PREPARING A STATEMENT OF CASH FLOWS FROM BALANCE SHEETS AND INCOME STATEMENTS. GTI, Inc., manufactures parts, components, and processing equipment for electronics and semiconductor applications in the communica- tions, computer, automotive, and appliance industries. Its sales tend to vary with changes in the business cycle because the sales of most of its customers are cyclical. Exhibit 3.34 presents bal- ance sheets for GTI as of December 31, Year 7 through Year 9, and Exhibit 3.35 presents income statements for Year 8 and Year 9.
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GTI, Inc.
Balance Sheets (amounts in thousands) (Problem 3.25) |
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December 31:
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Year 9
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Year 8
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Year 7
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ASSETS
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Cash
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$ 367
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$ 475
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$ 430
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Accounts receivable
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2,545
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3,936
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3,768
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Inventories
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2,094
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2,966
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2,334
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Prepayments
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122
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270
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116
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Total Current Assets
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$5,128
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$ 7,647
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$ 6,648
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Property, plant, and equipment, net
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4,027
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4,598
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3,806
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Other assets
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456
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559
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193
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Total Assets
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$9,611
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$12,804
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$10,647
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Accounts payable
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$ 796
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$ 809
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$ 1,578
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Notes payable to banks
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2,413
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231
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11
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Other current liabilities
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695
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777
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1,076
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Total Current Liabilities
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$3,904
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$ 1,817
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$ 2,665
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Long-term debt
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2,084
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4,692
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2,353
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Deferred income taxes
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113
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89
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126
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Total Liabilities
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$6,101
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$ 6,598
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$ 5,144
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Preferred stock
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$ 289
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$ 289
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$ -
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Common stock
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85
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85
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83
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Additional paid-in capital
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4,395
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4,392
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4,385
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Retained earnings
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(1,259)
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1,440
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1,035
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Total Shareholders' Equity
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$3,510
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$ 6,206
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$ 5,503
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Total Liabilities and Shareholders' Equity
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$9,611
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$12,804
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$10,647
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Required
a. Prepare a worksheet for the preparation of a statement of cash flows for GTI, Inc., for Year 8 and Year 9. Notes to the firm's financial statements reveal the following (amounts in thousands):
(1) Depreciation expense was $641 in Year 8 and $625 in Year 9. GTI, Inc., did not sell any fixed assets during Year 8 and Year 9.
(2) Other Assets represents patents. Patent amortization was $25 in Year 8 and $40 in Year 9. GTI, Inc., sold a patent during Year 9 at no gain or loss.
(3) Changes in Deferred Income Taxes are operating activities.
b. Discuss the relation between net income and cash flow from operations and the pat- tern of cash flows from operating, investing, and financing activities.
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GTI, Inc.
Income Statements (amounts in thousands) (Problem 3.25) |
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Year Ended December 31:
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Year 9
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Year 8
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Sales
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$11,960
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$22,833
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Cost of goods sold
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(11,031)
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(16,518)
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Selling and administrative expenses
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(3,496)
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(4,849)
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Interest expense
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(452)
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(459)
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Income tax expense
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328
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(590)
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Net Income
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$(2,691)
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$ 417
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Dividends on preferred stock
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(8)
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(12)
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Net Income Available to Common
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$(2,699)
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$ 405
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