526 RESOURCES INC. COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31 2015 201
ID: 2481004 • Letter: 5
Question
526 RESOURCES INC.
COMPARATIVE BALANCE SHEET ACCOUNTS
AS OF DECEMBER 31
2015
2014
Debit Balances
Cash
$ 60,000
$ 71,500
Investments (available-for-sale)
30,000
55,000
Accounts Receivable
152,000
136,000
Inventory
118,000
84,000
Land
50,000
15,000
Buildings
160,000
160,000
Equipment
60,000
41,500
Total assets
$ 630,000
$ 563,000
Totals
Credit Balances
Allowance for doubtful accounts
$ 6,000
$ 3,000
Accumulated depreciation-buildings
40,000
32,000
Accumulated depreciation-equipment
24,000
18,500
Accounts payable
102,000
95,000
Income taxes payable
13,000
8,000
Long-term notes payable
65,000
80,000
Common stock
295,000
236,500
Retained earnings
85,000
90,000
Totals
$ 630,000
$ 563,000
Additional data:
Equipment that cost $20,000 and was 40% depreciated was sold in 2015.
Common stock was issued in exchange for land.
Investments that cost $25,000 were sold during the year.
There were no write-offs of uncollectible accounts during the year.
526 Resources Inc.’s 2015 income statement is as follows.
Sales
$ 750,000
Less: Cost of goods sold
480,000
Gross profit
270,000
Less: Operating expenses (Includes depreciation expense and bad debt expense)
145,000
Income from operations
125,000
Other revenues and expenses
Gain on sale of investments
$ 7,000
Loss on sale of equipment
(4,000)
3,000
Income before taxes
128,000
Income taxes
52,000
Net income
76,000
Instructions:
From the information given and your cash flow statement, comment on the activities and the financial position of 526 Resources Inc. during 2015
526 RESOURCES INC.
COMPARATIVE BALANCE SHEET ACCOUNTS
AS OF DECEMBER 31
2015
2014
Debit Balances
Cash
$ 60,000
$ 71,500
Investments (available-for-sale)
30,000
55,000
Accounts Receivable
152,000
136,000
Inventory
118,000
84,000
Land
50,000
15,000
Buildings
160,000
160,000
Equipment
60,000
41,500
Total assets
$ 630,000
$ 563,000
Totals
Credit Balances
Allowance for doubtful accounts
$ 6,000
$ 3,000
Accumulated depreciation-buildings
40,000
32,000
Accumulated depreciation-equipment
24,000
18,500
Accounts payable
102,000
95,000
Income taxes payable
13,000
8,000
Long-term notes payable
65,000
80,000
Common stock
295,000
236,500
Retained earnings
85,000
90,000
Totals
$ 630,000
$ 563,000
Explanation / Answer
526 Resources Inc. Cash flow Statement for the period ending Dec 31 2015. Indirect Method Details Amt $ Cash Flow From Operating Activities Net Income 76,000 Add Depreciation 21,500 Add : Bad debt provision 3,000 Less : Capital Gain Less Invstment Income (7,000) Add : Capital Loss 4,000 Add: investment Loss Increased Accounts Receivable (16,000) Increased Inventory (34,000) Prepaid Expenses Increased Accounts Payable 7,000 Accrued Expenses Increased Income Tax Payable 5,000 Total Cash Flow From Operating Activities 59,500 Cash Flow From Investing Activities Cash Inflow from sales of assets 8,000 Cash outflow from purchase of assets (38,500) Cash Inflow from sales of investments 32,000 Cash outflow from purchase of Investments Total Cash Flow From Investing Activities 1,500 Cash Flow From Financing Activities Cash received from issue of Common stock( apart from issued for Land) 23,500 Cash Received from Loan Cash paid for repayment of Loan (15,000) Cash Paid for Dividend Payment (81,000) Cash paid for stock repurchase TotalCash Flow From Financing Activities (72,500) Total Cash Flow from Operating. Investing and Financing Activities (11,500) Intial Cash Balance 71,500 Net Effect of Cash Flow during the period (11,500) Closing Cash Balance 60,000 Observations The cash flow statement indicates a healthy opeartional performance as the Cash flow from opertaing income is positive. However, the effects of high dividend payment and Loan repayment makes the net cash position negative. There is good amount of cash outflow for equipment purchase also. The net income % is acceptable 10.1% and the overall cash flow position is normal. There is nothing specific to worry at this point.
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