Exercise 23-9 Novak Corp. uses the direct method to prepare its statement of cas
ID: 2589546 • Letter: E
Question
Exercise 23-9
Novak Corp. uses the direct method to prepare its statement of cash flows. Novak trial balances at December 31, 2017 and 2016, are as follows.
December 31
2017
2016
$34,700
$31,700
32,700
29,800
30,900
46,700
99,800
94,800
4,500
5,000
248,600
381,400
142,800
170,600
137,900
150,100
4,400
2,600
20,400
61,200
$756,700
$973,900
$1,400
$1,000
16,500
15,000
25,200
15,700
20,800
28,900
5,300
4,600
45,000
20,000
49,900
40,000
9,200
7,500
45,000
64,800
538,400
776,400
$756,700
$973,900
Additional information:
Determine what amounts Novak should report in its statement of cash flows for the year ended December 31, 2017, for the following items.
December 31
Debits2017
2016
Cash$34,700
$31,700
Accounts receivable32,700
29,800
Inventory30,900
46,700
Property, plant, & equipment99,800
94,800
Unamortized bond discount4,500
5,000
Cost of goods sold248,600
381,400
Selling expenses142,800
170,600
General and administrative expenses137,900
150,100
Interest expense4,400
2,600
Income tax expense20,400
61,200
$756,700
$973,900
Credits Allowance for doubtful accounts$1,400
$1,000
Accumulated depreciation—plant assets16,500
15,000
Accounts payable25,200
15,700
Income taxes payable20,800
28,900
Deferred tax liability5,300
4,600
8% callable bonds payable45,000
20,000
Common stock49,900
40,000
Paid-in capital in excess of par9,200
7,500
Retained earnings45,000
64,800
Sales revenue538,400
776,400
$756,700
$973,900
Explanation / Answer
(a) Cash collected from customers. $530,900 (b) Cash paid to suppliers. $223,300 (c) Cash paid for interest. $ 4,400 (d) Cash paid for income taxes. $28,500 (e) Cash paid for selling expenses. $142,300 Explanation a Cash collected from customers. Begining Accounts Receivable 29,800 Add: Sales Revenue 538,400 Less: Ending Accounts Receivable -32,700 Less: Uncollectable Accounts -4,600 Cash collected from customers. 530,900 (b) Cash paid to suppliers. Ending Inventory 30,900 Add:Cost of Good Sold 248,600 Less: Beginning Inventory -46,700 Merchandise from Suppliers 232,800 Begining Accounts Payable 15,700 Add: Merchandise 232,800 Less: Ending Accounts Payable -25,200 Cash paid to suppliers. 223,300 (c) Cash paid for interest. $4,400 Theres is no Interest Payable at Beginning and Ending of the year 2017, so what ever expenses is paid in cash (d) Cash paid for income taxes. Begining Income taxes Payable 28,900 Add: Income tax expense 20,400 Less: Ending Income taxes Payable -20,800 Cash paid for income taxes. 28,500 (e) Cash paid for selling expenses. Selling Expenses 142,800 Less: one third of Depreciation (1500X1/3) -500 Cash paid for selling expenses. 142,300 Note: Depreciation Expense Ending Accumulation Depreciation 16,500 Beginning Accumulation Depreciation -15,000 Depreciation Expense 1,500
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