interest receivable | 8,000 | 3,000 |
Prepaids | 18,000 | 17,000 |
Long term receivable from Dennis's Ltd. | 26,000 | - |
Property, Plant and Equipment (PPE), net | 1,087,000 | 525,000 |
Total | 1,743,000 | 1,168,000 |
Liabilities | ||
Accounts payable | 220,000 | 137,000 |
Accrued liabilities | 5,000 | 7,000 |
Wages payable | 6,000 | 12,000 |
Mortgage payable | 384,000 | 185,000 |
Shareholder's Equity | ||
Common shares | 861,000 | 619,000 |
Retained earnings | 267,000 | 208,000 |
Total | 1,743,000 | 1,168,000 |
How much is the net adjustment to net income under the operating activities section for inventory as it appears on the cash flow statement when using the indirect method?
Multiple Choice
$6,000
($7,000)
The adjustment for inventory does not fall under the operating activities section.
$7,000
None of the other alternatives are correct
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