526 RESOURCES INC. COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31 2015 201
ID: 2483495 • 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, prepare the cash flow from operating activities sections of the cash flow statement under the DIRECT METHOD and 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
Answer Cash Flow from Operating Activities Cash receipts from cutomer 737000 Cash Payments Paid to Suppliers -27000 Operating Expenses -128500 Income tax -47000 Cash from operating activities 534500 Cash collection is good forom operation Therefore, Financial position of the Company will be improve. Working Notes Cash Received from customer Net Sales 750000 Add Account Receivable at 2014 133000 Less Account Receivable at 2015 146000 Cash Received from customer 737000 Inventory at 2014 84000 less Inventory at 2015 118000 less Account payable 2014 95000 Add Account payable 2015 102000 Cash payment to suppliers -27000 Operating expenses 145000 Less Depreciation (40000-32000+24000-18500) 13500 Bad debts (+6000-3000) 3000 Total Expenses Paid 128500 Income tax income tax 52000 add Income tax payable at 2014 8000 less Income tax payable at 2015 13000 47000
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