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The balance sheets for ABC Company at January 1, 2007 and December1, 2007 are pr

ID: 2457937 • Letter: T

Question

The balance sheets for ABC Company at January 1, 2007 and December1, 2007 are presented below:

January1,2007             December 1, 2007
ASSETS
Cash:                                          35,000                                  ?
Accountsreceivable:                   65,000                              88,000
Inventory:                                         ?                                  57,000
Land:                                         80,000                               60,000
Equipment:                                120,000                            230,000
Accumulateddepreciation:        <27,000>                          <41,000>

LIABILITIES + EQUITY
Accountspayable:                    26,000                               51,000
Short-term notespayable:         40,000                               45,000
Income taxespayable:               11,000                                 5,000
Commonstock:                              ?                                 135,000
Retainedearnings:                    183,000                                   ?

The following information was taken from ABC Company's 2007statement of cash flows:

Net cash flow from operatingactivities:          85,000
Net cash flow from investingactivities:          <75,000>
Net cash flow from financingactivities:          <5,000>

Net change incash                                        5,000

It is known that during 2007 ABC Company sold land having a cost of20,000 for 35,000 cash. ABC Company reported a net income of48,000 and depreciation expense of 14,000 during 2007.

Calculate the balance in the inventory account at January1, 2007.

(Use the indirect method)

January1,2007             December 1, 2007
ASSETS
Cash:                                          35,000                                  ?
Accountsreceivable:                   65,000                              88,000
Inventory:                                         ?                                  57,000
Land:                                         80,000                               60,000
Equipment:                                120,000                            230,000
ASSETS
Cash:                                          35,000                                  ?
Accountsreceivable:                   65,000                              88,000
Inventory:                                         ?                                  57,000
Land:                                         80,000                               60,000
Equipment:                                120,000                            230,000

Explanation / Answer

Balance in Inventory account on Jan1 , 2007 is $ 94,000 Explanation NetIncome                               48,000 Adjustments Depreciation               14,000 Gain on sale              ( 15,000) in C.A & C.L Inc inA/R                 (23,000) Inc.in s.termN/P          5,000 Inc inA/P                  25,000 Dec.in I/T payable     (6,000)               0 Net cash flow fromoperating         85,000 Notes Net cash flow from operating is given as 85,000 So the difference between 85,000 and 48,000 is 37,000. When you add this 37,000 to the ending inventory of $ 57,000 youget 94,000 (beg. balance)

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