Question
Financial statements for McGinnis Company as well as additional information relevant to cash flows during the period are given below. McGinnis Company Income Statement For
Financial statements for McGinnis Company as well as additional information relevant to cash flows during the period are given below.
| McGinnis Company |
| Income Statement |
| For Year Ended December 31, 20-2 |
| 1 | Net sales |
| $1,750,000.00 |
| 2 | Cost of goods sold |
| 890,000.00 |
| 3 | Gross profit |
| $860,000.00 |
| 4 | Operating expenses |
| 590,600.00 |
| 5 | Operating income |
| $269,400.00 |
| 6 | Other revenues and expenses: |
|
|
| 7 | Interest revenue | $2,700.00 |
|
| 8 | Interest expense | (750.00) |
|
| 9 | Gain on sale of office equipment | 15,000.00 | 16,950.00 |
| 10 | Income before taxes |
| $286,350.00 |
| 11 | Income tax expense |
| 95,000.00 |
| 12 | Net income |
| $191,350.00 |
| McGinnis Company |
| Statement of Retained Earnings |
| For Year Ended December 31, 20-2 |
| 1 | Retained earnings, January 1, 20-2 |
| $320,000.00 |
| 2 | Net income | $191,350.00 |
|
| 3 | Less dividends | 40,000.00 |
|
| 4 | Net increase in retained earnings |
| 151,350.00 |
| 5 | Retained earnings, December 31, 20-2 |
| $471,350.00 |
| McGinnis Company |
| Comparative Balance Sheet |
| December 31, 20-2 and 20-1 |
| 1 |
|
| 20-2 |
| 20-1 | INCREASE (DECREASE) |
| 2 | Assets |
|
|
|
|
|
| 3 | Current assets: |
|
|
|
|
|
| 4 | Cash | $103,420.00 |
| $50,520.00 |
| $52,900.00 |
| 5 | Government notes | 5,400.00 |
| 16,000.00 |
| (10,600.00) |
| 6 | Accrued interest receivable | 830.00 |
| 580.00 |
| 250.00 |
| 7 | Accounts receivable (net) | 300,600.00 |
| 309,200.00 |
| (8,600.00) |
| 8 | Merchandise inventory | 580,300.00 |
| 495,800.00 |
| 84,500.00 |
| 9 | Supplies and prepayments | 65,000.00 |
| 32,000.00 |
| 33,000.00 |
| 10 | Total current assets |
| $1,055,550.00 |
| $904,100.00 | 151,450.00 |
| 11 | Property, plant, and equipment: |
|
|
|
|
|
| 12 | Store equipment | $560,000.00 |
| $420,000.00 |
| 140,000.00 |
| 13 | Less accumulated depreciation-store equipment | 120,000.00 | 440,000.00 | 90,000.00 | 330,000.00 | 30,000.00 |
| 14 | Delivery equipment | $430,000.00 |
| $330,000.00 |
| 100,000.00 |
| 15 | Less accumulated depreciation-delivery equipment | 150,000.00 | 280,000.00 | 120,000.00 | 210,000.00 | 30,000.00 |
| 16 | Office equipment | $320,000.00 |
| $380,000.00 |
| (60,000.00) |
| 17 | Less accumulated depreciation-office equipment | 30,500.00 | 289,500.00 | 100,500.00 | 279,500.00 | (70,000.00) |
| 18 | Total property, plant, and equipment |
| 1,009,500.00 |
| 819,500.00 | 190,000.00 |
| 19 | Total assets |
| $2,065,050.00 |
| $1,723,600.00 | 341,450.00 |
| 20 | Liabilities |
|
|
|
|
|
| 21 | Current liabilities: |
|
|
|
|
|
| 22 | Notes payable | $117,000.00 |
| $109,000.00 |
| $8,000.00 |
| 23 | Accounts payable | 135,000.00 |
| 185,000.00 |
| (50,000.00) |
| 24 | Income tax payable | 25,000.00 |
| 15,000.00 |
| 10,000.00 |
| 25 | Accrued and withheld payroll taxes | 15,800.00 |
| 13,400.00 |
| 2,400.00 |
| 26 | Accrued interest payable | 900.00 |
| 1,200.00 |
| (300.00) |
| 27 | Total current liabilities |
| $293,700.00 |
| $323,600.00 | (29,900.00) |
| 28 | Stockholders Equity |
|
|
|
|
|
| 29 | Common stock ($10 par, 400,000 shares authorized; |
|
|
|
|
|
| 30 | Issued: 80,000 in 20-2 and 70,000 in 20-1) | $800,000.00 |
| $700,000.00 |
| $100,000.00 |
| 31 | Paid-in capital in excess of par-common stock | 500,000.00 |
| 380,000.00 |
| 120,000.00 |
| 32 | Retained earnings | 471,350.00 |
| 320,000.00 |
| 151,350.00 |
| 33 | Total stockholders equity |
| 1,771,350.00 |
| 1,400,000.00 | 371,350.00 |
| 34 | Total liabilities and stockholders equity |
| $2,065,050.00 |
| $1,723,600.00 | 341,450.00 |
Additional information:
| 1. | Office equipment was sold in 20-2 for $35,000. Additional information on the office equipment sold is provided below. |
| Cost | $100,000 |
| Accumulated depreciation | (80,000) |
| Book value | $20,000 |
| Market value | 35,000 |
| Gain on sale | $15,000 |
| 2. | Depreciation expense for the year was $70,000. |
| 3. | The following purchases were made for cash: |
| Store equipment | $140,000 |
| Delivery equipment | 100,000 |
| Office equipment | 32,000 |
| $272,000 |
| 4. | Declared and paid cash dividends of $40,000. |
| 5. | Issued 10,000 shares of $10 par common stock for $22 per share. |
| 6. | Acquired additional office equipment by issuing a note payable for $8,000. |
Required:
| Prepare a statement of cash flows explaining the change in cash and cash equivalents for the year ended December 31, 20-2. |
| McGinnis Company |
| Statement of Cash Flows |
|
|
| 1 | Cash flows from operating activities: |
|
|
| 2 |
|
|
|
| 3 | Adjustments for changes in current assets and liabilities related to operating activities: |
|
|
| 4 |
|
|
|
| 5 |
|
|
|
| 6 |
|
|
|
| 7 |
|
|
|
| 8 |
|
|
|
| 9 |
|
|
|
| 10 |
|
|
|
| 11 |
|
|
|
| 12 | Noncash expenses and other adjustments: |
|
|
| 13 |
|
|
|
| 14 |
|
|
|
| 15 |
|
|
|
| 16 | Cash flows from investing activities: |
|
|
| 17 |
|
|
|
| 18 |
|
|
|
| 19 |
|
|
|
| 20 |
|
|
|
| 21 |
|
|
|
| 22 | Cash flows from financing activities: |
|
|
| 23 |
|
|
|
| 24 |
|
|
|
| 25 |
|
|
|
| 26 |
|
|
|
| 27 | Cash and cash equivalents, January 1, 20-2 |
|
|
| 28 | Cash and cash equivalents, December 31, 20-2 |
|
|
| 29 | Schedule of Noncash Investing and Financing Activities: |
|
|
| 30 |
|
|
|
| 31 | Supplemental Disclosures of Cash Flow Information: |
|
|
| 32 | Cash paid for interest |
|
|
| 33 | Cash paid for income taxes |
|
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial Accounting
Authors: Karen Bird, Gene Imhoff
3rd Edition
0984200541, 9780984200542
