The following condensed financial statements are for Matadors, Inc. Comparative
ID: 2534156 • Letter: T
Question
The following condensed financial statements are for Matadors, Inc.
Comparative Balance Sheet, December 31, 2015 and 2014
2015
2014
Assets
Cash
$22
$16
Accounts receivable
225
245
Inventory
105
125
Prepaid general expenses
21
12
Plant assets
1,025
1,000
Accumulated depreciation – plant assets
(530)
(585)
Total assets
$868
$813
Liabilities and Stockholders’ Equity
Accounts payable
$70
$45
Interest payable
15
12
Income taxes payable
80
77
Bonds payable
105
97
Common stock
362
354
Retained earnings
236
228
Total liabilities and stockholders’ equity
$868
$813
Condensed Income Statement
For the Year Ended December 31, 2015
Sales
$1,450
Cost of goods sold
990
Gross profit
$460
Operating expenses:
Depreciation expense
$55
General expenses
340
Interest expense
12
Income tax expense
15
422
Net income
$38
The following information is also available for 2015:
1) Plant assets were sold for their book value of $180 during the year. The assets had an original cost of $290.
2) Cash dividends totaling $30 were paid during the year.
3) All accounts payable relate to inventory purchases
4) All purchases of plant assets were cash transactions.
Required
1) Compute cash from (for) operating activities using both the direct and indirect methods. For the direct method you will calculate the following amounts:
A) Cash received from customers,
B) Cash paid for inventory,
C) Cash paid for general expenses,
D) Cash paid for interest, and
E) Cash paid for taxes.
Operating cash flow using the direct method will be the sum of the above amounts. This will equal operating cash flow calculated using the indirect method (net income adjusted).
2) Compute cash from (for) investing activities.
3) Compute cash from (for) financing activities.
4) Use the above amounts to reconcile the beginning and ending cash balances.
Comparative Balance Sheet, December 31, 2015 and 2014
2015
2014
Assets
Cash
$22
$16
Accounts receivable
225
245
Inventory
105
125
Prepaid general expenses
21
12
Plant assets
1,025
1,000
Accumulated depreciation – plant assets
(530)
(585)
Total assets
$868
$813
Liabilities and Stockholders’ Equity
Accounts payable
$70
$45
Interest payable
15
12
Income taxes payable
80
77
Bonds payable
105
97
Common stock
362
354
Retained earnings
236
228
Total liabilities and stockholders’ equity
$868
$813
Explanation / Answer
CASH FLOW FROM OPERATING ACTIVITIES
2) CASH FLOW FROM INVESTING ACTIVITIES
3) CASH FLOW FROM FINANCING ACTIVITIES
4) RECONCILIATION
........
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By Direct Method (Working) $ Cash Reciepts: Cash Sales and Collection from Trade Recievables Sales + Opening Acc Rec - Closing Acc Rec (A) 1450 +245 - 225 1470 Cash Payments: Cash Purchases and Payment to Trade Payables Purchases + Opening Acc Payable - Closing Acc Payable (990-125+105) + 45 - 70 945 Cash Paid for General Expenses 340 +21 -12 349 Cash Paid for Interest 12 - 15 + 12 9 Cash Paid for Taxes 15 - 80 + 77 12 (B) 1315 Cash Flow from Operating Activities (A)-(B) $155 By Indirect Method Net Income 38 Add: Income Tax Expense 15 Net Income before Tax 53 Add: Non Cash Items - Depreciation 55 108 Working Capital Adjustments Add: Accounts receivable 20 Add:Inventory 20 Less: Prepaid general expenses -9 Add : Accounts Payable 25 Add : Interest Payable 3 Less: Cash Paid for Taxes -12 Cash Flow from Operating Activities $155Related Questions
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