MARCUS INC. COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31, 2014 AND 2013

Question

MARCUS INC. COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31, 2014 AND 2013 December 31 Debit Accounts 2014 2013 Cash $42,200 $33,300 Accounts Receivable 70,210 60,250 Inventory 29,930 24,180 Investments (available-for-sale) 22,660 38,230 Machinery 30,170 18,530 Buildings 67,770 56,500 Land 7,200 7,200 $270,140 $238,190 Credit Accounts Allowance for Doubtful Accounts $2,560 $1,030 Accumulated Depreciation—Machinery 6,080 1,810 Accumulated Depreciation—Buildings 13,630 8,580 Accounts Payable 35,110 24,010 Accrued Payables 3,005 2,726 Long-Term Notes Payable 21,180 31,360 Common Stock, no-par 149,800 124,900 Retained Earnings 38,775 43,774 $270,140 $238,190 Additional data (ignoring taxes): 1. Net income for the year was $40,931. 2. Cash dividends declared and paid during the year were $21,030. 3. A 20% stock dividend was declared during the year. $24,900 of retained earnings was capitalized. 4. Investments that cost $24,520 were sold during the year for $28,170. 5. Machinery that cost $3,910, on which $793 of depreciation had accumulated, was sold for $2,256. Marcus’s 2014 income statement follows (ignoring taxes). Sales revenue $537,502 Less: Cost of goods sold 379,230 Gross margin 158,272 Less: Operating expenses (includes $10,113 depreciation and $5,850 bad debts) 120,130 Income from operations 38,142 Other: Gain on sale of investments $3,650 Loss on sale of machinery (861 ) 2,789 Net income $40,931 (a) Compute net cash flow from operating activities using the direct method. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net cash flow from operating activities $ (b) Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Explanation / Answer

(8,950)

Working Notes:

(1) Machinery Account

(2) Accumulated Depreciation on Machinery Account

(3) Building Account

(4) Accumulated Depreciation on Building Account

(5) Retained Earnings

(6) Investment Account

Operating Activities Net Profit 40,931 Add: Depreciation 10,113 Add: Loss on Sale of Machinery 861 Less: Gain on Sale of Investments (3,650) Add: Provision for Doubtful Debts 1,530 Operating Cash flows before Working Capital Changes 49,785 Change in Working Capital Increase in Accounts Receivable (9,960) Increase in Inventory (5,750) Increase in Accounts Payable 11,100 Increase in Accrued Payables 279 Cash Flow from Operating Activities 45,454 Investing Activities Purchase in Investments

(8,950)

Sale in Investments 28,170 Sale of Machinery 2,256 Purchase of Machinery (15,550) Purchase of Building (11,270) Cash Flow from Investing Activity (5,344) Financing Activities Repayment in Long Term Loans (10,180) Dividend Paid (21,030) Cash flow from Financing Activities (31.210) Net Cash flow before Cash and Cash Equivalents 8,900 Add: Opening Balance of Cash and Cash Equivalents 33,300 Closing Balance of Cash and Cash Equivalents 42,200

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