Darn Tootin Inc Statement of Income For the year Ended April 30, 2003 Revenue Sa
ID: 2468038 • Letter: D
Question
Darn Tootin Inc Statement of Income For the year Ended April 30, 2003 Revenue Sales 300 Total Revenue 300 Expenses and Losses Cost of Goods sold 106 Salaries 20 Depreciation 8 Advertising 16 interest 4 Miscellanous 5 Loss on sale of Assets 4 Operating Income 137 Interest 7 Income Tax 5 Net Income 125 Darn Tootin Inc Balance Sheet April 30, 2003 and April 30, 2002 Assets: 30-Sep-01 30-Sep-00 Cash 65 81 Accounts receivable 9 12 Inventories 9 8 Prepaid advertising expenses 7 2 Available-for-sale investments (long-term) 60 63 Plant assets 53 34 Accumulated depreciation -21 -20 Total Assets $182 $180 Liabilities and Equity Accounts Payable 7 5 Accrued salaries payable 3 6 Interest payable 2 1 Bonds payable 58 68 Common stock ($1 par value) 60 50 Paid-In-capital excess over Par-Common Stock 15 10 Retained Earnings 37 40 Total Liabilities and Equity $182 $180 Additional Info 1. Plant Assets which were sold during the year were originally purchased for $13. 2 Market value of the stock at year-end was $25 Instructions 1. Prepare a statement of Cash flows (using the direct method to present the operating activities.) 2. Prepare a schedule reconciling Net Income to cash provided by (Used in) operationg activities. Darn Tootin Inc Statement of Income For the year Ended April 30, 2003 Revenue Sales 300 Total Revenue 300 Expenses and Losses Cost of Goods sold 106 Salaries 20 Depreciation 8 Advertising 16 interest 4 Miscellanous 5 Loss on sale of Assets 4 Operating Income 137 Interest 7 Income Tax 5 Net Income 125 Darn Tootin Inc Balance Sheet April 30, 2003 and April 30, 2002 Assets: 30-Sep-01 30-Sep-00 Cash 65 81 Accounts receivable 9 12 Inventories 9 8 Prepaid advertising expenses 7 2 Available-for-sale investments (long-term) 60 63 Plant assets 53 34 Accumulated depreciation -21 -20 Total Assets $182 $180 Liabilities and Equity Accounts Payable 7 5 Accrued salaries payable 3 6 Interest payable 2 1 Bonds payable 58 68 Common stock ($1 par value) 60 50 Paid-In-capital excess over Par-Common Stock 15 10 Retained Earnings 37 40 Total Liabilities and Equity $182 $180 Additional Info 1. Plant Assets which were sold during the year were originally purchased for $13. 2 Market value of the stock at year-end was $25 Instructions 1. Prepare a statement of Cash flows (using the direct method to present the operating activities.) 2. Prepare a schedule reconciling Net Income to cash provided by (Used in) operationg activities.Explanation / Answer
(‘1) Cash Flow from Operation (Direct Method)
Particular
Working Note
Amount
Cash From collection on accounts receivable
1
303
Less:
Payment made to supplier
2
105
Paid to Employees
3
23
Interest Payment
4
10
Income Tax Paid
5
Miscellaneous Expense paid
5
Advertisement expense paid
5
11
Payment of Bonds Payable
10
Cash Flow from Operation
134
WN-1 - Cash From Customers
Sales
300
+ Beginning accounts receivable
12
(-) Ending accounts receivable
9
Cash From customers
303
WN-2 – Payment to supplier
Purchase
106
(+) Ending inventory
9
(-) Beg Inventory
8
(+) Beg Accounts payable
5
(-) Ending accounts payable
7
Net cash payment
105
WN-3 Payment to Employees
Beginning Payable
6
(-) Ending payable
3
(+) Salary expense
20
Net payment
23
WN-4 Interest Payment
Beginning Payable
1
(-) Ending payable
2
(+) Interest expense
11
Net payment
10
WN-5 Advertisement Payment
Beginning Payable
2
(-) Ending payable
7
(+) Advertisement expense
16
Net payment
11
(‘2) Reconciliation of Net Income form Cash Received from Operation
Particulars
Amount
Net Income
125
Add Non-Cash Expense (Depreciation)
8
Add- Loss on sale of non-current asset
4
Less- Increase in current asset (note-1)
3
Net Cash From Operation
134
Note -1 – Ignore cash while calculating increase in the year.
Particular
Working Note
Amount
Cash From collection on accounts receivable
1
303
Less:
Payment made to supplier
2
105
Paid to Employees
3
23
Interest Payment
4
10
Income Tax Paid
5
Miscellaneous Expense paid
5
Advertisement expense paid
5
11
Payment of Bonds Payable
10
Cash Flow from Operation
134
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