Balance sheets for Plasma Screens Corporation along with additional information
ID: 2496891 • Letter: B
Question
Balance sheets for Plasma Screens Corporation along with additional information are provided below:
Plasma Screens Corporation
Balance Sheets
December 31, 2012 and 2011
2012
2011
Assets
Current assets:
Cash
$ 82,000
$ 120,000
Accounts receivable
72,000
96,000
Inventory
65,000
80,000
Prepaid rent
5,000
4,000
Long-term assets:
Land
500,000
500,000
Equipment
800,000
600,000
Accumulated depreciation
(380,000)
(300,000)
Total assets
$1,144,000
$1,100,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$ 78,000
$ 82,000
Interest payable
5,000
9,000
Income tax payable
9,000
7,000
Long-term liabilities:
Notes payable
75,000
150,000
Stockholders’ equity:
Common stock
600,000
600,000
Retained earnings
377,000
252,000
Total liabilities and stockholders’ equity
$1,144,000
$1,100,000
Additional Information for 2012:
1. Net income is $160,000.
2. Depreciation expense is $80,000.
3. The company declares and pays a cash dividend of $35,000.
4. Assume all changes in long term assets and liabilities were the result of cash transactions.
Required:
Prepare the statement of cash flows using the indirect method.
2012
2011
Assets
Current assets:
Cash
$ 82,000
$ 120,000
Accounts receivable
72,000
96,000
Inventory
65,000
80,000
Prepaid rent
5,000
4,000
Long-term assets:
Land
500,000
500,000
Equipment
800,000
600,000
Accumulated depreciation
(380,000)
(300,000)
Total assets
$1,144,000
$1,100,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$ 78,000
$ 82,000
Interest payable
5,000
9,000
Income tax payable
9,000
7,000
Long-term liabilities:
Notes payable
75,000
150,000
Stockholders’ equity:
Common stock
600,000
600,000
Retained earnings
377,000
252,000
Total liabilities and stockholders’ equity
$1,144,000
$1,100,000
Explanation / Answer
Cash Flow Statement (Indirect Method) Particulars Amount Cash Flow from Operating Activities A. Net Income $160,000 Adjustments for Non-Cash and non-operating Items B. Add: Depreciation expeneses $80,000 Operating Profit before Changes in Working Capital $240,000 Add: Inc. in Current liabilities or Dec. in Current Assets Dec. in Accounts Receivables $24,000 Dec. in Inventories $15,000 Inc. in I Tax Payable $2,000 $41,000 Less: Dec. in Current liabilities or Inc. in Current Assets Inc. in Prepaid Rent ($1,000) Dec. in Accounts Payables ($4,000) Dec. in Interest Payables ($4,000) ($9,000) Cash Flow from Operating Activities $272,000 Cash Flow from Investing Activities Purchase of Equipments ($200,000) Cash Flow from (or used in) Investing Activities ($200,000) Cash Flow from Financing Activities Repayment of Notes Payable ($75,000) Dividend Paid ($35,000) ($110,000) Cash Flow from (or Used in) Financing Activities ($110,000) Net Increase/Decrease in Cash and Cash Equivalents ($38,000) Add: Opening Cash Balance $120,000 Closing Cash Balance $82,000
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