Malco Enterprises issued $15,000 of common stock when the company was started. I
ID: 2457069 • Letter: M
Question
Malco Enterprises issued $15,000 of common stock when the company was started. In addition, Malco borrowed $41,000 from a local bank on July 1, 2016. The note had a 6 percent annual interest rate and a one-year term to maturity. Malco Enterprises recognized $78,000 of revenue on account in 2016 and $90,200 of revenue on account in 2017. Cash collections of accounts receivable were $66,300 in 2016 and $76,500 in 2017. Malco paid $43,500 of other operating expenses in 2016 and $50,000 of other operating expenses in 2017. Malco repaid the loan and interest at the maturity date.
What amount of interest expense would Malco report on the 2016 income statement?
What amount of net cash flow from operating activities would Malco report on the 2016 statement of cash flows?
What amount of total liabilities would Malco report on the December 31, 2016, balance sheet?
What amount of retained earnings would Malco report on the December 31, 2016, balance sheet?
What amount of net cash flow from financing activities would Malco report on the 2016 statement of cash flows?
What amount of interest expense would Malco report on the 2017 income statement?
What amount of net cash flow from operating activities would Malco report on the 2017 statement of cash flows?
What amount of total assets would Malco report on the December 31, 2017, balance sheet?
What amount of net cash flow from investing activities would Malco report on the 2017 statement of cash flows?
If Malco Enterprises paid a $2,500 dividend during 2017, what retained earnings balance would it report on the December 31, 2017, balance sheet?
What amount of interest expense would Malco report on the 2016 income statement?
Explanation / Answer
a. On the 2016 income statement, Malco recognized interest expense of 41,000 x 6% x 6/12 = $ 1230 on accrual basis.
b. on the 2016 cash flow statement, Malco would record $ ( 66,300-43,500) = $ 22,800 as net cash flows from operating activities.
c.On December 31,2016, the liabilities side of the balance sheet would have Common stock $ 15,000, Retained earnings $ 33,270, Loan $ 41,000, and outstanding interest on loan $ 1230.
d. The balance sheet on December 31, 2016 would have retained earnings of $ (78,000-43,500-1230)= 33,270
e. As the interest amount remains due on December 31, 2016, the cash flow statement would report a cash inflow of $ 56,000 on account of financing activities.( being issue proceeds of common stock and borrowing from a bank)
f. On the income statement of 2017, since the loan is repaid on 30th June, 2017, half year's interest of $1230 should be recognized as interest expense.
g. Net cash flows from operating activities to be reported in the 2017 statement of cash flows should be $ ( 76,500-50,000) = $ 26,500.
h. No investing activities in 2017.
i..December 31,2017 balance sheet total assets should be $ 87,240. ( Accounts receivable $ 25,400 and cash $ 61,840)
j.$ 69,740
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