Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

The Sage Corp. prepared for 2005 and 2004, the following balance sheet data: ---

ID: 2378200 • Letter: T

Question

The Sage Corp. prepared for 2005 and 2004, the following balance sheet data:


----------------------------------------------------------------------------------------2005 2004


Cash............................................................................ 87,375 63,750


available-for-sale securities (not cash equivalents)............17,250 105,000


accounts receivable........................................................90,000 86,250


merchandise inventory..................................................187,500 163,500


prepaid insurance............................................................1,125 1,500


Land, Buildings, and equipment.......................................1,378,875 1,087,500


Accumulated depreciation..............................................(558,750) (498,750)

Total........................................................................$1,203,375 $1,008,750


Accounts Payable..........................................................153,375 236,250


Salaries Payable.............................................................18,750 26,250


Notes payable-bank (current).........................................37,500 150,000


Bonds payable..............................................................375,000 0


Common stock.............................................................600,000 600,000


Retained earnings (deficit).............................................18,750 (3,750)

Total.......................................................................$1,203,375 $ 1,008,750


Addtional information:

(a) sold available-for-sale securities (not cash equivalents) costing $87,750 for $90,000


(b) Equipment costing $18750 with a book value of $3,750 was sold for $4,500.


(c) Issued 8% bonds payable at par, $375,000.


(d) Purchased new equipment for cash, $310,125.


(e) Paid cash dividends of $22,500 during the year.


(f) Net Income for 2005 was $45,000.


(g) Proceeds from the notes payable were issued for operating purposes.


Prepare a cash flow statement for Sage Corp. for 2005, using the indirect method.


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~


This is what I have so far.


Net Income Cash flow of operating Activity ----------45,000

Adjustments


Subtract: Accounts Receivable ---------(3,750)

Add: Merchendise Inventory --------------(24,000)

Add: Accumulated depreciation ---------60,000

Subtract: Prepaid Insurance --------------375

Add: Salaries Payable ---------------------(7,500)

Add: Accounts Payable -------------------(82,875)

Availeable-for-sale secuirities Gain ----(2,250)

Equipment sale gain ------------------------(750)


Net Cash from operating activities ------------------(15,750)


Cash flow from investment activities

Purchase Land, Building, and Equipment (310,125)

Availeable-for-sale secuirities -------------------87,750

Sale of equipemt --------------------------------------3,750


Net Cash in investing activities ---------------------------(218,625)


Cash flow from financial activities

Dividends -----------------------------(22,500)

Bonds Payable ---------------------375,000

Notes Payable ----------------------(112,500)




Net Cash from financial activities ----------------- 240,000


Net increase in Cash 23,625 (CORRECT ANSWER) 5,625 (MY ANSWER)

Cash Beginning --------63,750

Cash End -----------------87,375






What am I doing wrong? What confuses me is (b) equipment costing 18,750 with a book value of $3,750 was sold for $4,500. But I think I did it correctly.


(g) Proceeds from the notes payable were used for operating purposes. This also confused me. Since Notes payable went lower how could there be proceeds? Unless that loan was to pay off some of the operations, if so how would I write it?

Explanation / Answer

Net Income Cash flow of operating Activity ----------45,000

Adjustments


Subtract: Accounts Receivable ---------(3,750)

LESS: Merchendise Inventory --------------(24,000)

Add: Accumulated depreciation ---------60,000

Depreciation on Equipment 15000

ADD: Prepaid Insurance --------------375

Less: Salaries Payable ---------------------(7,500)

Less: Accounts Payable -------------------(82,875)

Availeable-for-sale secuirities Gain ----(2,250)

Equipment sale gain ------------------------(750)

Less:Notes payable--------------------------(112500)

Net Cash from operating activities ------------------(113250)


Cash flow from investment activities

Purchase Land, Building, and Equipment (310,125)

Availeable-for-sale secuirities -------------------90000

Sale of equipemt --------------------------------------4500


Net Cash in investing activities ---------------------------(215625)


Cash flow from financial activities

Dividends -----------------------------(22,500)

Bonds Payable ---------------------375,000





Net Cash from financial activities ----------------- 352500


Net increase in Cash 23,625

Cash Beginning --------63,750

Cash End -----------------87,375


Hire Me For All Your Tutoring Needs
Integrity-first tutoring: clear explanations, guidance, and feedback.
Drop an Email at
drjack9650@gmail.com
Chat Now And Get Quote