The following balances were gathered from Brandon Company’s general ledger. June
ID: 2466819 • Letter: T
Question
The following balances were gathered from Brandon Company’s general ledger.
June 30, 2014
June 30, 2015
Accounts receivable
$120,000
$132,000
Inventory
180,000
197,000
Accounts payable
43,000
54,000
Accrued liabilities
12,000
16,000
Income taxes payable
22,000
15,000
Sales
430,000
Cost of goods sold
270,000
Operating expenses (includes $15,000 depreciation)
112,000
Gain on sale of equipment
26,000
Income tax expense
17,000
Required: Using the indirect method, prepare the cash flows provided by operating activities section of Brandon’s statement of cash flows.
Question 3:
Berry Corporation reported the following cash transactions for last year.
Issued common stock at $72 per share
$180,000
Paid dividends to stockholders at year end
60,000
Received dividends from investments in other companies
32,000
Purchased bonds issued by City of Metropolis
50,000
Borrowed money from City Bank
25,000
Made payment to City Bank on loan
4,000
Purchased office equipment
12,000
Received interest payment on City of Metropolis bonds
2,000
Required:
a. Prepare the investing section of Berry’s statement of cash flows.
b. Prepare the financing section of Berry’s statement of cash flows.
June 30, 2014
June 30, 2015
Accounts receivable
$120,000
$132,000
Inventory
180,000
197,000
Accounts payable
43,000
54,000
Accrued liabilities
12,000
16,000
Income taxes payable
22,000
15,000
Sales
430,000
Cost of goods sold
270,000
Operating expenses (includes $15,000 depreciation)
112,000
Gain on sale of equipment
26,000
Income tax expense
17,000
Explanation / Answer
Solution :
OPERATING ACTIVITIES
Net income before tax**
344,000
Depreciation
15000
GAIN ON SALE OF EQUIPMENT
-26000
Increase in Accounts Receivable
-12000
Increase in inventory
-17000
Increase in Accounts Payable
11000
Decrease in Income Tax Payable
-7000
Increase in Accrued liabilities
4000
cash flow from operating activities
312000
Sales
430000
COGS
-112000
GROSS PROFIT
318000
GAIN ON SALE OF EQUIPMENT
26000
Net income before tax**
344000
INVESTING ACTIVIES
dividends from investments
32000
Purchased City of Metropolis bonds
-50000
Purchased office equipment
-12000
Received interest payment on City of Metropolis bonds
2000
cash flow from Investing activities
-28000
FINANCING ACTIVITIES
common stock issued
180000
Dividend paid
-60000
Borrowed money from City Bank
25000
Made payment to City Bank on loan
-4000
cash flow from Financing activities
141000
OPERATING ACTIVITIES
Net income before tax**
344,000
Depreciation
15000
GAIN ON SALE OF EQUIPMENT
-26000
Increase in Accounts Receivable
-12000
Increase in inventory
-17000
Increase in Accounts Payable
11000
Decrease in Income Tax Payable
-7000
Increase in Accrued liabilities
4000
cash flow from operating activities
312000
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