Below are the balance sheets and income statement for Kinder Care Company. Pleas
ID: 2464582 • Letter: B
Question
Below are the balance sheets and income statement for Kinder Care Company. Please prepare the statement of cash flows for 2015 on both the indirect and direct bases.
Kinder Care Company
Balance Sheet
December 31
2015
2014
Cash
135,900
111,200
Accounts receivable (net)
38,300
20,300
Inventory
35,000
26,000
Long-term investments
-
20,000
Property, plant & equipment
216,500
150,000
Accumulated depreciation
(57,700)
(25,000)
368,000
302,500
Accounts payable
17,000
35,500
Accrued liabilities
21,000
27,000
Long-term notes payable
70,000
50,000
Common stock
185,000
145,000
Retained earnings
75,000
45,000
368,000
302,500
Sales Revenue………………………………………………..
$ 512,000
Cost of goods sold…………………………………………
291,000
Gross margin …………………..
221,000
Operating expenses…………………………………………
91,500
Pre-tax operating income
129,500
Gain on sale of investments
15,000
Pre-tax income
144,500
Tax
42,000
Net income………………………………………………………
$ 102,500
Additional data:
1
Depreciation on plant assets for the year, $32,700.
2
Sold the long-term investments for $35,000.
3
Purchased machinery costing $66,500, issued note for $20,000 and paid remainder in cash.
4
Paid a $40,000 long-term note payable by issuing common stock.
5
Issued additional long-term notes payable during the year.
Kinder Care Company
Balance Sheet
December 31
2015
2014
Cash
135,900
111,200
Accounts receivable (net)
38,300
20,300
Inventory
35,000
26,000
Long-term investments
-
20,000
Property, plant & equipment
216,500
150,000
Accumulated depreciation
(57,700)
(25,000)
368,000
302,500
Accounts payable
17,000
35,500
Accrued liabilities
21,000
27,000
Long-term notes payable
70,000
50,000
Common stock
185,000
145,000
Retained earnings
75,000
45,000
368,000
302,500
Explanation / Answer
Cash flow from operations - Indirect Method Net Income 102500 Add : Depriciation 32700 32700 Less: Increase in Accounts receivable 18000 Increase in inventory 9000 Decrease in accounts payable 18500 Decrease in accrued liabilities 6000 51500 Net cash flow from operations 83700 Cash flow from investing activity Proceeds from sale of long term investmens 20000 Add : Increase in notes payable 20000 Less : Purchase of machinery in cash 66500 Net cash flow from investing activity -26500 Cash flow from financing activity Issuance of common stock 40000 Less : Dividends paid 72500 Retained earning ( 45000 + 102500 - 75000) Net cash flow from financing activity -32500 Net cash flow 24700 Beginning cash balance 111200 Ending cash balance 135900 Net Increase in cash 24700 Cash flow from operations - direct Method Received from customers Opening accounts receivable 20300 Add : Sales 512000 Less : closing accounts receivable 38300 Cash received from customers 494000 Cost of goods sold = opening inventory + Purchases - closing inventory hence, purchases = cost of goods sold - opening inventory + closing inventory = 291000 - 26000 + 35000 = 300000 Cash disbursemnets for purchases = opening accounts payable + Purchases - closing accounts payable = 35500 + 300000 - 17000 = 318500 Cash disbursement for operating expenses = opening accrued liability + operating expenses - closing accrued iability = 27000 + 91500 - 21000 = 97500 Cash flow from operating activity Cash received from customers 494000 Add : Less : Cash disbursement for purchases 318500 Cash disbursement for operating expenses 97500 Taxes paid 49300 Net cash flow from operating activity 28700 Cash flow from investing activity Proceeds from long term investments 35000 Purchase of machinery in cash -46500 Additional notes issued 40000 ( 50000 +20000-40000-70000) Net Cash flow from investing activity 28500 Cash flow from financing activity Dividends paid -72500 Common stock issued 40000 Net Cash flow from financing activity -32500 Net Cash flow 24700 Beginning cash balance 111200 Ending cash balance 135900 Net Increase in cash 24700
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