P5-6B (Preparation of a Statement of Cash Flows and a Balance Sheet) Maroon Six
ID: 2458772 • Letter: P
Question
P5-6B (Preparation of a Statement of Cash Flows and a Balance Sheet) Maroon Six Inc. had the balance sheet shown below at December 31, 2013.
Cash
31000
Accounts Payable
61000
Accounts Receivable
56800
Notes Payable
76000
Investments
86000
Common Stock
200000
Plant Assets
138500
Retained Earnings
41300
Land
66000
Totals
378300
378300
Maroon Six Inc. sold part of its investment portfolio for $20,000. This transaction resulted in a loss of $2,100 for the firm. The company classifies its investments as available-for-sale.
A tract of land was purchased for $25,000 cash.
Long-term notes payable in the amount of $30,000 were retired before maturity by paying $30,000 cash.
An additional $43,000 in common stock was issued at par.
Dividends of $20,000 were declared and paid to stockholders.
Net income for 2014 was $21,000 after allowing for depreciation of $16,000.
Land was purchased through the issuance of $61,000 in notes payable.
At December 31, 2014, Cash was $46,100, Accounts Receivable was $61,800, and Accounts Payable remained at $61,000.
Instructions
(a) Prepare a statement of cash flows for 2014.
(b) Prepare an unclassified balance sheet as it would appear at December 31, 2014.
(c) How might the statement of cash flows help the user of the financial statements? Compute two cash flow ratios.
Cash
31000
Accounts Payable
61000
Accounts Receivable
56800
Notes Payable
76000
Investments
86000
Common Stock
200000
Plant Assets
138500
Retained Earnings
41300
Land
66000
Totals
378300
378300
Explanation / Answer
An item os $ 7000 seems to be missing from the data provided. Please check
Cash Flow Statement for the year ended December 31 2014
Balance Sheet as on December 31, 2014
$ $ Net income 21,000 Add depreciation 16,000 loss on sale of investment 2,100 18,100 Operating profit before working caiptal adjustment 39,100 Increase in account receivable (5,000) Net cash flows from operating activities 34,100 Cash flows from investing activities Sale proceeds of investment 20,000 Purchase of land (25,000) Net cash used in investing activities (5,000) Cash flows from financing activities Dividends paid (20,000) Retirement of long term debt (30,000) Issue proceeds of of common stock 43,000 Net cash used in financing activities (7000) Net increase in cash and cash equivalent 22,100 Opening cash and cash equivalent 31,000 Closing cash and cash equivalent 53,100Related Questions
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