IV. (35 points) The following include your company\'s income statement, and the

Question

IV. (35 points) The following include your company's income statement, and the statement of retained earnings for year 2013. Your company's balance sheets, at the end of years 2012 and 2013, are also provided. There were no non-cash investing or financing activities during 2013. Income Statement (for year 2013) Statement of Retained Earnings (for year 2013) Beginning retained earnings (+) Net income (-) Dividends (paid in cash) Ending retained earnings S 42,000 98,000 21,000 S 119,000 Revenues and Gains Sales revenue Gain on sale of land xpenses: Cost of goods sold Salary expense Depreciation expenses Other operating expenses Interest expense Income tax expense $ 812,000 392,000 133,000 22,400 82,600 37,800 53,200 Net income $ 98,000 Balance Sheet Assets Current Assets 1 12/31/13 12/31/12 Liabilities 12/31/13 12/31/12 Current Liabilities: S 7,000 $2,800 Accounts payable $50,400 $ 37,800 Unearned revenue Accounts receivable 77,000 35,000 Inventory Prepaid expenses 4,200 63,000 42,000 Salary payable 1,400 4,200Interest payable 35,000 39,200 1,400 7,000 2 Noncurrent Assets: Long-term Liabilities: 190,400 190,400 Notes payable Equipment (-) Accumulated (44,800) (22,400) Total Liabilities 84,000 140,000 $ 175,000 $ 224,000 depreciation 28,000 42,000 Owners' Equity Common stock 28,000 28,000 Retained earnings 119,000 42,000 $ 322,000 $294,000 Total Assets $322,000 $ 294,000 Total L.&OE;

Explanation / Answer

STATEMENT OF CASH FLOWS (INDIRECT METHOD) Cash flows from operating activities: Net loss 98000 Adjustments to reconcile net loss with cash flow from operating activities: Depreciation 22400 Gain on sale of land -7000 Increase in accounts receivable (77000-35000) -42000 Decrease in prepaid expenses (4200-1400) 2800 Increase in inventory (63000-42000) -21000 Increase in accounts payable (50400-37800) 12600 increase in unearned revenue 4200 Decrease in salary payable (39200-35000) -4200 Deceaswe in interest payable (7000-1400( -5600 -37800 Net Cash provided by operating activities 60200 Cash flows from investing activities: Sale of land 21000 Net cash provided by investing activities 21000 Cash flows from financing activities: Decrease in notes payable (140000-84000) -56000 Dividends paid -21000 Net cash used by financing activities -77000 Decrease in cash and cash equivalents 4200 Beginning balance of cash and cash equivalents 2800 Ending balance of cash and cash equivalents 7000

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