The chief accountant for Monster Inc. provides you (below) with the firm’s most
ID: 2416115 • Letter: T
Question
The chief accountant for Monster Inc. provides you (below) with the firm’s most recent financial statements, with some missing information.
BALANCE SHEET (in $ millions)
12/31/13
12/31/12
Cash
X
X
Accounts Receivable
333
212
less: Allowance for Doubtful Accounts
(36)
(11)
Prepaid Rent
9
4
Inventory
177
100
Property, Plant & Equipment
660
886
less: Accumulated Depreciation
(323)
(270)
X
X
Accounts Payable to Suppliers
65
70
Payables for Selling & Administration
X
X
Income Taxes Payable
47
X
Dividends Payable
39
33
Common Stock
X
X
Retained Earnings
237
102
X
X
2013 Cash Flow Statement (in $ millions))
Cash collected from customers
407
Cash paid to suppliers
Cash paid in advance for rent
(40)
Cash paid for S & A costs
X
Cash paid for income taxes
(32)
NET CASH FLOW FROM OPERATING ACTIVITIES
X
Cash received from sale of equipment
250
NET CASH FLOW FROM INVESTING ACTIVITIES
250
Cash received from issue of common stock
X
Cash dividends paid to shareholders
??
NET CASH FLOW FROM FINANCING ACTIVITIES
X
2013 INCOME STATEMENT (in $ millions)
Sales Revenue
??
Cost Of Goods Sold
(210)
Bad Debts Expense
(30)
Depreciation Expense
X
Other Operating Expenses
Income before Taxes
X
Income Tax Expense
X
Gain on the Sale of Equipment (net of $15 tax on gain)
35
NET INCOME
174
REQUIRED: Compute the amounts below, placing your answers in the spaces provided below.
Answers: (in $millions)
Cash dividends paid to shareholders during 2013
Accounts Receivable written off during 2013
Sales Revenue during 2013
Historical cost of the equipment sold during 2013
Net book value of the equipment sold during 2013
BALANCE SHEET (in $ millions)
12/31/13
12/31/12
Cash
X
X
Accounts Receivable
333
212
less: Allowance for Doubtful Accounts
(36)
(11)
Prepaid Rent
9
4
Inventory
177
100
Property, Plant & Equipment
660
886
less: Accumulated Depreciation
(323)
(270)
X
X
Accounts Payable to Suppliers
65
70
Payables for Selling & Administration
X
X
Income Taxes Payable
47
X
Dividends Payable
39
33
Common Stock
X
X
Retained Earnings
237
102
X
X
2013 Cash Flow Statement (in $ millions))
Cash collected from customers
407
Cash paid to suppliers
Cash paid in advance for rent
(40)
Cash paid for S & A costs
X
Cash paid for income taxes
(32)
NET CASH FLOW FROM OPERATING ACTIVITIES
X
Cash received from sale of equipment
250
NET CASH FLOW FROM INVESTING ACTIVITIES
250
Cash received from issue of common stock
X
Cash dividends paid to shareholders
??
NET CASH FLOW FROM FINANCING ACTIVITIES
X
2013 INCOME STATEMENT (in $ millions)
Sales Revenue
??
Cost Of Goods Sold
(210)
Bad Debts Expense
(30)
Depreciation Expense
X
Other Operating Expenses
Income before Taxes
X
Income Tax Expense
X
Gain on the Sale of Equipment (net of $15 tax on gain)
35
NET INCOME
174
Explanation / Answer
Dividend payable as of 12/31/12 will be paid in 2013. So the cash dividends paid to shareholders during 2013 is $33.
Allowance for doubtful accounts as of 12/31/12 is -$11 and as of 12/31/13 is -$36. So the accounts receivable written off during 2013 is $36 - $11 = $25
Depreciation expense for the 2013 will be the difference in accumulated depreciation as of 2012 and 2013. That will be $323 - $270 = $53
Income tax expense for the year will be the income taxes payable as of 12/31/13 i.e. $47.
So the sales revenue for 2013, will be as follows:
Sales Revenue = Net Income – Gain on sale of assets + Income Tax expense + Depreciation expense + Bad Debt expense + Cost of Goods Sold = $174 - $35 + $47 + $53 + $30 + $210 = $479
As per the cash flow, there is only sale of asset and there are no purchase of assets. So the reduction in the value of Property, Plan t and equipment will be the historical cost of the equipment sold. The Value of Property, Plant and equipment on 12/31/12 is $886 and on 12/31/13 is $660. The difference of $886 - #660 = $226 will be the Historical cost of the equipment sold during 2013.
Gain on sale of equipment reported in the income statement is $35 (net of $15 tax). So actual gain is $35 + $15 = $50
Cash received from sale of equipment reported in the cash flow statement under Investing activities is $250. Gain is calculated using the formula,
Gain = Sale price – Net book value
$50 = $250 – Net book value
Net book value = $250 - $50 = $200
So the Net book value of the equipment sold during 2013 is $200.
To summarize, the answers in $millions are as follows:
Cash dividends paid to shareholders during 2013
33
Accounts Receivable written off during 2013
25
Sales Revenue during 2013
479
Historical cost of the equipment sold during 2013
226
Net book value of the equipment sold during 2013
200
Cash dividends paid to shareholders during 2013
33
Accounts Receivable written off during 2013
25
Sales Revenue during 2013
479
Historical cost of the equipment sold during 2013
226
Net book value of the equipment sold during 2013
200
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