SCHMITT COMPANY Comparative Balance Sheets December 31 Assets 2014 2013 $ 84,320
ID: 2497276 • Letter: S
Question
SCHMITT COMPANY
Comparative Balance Sheets
December 31
Assets
2014
2013
$ 84,320
$ 27,280
109,120
94,240
207,080
234,360
99,200
124,000
322,400
248,000
(81,840
)
(39,680
)
$740,280
$688,200
Liabilities and Stockholders’ Equity
$ 48,360
$ 53,320
186,000
248,000
267,840
215,760
238,080
171,120
$740,280
$688,200
SCHMITT COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2014
Adjustments to reconcile net income to
Shown below are comparative balance sheets for Schmitt Company.SCHMITT COMPANY
Comparative Balance Sheets
December 31
Assets
2014
2013
Cash$ 84,320
$ 27,280
Accounts receivable109,120
94,240
Inventory207,080
234,360
Land99,200
124,000
Equipment322,400
248,000
Accumulated depreciation—equipment(81,840
)
(39,680
)
Total$740,280
$688,200
Liabilities and Stockholders’ Equity
Accounts payable$ 48,360
$ 53,320
Bonds payable186,000
248,000
Common stock ($1 par)267,840
215,760
Retained earnings238,080
171,120
Total$740,280
$688,200
Additional information:
1. Net income for 2014 was $115,320. 2. Depreciation expense was $42,160. 3. Cash dividends of $48,360 were declared and paid. 4. Bonds payable amounting to $62,000 were redeemed for cash $62,000. 5. Common stock was issued for $52,080 cash. 6. No equipment was sold during 2014. 7. Land was sold for its book value.
Explanation / Answer
The statement of cash flows is given below:
___________
Part B)
Current Cash Debt Coverage can be calculated with the use of following formula:
Current Cash Debt Coverage = Net Cash Provided by Operating Activities/Average Current Liabilties
___________
Here, Net Cash Provided by Operating Activities = $164,920 and Average Current Liabilities = (48,360 + 53,320)/2 = $50,840
Using these values in the above formula we get,
Current Cash Debt Coverage = 164,920/50,840 = 3.24 times
___________
Part C)
Cash Debt Coverage can be calculated with the use of following formula:
Cash Debt Coverage = Cash Debt Coverage = Net Cash Provided by Operating Activities/Average Total Liabilties
___________
Here, Net Cash Provided by Operating Activities = $164,920 and Average Total Liabilities = (48,360 + 53,320 + 186,000 + 248,000)/2 = $267,840
Using these values in the above formula we get,
Cash Debt Coverage = 164,920/267,840 = .62 times
SCHMITT COMPANY Statement of Cash Flows For the Year Ended December 31, 2014 Cash Flow from Operating Activities Net Income 115,320 Add Adjustments to reconcile net income to net cash provided by operating activities Depreciation 42,160 Decrease in Inventory (234,360 – 207,080) 27,280 Less Increase in Accounts Receivable (109,120 – 94,240) -14,880 Decrease in Accounts Payable (53,320 – 48,360) -4,960 49,600 Net Cash Provided by Operating Activities (A) $164,920 Cash Flow from Investing Activities Proceeds from Sale of Land (124,000 – 99,200) 24,800 Purchase of Equipment (322,400 – 248,000) -74,400 Net Cash Used by Investing Activities (B) -$49,600 Cash Flow from Financing Activities Proceeds from Issuance of Common Stock (267,840 – 215,760) 52,080 Redemption of Bonds (248,000 – 186,000) -62,000 Cash Dividends Paid -48,360 Net Cash Used by Financing Activities (C) -$58,280 Net Increase in Cash (A+B+C) 57,040 Add Cash at the Beginning of the Period 27,280 Cash at the End of the Period $84,320Related Questions
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