Question
Statement of Cash Flows Under The Direct Method 1. Prepare a schedule for the calculation of cash generated from operating activities for McGinnis Company for
Statement of Cash Flows Under The Direct Method
1. Prepare a schedule for the calculation of cash generated from operating activities for McGinnis Company for the year ended December 31, 20-2. If an amount box does not require an entry, enter 0.
2. Prepare a statement of cash flows for McGinnis Company prepared under the direct method for the year ended December 31, 20-2. Use a minus to indicate any decreases in cash or cash outflows.
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 | ||||
---|---|---|---|---|
Net sales | $1,750,000 | |||
Cost of goods sold | 890,000 | |||
Gross profit | $860,000 | |||
Operating expenses | 590,600 | |||
Operating income | $269,400 | |||
Other revenues and expenses: | ||||
Interest revenue | $ 2,700 | |||
Interest expense | (750) | |||
Gain on sale of office equipment | 15,000 | 16,950 | ||
Income before taxes | $286,350 | |||
Income tax expense | 95,000 | |||
Net income | $191,350 |
McGinnis Company Statement of Retained Earnings For Year Ended December 31, 20-2 | ||||
---|---|---|---|---|
Retained earnings, January 1, 20-2 | $320,000 | |||
Net income | $191,350 | |||
Less dividends | 40,000 | |||
Net increase in retained earnings | 151,350 | |||
Retained earnings, December 31, 20-2 | $471,350 |
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.
McGinnis Company Comparative Balance Sheet December 31, 20-2 and 20-1 | |||||
---|---|---|---|---|---|
20-2 | 20-1 | INCREASE (DECREASE) | |||
Assets | |||||
Current assets: | |||||
Cash | $103,420 | $50,520 | $52,900 | ||
Government notes | 5,400 | 16,000 | (10,600) | ||
Accrued interest receivable | 830 | 580 | 250 | ||
Accounts receivable (net) | 300,600 | 309,200 | (8,600) | ||
Merchandise inventory | 580,300 | 495,800 | 84,500 | ||
Supplies and prepayments | 65,000 | 32,000 | 33,000 | ||
Total current assets | $1,055,550 | $904,100 | 151,450 | ||
Property, plant, and equipment: | |||||
Store equipment | $560,000 | $420,000 | 140,000 | ||
Less accumulated depreciation-store equipment | 120,000 | 440,000 | 90,000 | 310,000 | 30,000 |
Delivery equipment | $430,000 | $330,000 | 100,000 | ||
Less accumulated depreciation-delivery equipment | 150,000 | 280,000 | 120,000 | 290,000 | 30,000 |
Office equipment | $320,000 | $380,000 | (60,000) | ||
Less accumulated depreciation-office equipment | 30,500 | 289,500 | 100,500 | 279,500 | (70,000) |
Total property, plant, and equipment | $1,009,500 | $819,500 | 190,000 | ||
Total assets | $2,065,050 | $1,723,600 | 341,450 | ||
Liabilities | |||||
Current liabilities: | |||||
Notes payable | $117,000 | $109,000 | 8,000 | ||
Accounts payable | 135,000 | 185,000 | (50,000) | ||
Income tax payable | 25,000 | 15,000 | 10,000 | ||
Accrued and withheld payroll taxes | 15,800 | 13,400 | 2,400 | ||
Accrued interest payable | 900 | 1,200 | (300) | ||
Total current liabilities | $293,700 | $323,600 | (29,900) | ||
Stockholders' Equity | |||||
Common stock ($10 par, 400,000 shares authorized; | |||||
Issued: 80,000 in 20-2 and 70,000 in 20-1) | $800,000 | $700,000 | 100,000 | ||
Paid-in capital in excess of par-common stock | 500,000 | 380,000 | 120,000 | ||
Retained earnings | 471,350 | 320,000 | 151,350 | ||
Total stockholders' equity | 1,771,350 | 1,400,000 | 371,350 | ||
Total liabilities and stockholders' equity | $2,065,050 | $1,723,600 | 341,450 |
Schedule of Calculations
1. Prepare a schedule for the calculation of cash generated from operating activities for McGinnis Company for the year ended December 31, 20-2. If an amount box does not require an entry, enter 0.
McGinnis Company | ||||
Schedule for the Calculation of Cash Generated from Operating Activities | ||||
For Year Ended December 31, 20-2 | ||||
Income Statement | Additions | Deductions | Cash Flows | |
Net sales | $1,750,000 | $ | $ | |
Cost of goods sold | 890,000 | |||
Gross profit | $ 860,000 | $ | ||
Operating expenses | 590,600 | $ | ||
Operating income | $269,400 | $ | ||
Interest revenue | 2,700 | |||
Interest expense | 750 | |||
Gain of sale of office equipment | 15,000 | |||
Income tax expense | 95,000 | |||
Net income | $191,350 | $ |
Statement of Cash Flows
2. Prepare a statement of cash flows for McGinnis Company prepared under the direct method for the year ended December 31, 20-2. Use a minus to indicate any decreases in cash or cash outflows.
McGinnis Company | ||
Statement of Cash Flows | ||
For the Year Ended December 31, 20-2 | ||
Cash flows from operating activities: | ||
$ | ||
$ | ||
$ | ||
Total cash disbursed for operating activities | ||
Net cash provided by operating activities | $ | |
Cash flows from investing activities: | ||
$ | ||
Net cash used by investing activities | ||
Cash flows from financing activities: | ||
$ | ||
Net cash provided by financing activities | ||
$ | ||
Cash and cash equivalents, January 1, 20-2 | ||
Cash and cash equivalents, December 31, 20-2 | $ | |
Schedule of Noncash Investing and Financing Activities: | ||
$ |
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