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MONTGOMERY INC. Comparative Balance Sheets December 31, 2018 and 2017 2018 2017 Assets Cash $ 54,100 $ 54,200 Accounts receivable, net 13,400 16,400 Inventory 120,100

MONTGOMERY INC. Comparative Balance Sheets December 31, 2018 and 2017
2018 2017
Assets
Cash $ 54,100 $ 54,200
Accounts receivable, net 13,400 16,400
Inventory 120,100 94,800
Total current assets 187,600 165,400
Equipment 66,500 56,100
Accum. depreciationEquipment (30,100 ) (20,700 )
Total assets $ 224,000 $ 200,800
Liabilities and Equity
Accounts payable $ 32,000 $ 34,400
Salaries payable 600 800
Total current liabilities 32,600 35,200
Equity
Common stock, no par value 159,800 148,200
Retained earnings 31,600 17,400
Total liabilities and equity $ 224,000 $ 200,800

MONTGOMERY INC. Income Statement For Year Ended December 31, 2018
Sales $ 60,900
Cost of goods sold (25,300 )
Gross profit 35,600
Operating expenses
Depreciation expense $ 9,400
Other expenses 7,500
Total operating expense 16,900
Income before taxes 18,700
Income tax expense 4,500
Net income $ 14,200

Additional Information

No dividends are declared or paid in 2018.

Issued additional stock for $11,600 cash in 2018.

Purchased equipment for cash in 2018; no equipment was sold in 2018.

1. Use the above financial statements and additional information to prepare a statement of cash flows for the year ended December 31, 2018, using the indirect method. (Amounts to be deducted should be indicated by a minus sign.)

MONTGOMERY, INC.
Statement of Cash Flows (Indirect Method)
For Year Ended December 31, 2018
Cash flows from operating activities
Adjustments to reconcile net income to net cash provided by operations:
Changes in current operating assets and liabilities
$0
Cash flows from investing activities
0
Cash flows from financing activities
0
$0
Cash balance at beginning of year
Cash balance at end of year $0

The following transactions and events occurred during the year. Assuming that this company uses the indirect method to report cash provided by operating activities, indicate where each item would appear on its statement of cash flows by placing an X in the appropriate column(s). (More than one column may be used.)

Statement of Cash Flows Noncash Investing & Financing Activities Not Reported on Statement or in Notes
Operating Activities Investing Activities Financing Activities
a. Declared and paid a cash dividend
b. Recorded depreciation expense
c. Paid cash to settle long-term note payable
d. Prepaid expenses increased in the year
e. Accounts receivable decreased in the year
f. Purchased land by issuing common stock
g. Inventory increased in the year
h. Sold equipment for cash, yielding a loss
i. Accounts payable decreased in the year
j. Income taxes payable increased in the year

The following financial statements and additional information are reported.

IKIBAN INC. Comparative Balance Sheets June 30, 2017 and 2016
2017 2016
Assets
Cash $ 105,100 $ 48,000
Accounts receivable, net 71,000 55,000
Inventory 67,800 92,500
Prepaid expenses 4,800 6,200
Total current assets 248,700 201,700
Equipment 128,000 119,000
Accum. depreciationEquipment (29,000 ) (11,000 )
Total assets $ 347,700 $ 309,700
Liabilities and Equity
Accounts payable $ 29,000 $ 36,000
Wages payable 6,400 15,800
Income taxes payable 3,800 4,600
Total current liabilities 39,200 56,400
Notes payable (long term) 34,000 64,000
Total liabilities 73,200 120,400
Equity
Common stock, $5 par value 228,000 164,000
Retained earnings 46,500 25,300
Total liabilities and equity $ 347,700 $ 309,700

IKIBAN INC. Income Statement For Year Ended June 30, 2017
Sales $ 698,000
Cost of goods sold 415,000
Gross profit 283,000
Operating expenses
Depreciation expense $ 62,600
Other expenses 71,000
Total operating expenses 133,600
149,400
Other gains (losses)
Gain on sale of equipment 2,400
Income before taxes 151,800
Income taxes expense 44,290
Net income $ 107,510

Additional Information

A $30,000 note payable is retired at its $30,000 carrying (book) value in exchange for cash.

The only changes affecting retained earnings are net income and cash dividends paid.

New equipment is acquired for $61,600 cash.

Received cash for the sale of equipment that had cost $52,600, yielding a $2,400 gain.

Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.

All purchases and sales of inventory are on credit.

rev: 12_05_2017_QC_CS-111198

Exercise 12-11 Part 1

Required:

(1) Prepare a statement of cash flows for the year ended June 30, 2017, using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

IKIBAN, INC.
Statement of Cash Flows (Indirect Method)
For Year Ended June 30, 2017
Cash flows from operating activities
Adjustments to reconcile net income to net cash provided by operating activities
Income statement items not affecting cash
Changes in current operating assets and liabilities
$0
Cash flows from investing activities
0
Cash flows from financing activities
0
Net increase (decrease) in cash $0
Cash balance at prior year-end
Cash balance at current year-end $0

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