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1. Open the Guidance Report and rework the problem with the changed numbers noted on the guidance report and place your answers on the guidance report.

2. Submit the guidance report using the Assignment Submission tab.
Complete the following problems and exercises:
Chapter One Exercise 2
Chapter One Exercise 3
Chapter One Exercise 6
Chapter One Problem 2
Chapter One Problem 3

Exercise 2. Indirect calculation of operating cash flows

Video Corporation's balance sheet revealed the following account balance information:

Account                                               Dec. 31, 20X6                                     Dec. 31, 20X5

Accounts receivable                                       $52,000                                                 $57,000

Merchandise inventory                                    75,000                                                   68,000

Accounts payable                                            21,000                                                   19,500

The accrual-basis net income was $107,000. In computing net income, the company recorded $12,600 of depreciation expense; there were no gains or losses from investing and financing activities.

On the basis of the preceding information, calculate Video's cash flows from operating activities by using the indirect method.

Exercise. Indirect calculation of operating cash flows

Specialty Services Inc. reported a net income of $110,000 for the year just ended, which includes an $18,000 gain on the sale of long-term investments. The following data were obtained from comparative balance sheets:

                                                                   Oct. 31, 20X2                                      Oct. 31, 20X1

Trade accounts receivable                           $245,000                                              $203,000

Merchandise inventory                                230,000                                                 308,000

Accumulated depreciation:

Equipment                                                    120,000                                                 65,000

Accounts payable                                         190,000                                                 124,000

Accrued liabilities                                            38,000                                                   73,000

There were no purchases or disposals of equipment during the year. The long-term investment had a carrying (book) value of $77,000 and was sold for cash on June 15.

On the basis of the preceding information, determine the cash provided by operating activities from November 1, 20X1 through October 31, 20X2. The firm uses the indirect method of statement preparation.

Chapter One Exercise 6. Equipment transaction and cash flow reporting

The property, plant, and equipment section of ProComp Inc.'s comparative balance sheet follows:

                                                                           Dec. 31, 20X4                                     Dec. 31, 20X3

Property, plant, & equipment

Land                                                                    $94,000                                                 $94,000

Equipment                                                           652,000                                                 527,000

Less: Accumulated depreciation                          (316,000)                                             (341,000)

New equipment purchased during 20X4 totaled $280,000. The 20X4 income statement disclosed equipment depreciation expense of $41,000 and a $9,000 loss on the sale of equipment.

a. Determine the cost and accumulated depreciation of the equipment sold during 20X4.

b. Determine the selling price of the equipment sold.

c. Show how the sale of equipment would appear on a statement of cash flows prepared by using the indirect method.

Problem. Operating activities: Direct and indirect methods

The 20X5 income statement of Office Products Inc. follows:Operating activities: Direct and indirect methods The 20X5 income statement of Office Products Inc. follows:

OFFICE PRODUCTS INC.

Income Statement

for the Year Ended December 31, 20X5

Net sales                                                                                                                             $980,000

Cost of goods sold

Beginning inventory                                                       $235,000

Net purchases                                                                   720,000

Goods available for sale                                                $955,000

Less: Ending inventory                                                   260,000

Cost of goods sold                                                                                                           695,000

Gross profit                                                                                                                        $285,000

Expenses

Selling & administrative                                                 $149,000

Depreciation                                                                      54,000                                   203,000

$82,000

Other revenue (expense)

Interest expense                                                             $(18,000)

Gain on sale of equipment                                          26,000                                       8,000

Income before income taxes                                                                                         $90,000

Income taxes                                                                                                                   27,000

Net income                                                                                                                    $63,000

The following additional information was obtained from the general ledger and management personnel:

1. Accounts payable related to the purchases of merchandise decreased during 20X5 by $32,800. In contrast, accounts receivable increased by $23,700.

2. Prepaid expenses and wages payable increased throughout 20X5 by $2,400 and $5,600, respectively.

3. The balance in the income taxes payable account on January 1 was $4,900; the December 31 balance was $4,100.

4. The company financed a $78,000 equipment purchase by signing a note payable that is due in 20X8.

Instructions

a. Prepare the operating activities section of the statement of cash flows by using the direct method.

b. Prepare the operating activities section of the statement of cash flows by using the indirect method.

Chapter One Problem 3. Cash flow information: Direct and indirect methods

The comparative year-end balance sheets of Sign Graphics Inc. revealed the following activity in the company's current accounts:

                                                                                                                                                                Increase

                                                                                                20x5                       20x4                       (decrease)

Current assets

Cash                                                                                      $55,400                 $35,200                 $20,200

Accounts receivable

(net)                                                                                      83,800                   88,000                   (4,200)

Inventory                                                                            243,400                 233,800                 9,600

Prepaid expenses                                                            25,400                   24,200                   1,200

Current liabilities

  Accounts payable                                                          $123,600              $140,600              $(17,000)

Taxes payable                                                                   43,600                   49,200                   (5,600)

Interest payable                                                               9,000                     6,400                     2,600

Accrued liabilities                                                             38,800                   60,400                   (21,600)

Note payable                                                                     44,000                   -                           44,000

The accounts payable were for the purchase of merchandise. Prepaid expenses and accrued liabilities relate to the firm's selling and administrative expenses. The company's condensed income statement follows:

SIGN GRAPHICS INC.

Income Statement

for the Year Ended December 31, 20X5

Sales                                                                                                                                      $713,800

Less: Cost of goods sold                                                                                                323,000

Gross profit                                                                                                                        $390,800

Less: Selling & administrative expenses                                                 $186,000

Depreciation expense                                                                   17,000

Interest expense                                                                             27,000                   230,000

Add: Gain on sale of land                                                                                              $160,800

                                                                                                                                                21,800

Income before taxes                                                                                                      $182,600

Income taxes                                                                                                                     36,800

Net income                                                                                                                        $145,800

Other data:

1. Long-term investments were purchased for cash at a cost of $74,600.

2. Cash proceeds from the sale of land totaled $76,200.

3. Store equipment of $44,000 was purchased by signing a short-term note payable. Also, a $150,000 telecommunications system was acquired by issuing 3,000 shares of preferred stock.

4. A long-term note of $49,400 was repaid.

5. Twenty thousand shares of common stock were issued at $5.19 per share.

6. The company paid cash dividends amounting to $128,600.

Instructions

a. Prepare the operating activities section of the company's statement of cash flows,
assuming use of
1) the direct method.
2) the indirect method.

b. Prepare the investing and financing activities sections of the statement of cash flows.

Attachment:- Guidance Report.xlsx

Accounting Basics, Accounting

  • Category:- Accounting Basics
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