The 20162016 income statement and comparative balance sheet of Granite RockGrani
ID: 2556551 • Letter: T
Question
The
20162016
income statement and comparative balance sheet of
Granite RockGranite Rock?,
Inc.? follow:
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?Additionally,
Granite RockGranite Rock
purchased land of
$ 19 comma 600$19,600
by financing it? 100% with? long-term notes payable during
20162016.
During the? year, there were no sales of? land, no retirements of? stock, and no treasury stock transactions. A plant asset was disposed of for? $0. The cost and accumulated depreciation of the disposed asset was
$ 11 comma 340$11,340.
The plant acquisition was for cash.
Requirements
1.
20162016
2.
How will what you learned in this problem help you evaluate an? investment?
Granite Rock, Inc.
Income Statement
Year Ended December 31, 2016
Sales Revenue
$437,000
Cost of Goods Sold
200,200
Gross Profit
236,800
Operating Expenses:
Salaries Expense
$77,400
Depreciation Expense—Plant Assets
14,800
Other Operating Expenses
11,000
Total Operating Expenses
103,200
Operating Income
133,600
Other Revenues and (Expenses):
Interest Revenue
8,700
Interest Expense
(21,500)
Total Other Revenues and (Expenses)
(12,800)
Net Income Before Income Taxes
120,800
Income Tax Expense
19,600
Net Income
$101,200
Granite Rock, Inc.
Comparative Balance Sheet
December 31, 2016 and 2015
2016
2015
Assets
Current Assets:
Cash
$26,700
$15,000
Accounts Receivable
26,800
25,000
Merchandise Inventory
79,300
91,000
Long-term Assets:
Plant Assets
125,180
105,520
Accumulated Depreciation—Plant Assets
(21,280)
(17,820)
Land
34,600
15,000
Total Assets
$271,300
$233,700
Liabilities
Current Liabilities:
Accounts Payable
$35,500
$30,700
Accrued Liabilities
28,000
30,400
Long-term Liabilities:
Notes Payable
79,000
102,000
Total Liabilities
142,500
163,100
Stockholders' Equity
Common Stock, no par
88,300
64,100
Retained Earnings
40,500
6,500
Total Stockholders' Equity
128,800
70,600
Total Liabilities and Stockholders' Equity
$271,300
$233,700
Requirement 1. Prepare the
20162016
Statement of Cash Flows by the direct method. ?(Use parentheses or a minus sign for numbers to be subtracted. If a box is not used in the? statement, leave the box? empty; do not select a label or enter a? zero.)
Complete the statement one section at a? time, beginning with the cash flows from operating activities.
Granite Rock, Inc.
Statement of Cash Flows
Year Ended December 31, 2016
Cash Flows from Operating Activities:
Receipts:
Total Cash Receipts
Payments:
Total Cash Payments
Net Cash Provided by (Used for) Operating Activities
Cash Flows from Investing Activities:
Net Cash Provided by (Used for) Investing Activities
Cash Flows from Financing Activities:
Net Cash Provided by (Used for) Financing Activities
Net Increase (Decrease) in Cash
Cash Balance, December 31, 2015
Cash Balance, December 31, 2016
Non-cash Investing and Financing Activities:
Total Non-cash Investing and Financing Activities
Requirement 2. How will what you learned in this problem help you evaluate an? investment?
A.
Learn how operating? activities, investing? activities, and financing activities generate cash receipts and cash payments
B.
Learn how to predict future cash? flows, evaluate management? decisions, and predict the ability of the company to pay their debts and dividends
C.
Both A and B
D.
None of the above
1.
Prepare the20162016
statement of cash flows by the direct method.2.
How will what you learned in this problem help you evaluate an? investment?
Granite Rock, Inc.
Income Statement
Year Ended December 31, 2016
Sales Revenue
$437,000
Cost of Goods Sold
200,200
Gross Profit
236,800
Operating Expenses:
Salaries Expense
$77,400
Depreciation Expense—Plant Assets
14,800
Other Operating Expenses
11,000
Total Operating Expenses
103,200
Operating Income
133,600
Other Revenues and (Expenses):
Interest Revenue
8,700
Interest Expense
(21,500)
Total Other Revenues and (Expenses)
(12,800)
Net Income Before Income Taxes
120,800
Income Tax Expense
19,600
Net Income
$101,200
Explanation / Answer
Cash flow for operating activities under direct method Cash receipts from customers Opening Accounts receivable 25000 Add : Sales 437000 Less : Closing accounts receivable 26800 435200 Payment made to suppliers Ending Inventory 79300 Add : cost of goods sold 200200 Less : Beginning Inventory 91000 Inventory purchased 188500 Add : Beginning Accounts payable 30700 Less : Ending Accounts Payable 35500 -183700 Operating expenses paid Salaries expenses 77400 Other operating expenses 11000 Income tax expense 19600 Less: Closing accrued expenses 28000 Add : Opening accrued expenses 30400 -110400 Cash flows from operating activities 141100 Cash flow from Financing activities Interest expense paid -21500 Notes payable repaid -42600 Payment of Dividends(hidden adjustment) -67200 Receipt from issaunce of stock 24200 Cash flow from Financing activities -107100 Cash flow from Investing activities Interest Revenue 8700 Payment for purchase of plant asset -31000 Cash flow from Investing activities -22300 Net Cash flows 11700 Add : beginning cash balance 15000 Ending cash balance 26700 26700 Non-Cash Investing and financing activities Land purchase 19600 Issuance of Notes payable Total Non cash Investing and financing activities 19600
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