Question
Stellar Inc. is a major retailer of road bicycles and a promoter of riding bicycles to work, both to save the environment and improve physical
Stellar Inc. is a major retailer of road bicycles and a promoter of riding bicycles to work, both to save the environment and improve physical fitness. Financial statements for Stellar are presented below.
STATEMENT OF FINANCIAL POSITION December 31 | |||||||
Current Assets | 2021 | 2020 | |||||
Cash | 56,000 | 20,800 | |||||
Accounts receivable | 24,800 | 10,550 | |||||
Inventory | 31,050 | 16,050 | |||||
Prepaid expenses | 15,150 | 10,150 | |||||
Total current assets | 127,000 | 57,550 | |||||
Property and Equipment | |||||||
Property and equipment | 160,550 | 150,550 | |||||
Less: Accumulated depreciation | 78,900 | 70,000 | |||||
Net property and equipment | 81,650 | 80,550 | |||||
TOTAL ASSETS | $208,650 | $138,100 | |||||
Current Liabilities | |||||||
Accounts payable | 11,600 | 15,500 | |||||
Salaries payable | 10,150 | 8,150 | |||||
Interest payable | 2,550 | 3,550 | |||||
Total current liabilities | 24,300 | 27,200 | |||||
Loan payable | 100,550 | 60,550 | |||||
Total Liabilities | 124,850 | 87,750 | |||||
Shareholders Equity | |||||||
Common shares | 10,050 | 1,000 | |||||
Retained earnings | 73,750 | 49,350 | |||||
Total shareholders equity | 83,800 | 50,350 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $208,650 | $138,100 |
INCOME STATEMENT For the Years Ended December 31 | |||||||
2021 | 2020 | ||||||
Sales revenue | 613,600 | 500,000 | |||||
Cost of sales | 419,000 | 350,000 | |||||
Gross margin | 194,600 | 150,000 | |||||
Expenses | |||||||
Salary expense | 136,000 | 125,000 | |||||
Interest expense | 3,500 | 2,400 | |||||
Other expenses | 6,000 | 3,000 | |||||
Depreciation expense | 14,900 | 8,000 | |||||
Total expenses | 160,400 | 138,400 | |||||
Operating income | 34,200 | 11,600 | |||||
Gain on disposal of equipment | 1,400 | - | |||||
Income tax expense | 6,400 | 1,972 | |||||
Net income | $29,200 | $9,628 |
The following is additional information concerning Stellars transactions during the year ended December 31, 2021:
Equipment costing $40,000 was purchased by paying $34,650 cash and issuing 100 shares. | ||
Equipment costing $30,000 that was purchased at the beginning of 2020 was sold at the end of 2021 for $25,400. Straight-line depreciation had been used with an expected asset life of 10 years and a residual value of $0. | ||
The other expenses relate to prepaid items. | ||
In order to supplement its cash, Stellar borrowed an additional $40,000. | ||
Cash dividends of $4,800 were paid at the end of the fiscal year. | ||
Cost of sales includes $155,000 of direct labour costs. |
Prepare a statement of cash flows for Stellar for the year ended December 31, 2021, using the direct method. Stellar follows ASPE. Include any note disclosure on non-cash financing and investing transactions. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
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