Use the A. Karev Medical Supplies data from P8-30 A. The cash amounts for Intere
ID: 2445478 • Letter: U
Question
Use the A. Karev Medical Supplies data from P8-30 A. The cash amounts for Interest Revenue, Salary Expense, Inerest Expense, and Income Tax Expensse are the same as the accrual amounts for these items.
1. Prepare the 2008 statement of cash flow by the direct method.
2. How will what you learend in this problem help you evaluate an investment?
P8-30A
A. Karev Medical Supplies
Comparative Balance Sheet
December 31, 2008 and 2007
(25,000)
Karev Medical Supplies
Income Statement
Year Ended December 31,2008
2008 2007 Increase/(Decrease) Current assets: Cash and cash equivelents $6,700 $5,300 $1,400 Accounts receivable 25,300 26,900 (1,600) Inventory 91,800 89,800 2,000 Plant Assets: Land 89,000 60,000 29,000 Equipment, net 53,500 49,400 4,100 Total Assets $266,300 $231,400 $34,900 Current Liabilities: Accounts Payable $30,900 $35,400 $(4,500) Accrued Liabilities 30,600 28,600 2,000 Long-term Liabilities: Notes Payable 75,000 100,000(25,000)
Stockholders' equity: Common Stock 88,300 64,700 23,600 Retained Earnings 41,500 2,700 38,800 Total Liabilites and Stockholders' equity $266,300 $231,400 $34,900Explanation / Answer
This firms investment in business is creating sufficient operational cash flows which s good for business.
A. Karev Medical Supplies Cash flows from (used in) operating activities Direct Method Amount(in $) Sales 2,13,000.00 Add: Decrease in Accounts receivable 1,600.00 Cash receipts from customers 2,14,600.00 Add: Interest 8,600.00 Cost of Goods Sold 70,600.00 Add: Increase in Inventory 2,000.00 Add: Decrease in Accounts Payable 4,500.00 Less: Cash payment for purchases 77,100.00 Salary Expense 27,800.00 Add: Other operating expenses 10,500.00 Less: Increase in Accrued Liabilities 2,000.00 Less: Cash payment for operating expenses 36,300.00 Less: Cash interest 11,600.00 Less: Cash payments for income taxes 29,100.00 Net cash flows from operating activities 69,100.00 Cash flows from (used in) investing activities Purchase of Land 29,000.00 Increase in value of Equipment 4,100.00 Add: Depreciation 4,000.00 Purchase of Equipment 8,100.00 Net cash flows from investing activities -37,100.00 Cash flows from (used in) financing activities Less: Decrease in Notes Payable 25,000.00 Add: Increase in Common Stock 23,600.00 Less: Dividend Paid 29,200.00 Net cash flows used in financing activities -30,600.00 Net increase in cash and cash equivalents 1,400.00 Cash and cash equivalents, beginning of year 5,300.00 Cash and cash equivalents, end of year 6,700.00Related Questions
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