Problem I Katie Inc. Balance Sheet At December 31 2017 2016 Current assets: Cash
ID: 2536877 • Letter: P
Question
Problem I
Katie Inc.
Balance Sheet
At December 31
2017
2016
Current assets:
Cash
$ 17,000
$ 10,000
Accounts receivables
50,000
45,000
Inventory
64,000
70,000
Prepaid expenses
12,000
10,000
Total Current Assets
$143,000
$135,000
Non-current Assets:
Plant assets
580,000
560,000
Accumulated depreciation
(130,000)
(100,000)
Patent
50,000
60,000
Total Non-current Assets
$500,000
$520,000
Total Assets
$643,000
$655,000
Liabilities:
Current Liabilities
Accounts payable
$ 90,000
$ 93,000
Salaries payable
8,000
4,000
Total Current Liabilities
$98,000
97,000
Non-current Liabilities:
Bonds payable, net of discount of $2,000
0
118,000
Notes payable
40,000
40,000
Total non-current liabilities
$40,000
158,000
Total Liabilities
$138,000
255,000
Equity
Contributed Capital
Common stock
280,000
260,000
Retained earnings
265,000
140,000
Treasury stock
(40,000)
0
Total Equity
$505,000
$400,000
Total Liabilities and Equity
$643,000
$655,000
Katie Inc.
Income Statement
For the years ended December 31
The income statement for 2017 is as follows:
Sales
$1,500,000
Cost of sales
(900,000)
Gross margin
$ 600,000
Operating expenses
(450,000)
Income from operations
$ 150,000
Interest expense
(5,000)
Net income
$ 145,000
Additional information:
a. The Accumulated Depreciation account has been credited only for the depreciation expense for the period.
b. The only changes to retained earnings were for net income and dividends for 2014.
c. A piece of equipment was acquired and common stock was issued in exchange.
d. Salaries expense was $100,000; the company usually reports the related cash flows separately in the statement of cash flows.
Required:
Using the information above, prepare a statement of cash flows for Katie Inc. for the year ended December 31, 2017, using the direct method. (Also prepare any required supplemental schedules and disclosures).
2017
2016
Current assets:
Cash
$ 17,000
$ 10,000
Accounts receivables
50,000
45,000
Inventory
64,000
70,000
Prepaid expenses
12,000
10,000
Total Current Assets
$143,000
$135,000
Non-current Assets:
Plant assets
580,000
560,000
Accumulated depreciation
(130,000)
(100,000)
Patent
50,000
60,000
Total Non-current Assets
$500,000
$520,000
Total Assets
$643,000
$655,000
Liabilities:
Current Liabilities
Accounts payable
$ 90,000
$ 93,000
Salaries payable
8,000
4,000
Total Current Liabilities
$98,000
97,000
Non-current Liabilities:
Bonds payable, net of discount of $2,000
0
118,000
Notes payable
40,000
40,000
Total non-current liabilities
$40,000
158,000
Total Liabilities
$138,000
255,000
Equity
Contributed Capital
Common stock
280,000
260,000
Retained earnings
265,000
140,000
Treasury stock
(40,000)
0
Total Equity
$505,000
$400,000
Total Liabilities and Equity
$643,000
$655,000
Explanation / Answer
Cash Flow from Operating Activities:-
Amount
Amount
Cash Collect from customer (1500000{sale} - 5000{A/c rec} + 6000{inventory})
1501000
Cash Paid to supplier (900000{cost of sale} + 3000 {A/c payable})
(903000)
Operating Exp (450000 - 100000{salary} + 2000{prepaid exp})
(352000)
Salary (100000 + 4000{salary payable})
(96000)
Depreciation
30000
Cash Flow from Operating Activities (A)
180000
180000
Cash Flow from Investing Activities:-
Purchase Equipment
(20000)
Ammortise Patent
10000
Cash Flow from Investing Activities (B)
(10000)
(10000)
Cash Flow from Financing Activities:-
Dividend Paid
(20000)
Stock Issue
20000
Int Exp
(5000)
Bond Paid
(118000)
Treasury stock
(40000)
Cash Flow from Financing Activities (C)
(163000)
(163000)
Total Cash Flow (A+B+C)
7000
Add :- Opening cash
10000
Ending Cash
17000
Cash Flow from Operating Activities:-
Amount
Amount
Cash Collect from customer (1500000{sale} - 5000{A/c rec} + 6000{inventory})
1501000
Cash Paid to supplier (900000{cost of sale} + 3000 {A/c payable})
(903000)
Operating Exp (450000 - 100000{salary} + 2000{prepaid exp})
(352000)
Salary (100000 + 4000{salary payable})
(96000)
Depreciation
30000
Cash Flow from Operating Activities (A)
180000
180000
Cash Flow from Investing Activities:-
Purchase Equipment
(20000)
Ammortise Patent
10000
Cash Flow from Investing Activities (B)
(10000)
(10000)
Cash Flow from Financing Activities:-
Dividend Paid
(20000)
Stock Issue
20000
Int Exp
(5000)
Bond Paid
(118000)
Treasury stock
(40000)
Cash Flow from Financing Activities (C)
(163000)
(163000)
Total Cash Flow (A+B+C)
7000
Add :- Opening cash
10000
Ending Cash
17000
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