Problem 9.30 LO 10 , 11 Prepare statement of cash flows (indirect method) using
ID: 2433095 • Letter: P
Question
Problem 9.30
LO 10, 11
Prepare statement of cash flows (indirect method) using balance sheet data Following are comparative balance sheets for Millco, Inc., at January 31 and February 28, 2017:
Page 356
Required:
Prepare a statement of cash flows that explains the change that occurred in cash during the month. You may assume that the change in each balance sheet amount is due to a single event (for example, the change in the amount of production equipment is not the result of both a purchase and sale of equipment). (Hints: What is the purpose of the statement of cash flows? How is this purpose accomplished?) Use the space to the right of the January 31 data to enter the difference between the February 28 and January 31 amounts of each balance sheet item; these are the amounts that will be in your solution.
MILLCO, INC. Balance Sheets February 28 and January 31, 2017 February 28 January 31 $126,000 $111,000 282,000 Assets Caeai.- 192,000 243,000 $561,000 $552,000 Total current assets. Plant and equipment: 498,000 Less: Accumulated depreciation (63,000) $987,000 945,000 Liabilities Accounts payable. Short-term debt 111000 $123,000 132,000 72,000 $306,000 $327,000 132,000 63,000 Long-term debt. ?tri,(KK) Stockholders' Equity $312,000 $288,000 Retained earnings: $192,000 $129,000 87,000 (24,000) $270,000 $192000 Net income for month 108,000 Ending balance ???KK $987,000 Total stockholders' equity $945,000Explanation / Answer
Answers
Assets
Feb-28
Jan-31
Increase (Decrease) during Feb
Cash
$ 126,000.00
$ 111,000.00
$ 15,000.00
A/R
$ 192,000.00
$ 159,000.00
$ 33,000.00
Merchandise Inventory
$ 243,000.00
$ 282,000.00
$ (39,000.00)
Total Currenr Assets
$ 561,000.00
$ 552,000.00
$ 9,000.00
Plant & Equipment
Product Equipment
$ 498,000.00
$ 456,000.00
$ 42,000.00
Less: Accumulated Depreciation
$ (72,000.00)
$ (63,000.00)
$ (9,000.00)
TOTAL ASSETS
$ 987,000.00
$ 945,000.00
$ 42,000.00
Liabilities
Feb-28
Jan-31
Increase (Decrease) during Feb
A/P
$ 111,000.00
$ 123,000.00
$ (12,000.00)
Short Term Debt
$ 132,000.00
$ 132,000.00
$ -
Other accrued liabilities
$ 63,000.00
$ 72,000.00
$ (9,000.00)
Total Current Liabilities
$ 306,000.00
$ 327,000.00
$ (21,000.00)
Long Term Debt
$ 99,000.00
$ 138,000.00
$ (39,000.00)
Total LIABILITIES
$ 405,000.00
$ 465,000.00
$ (60,000.00)
Stockholder's Equity
Feb-28
Jan-31
Increase (Decrease) during Feb
Common Stock
$ 312,000.00
$ 288,000.00
$ 24,000.00
Retained Earnings:
Beginning
$ 192,000.00
$ 129,000.00
$ 63,000.00
Net Income
$ 108,000.00
$ 87,000.00
$ 21,000.00
Dividends
$ (30,000.00)
$ (24,000.00)
$ (6,000.00)
Ending Balance
$ 270,000.00
$ 192,000.00
$ 78,000.00
Total Stockholder's Equity
$ 582,000.00
$ 480,000.00
$ 102,000.00
Total LIABILITIES & SE
$ 987,000.00
$ 945,000.00
$ 42,000.00
Cash Flows from Operating Activities
Net Income
$ 108,000.00
Adjustment to reconcile Net Income to cash provided by Operating Activities
Depreciation expenses
$ 9,000.00
Increase in accounts receivables
$ (33,000.00)
Decrease in Inventory
$ 39,000.00
Decrease in Accounts payable
$ (12,000.00)
Decrease in other accrued liabilities
$ (9,000.00)
$ (6,000.00)
Net Cash provided by Operating Activities
$ 102,000.00
Cash Flows from Investing Activities
Purchase of Product Equipment
$ (42,000.00)
Net Cash used in Investing activities
$ (42,000.00)
Cash flows from Financing Activities
Repayment of Long Term Debt
$ (39,000.00)
Issue of Common Stock
$ 24,000.00
Dividend paid
$ (30,000.00)
Net Cash used in Financing activities
$ (45,000.00)
Net Increase in Cash
$ 15,000.00
Cash at the beginning (Jan 31)
$ 111,000.00
Cash at the end (Feb 28)
$ 126,000.00
Assets
Feb-28
Jan-31
Increase (Decrease) during Feb
Cash
$ 126,000.00
$ 111,000.00
$ 15,000.00
A/R
$ 192,000.00
$ 159,000.00
$ 33,000.00
Merchandise Inventory
$ 243,000.00
$ 282,000.00
$ (39,000.00)
Total Currenr Assets
$ 561,000.00
$ 552,000.00
$ 9,000.00
Plant & Equipment
Product Equipment
$ 498,000.00
$ 456,000.00
$ 42,000.00
Less: Accumulated Depreciation
$ (72,000.00)
$ (63,000.00)
$ (9,000.00)
TOTAL ASSETS
$ 987,000.00
$ 945,000.00
$ 42,000.00
Liabilities
Feb-28
Jan-31
Increase (Decrease) during Feb
A/P
$ 111,000.00
$ 123,000.00
$ (12,000.00)
Short Term Debt
$ 132,000.00
$ 132,000.00
$ -
Other accrued liabilities
$ 63,000.00
$ 72,000.00
$ (9,000.00)
Total Current Liabilities
$ 306,000.00
$ 327,000.00
$ (21,000.00)
Long Term Debt
$ 99,000.00
$ 138,000.00
$ (39,000.00)
Total LIABILITIES
$ 405,000.00
$ 465,000.00
$ (60,000.00)
Stockholder's Equity
Feb-28
Jan-31
Increase (Decrease) during Feb
Common Stock
$ 312,000.00
$ 288,000.00
$ 24,000.00
Retained Earnings:
Beginning
$ 192,000.00
$ 129,000.00
$ 63,000.00
Net Income
$ 108,000.00
$ 87,000.00
$ 21,000.00
Dividends
$ (30,000.00)
$ (24,000.00)
$ (6,000.00)
Ending Balance
$ 270,000.00
$ 192,000.00
$ 78,000.00
Total Stockholder's Equity
$ 582,000.00
$ 480,000.00
$ 102,000.00
Total LIABILITIES & SE
$ 987,000.00
$ 945,000.00
$ 42,000.00
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