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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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