Beck Company uses the indirect method of preparing the Statement of Cash Flows and reports the following comparative balance sheet information. As customary, the most recent data is in the first column.
Balance Sheets
12-31-2007 12-31-2006
Cash $60,000 $80,000
Inventory 150,000 128,000
Equipment 240,000 205,000
Accumulated depreciation (39,000) (15,000)
$411,000 $398,000
Accounts payable $93,000 $133,000
Bonds payable (due in 7 years) 81,000 70,000
Common stock 129,000 120,000
Retained earnings 108,000 75,000
$411,000 $398,000
Additional information:
Net income for 2007 was $40,000.
No equipment was disposed of during 2007.
Required:
Prepare a Cash Flow Statement using the indirect method.
Click here for the solution: Beck Company uses the indirect method of preparing the Statement of Cash Flows
Showing posts with label Preparing. Show all posts
Showing posts with label Preparing. Show all posts
Saturday, October 17, 2015
Friday, September 25, 2015
Laurel Street, president of Uvalde Manufacturing Inc. is preparing a proposal to present to her board of directors
Complete Problem 6.6 on p. 232 (Ch. 6). Submit your answers to questions (a) and (b).
6.6. Laurel Street, president of Uvalde Manufacturing Inc. is preparing a proposal to present to her board of directors regarding a planned plant expansion that will cost $10 million. At issue is whether the expansion should be financed with debt (a long-term note at First National Bank of Uvalde with an interest rate of 15%) or through the issuance of common stock (200,000 shares at $50 per share).
Uvalde Manufacturing currently has a capital structure of:
Debt (12% interest) 40,000,000
Equity 50,000,000
The firm's most recent income statement is presented next:
Sales $100,000,000
Cost of goods sold 65,000,000
Gross profit 35,000,000
Operating expenses 20,000,000
Operating profit 15,000,000
Interest expense 4,800,000
Earnings before tax 10,200,000
Income tax expense (40%) 4,080,000
Net income $ 6,120,000
Earnings per share (800,000 shares) $ 7.65
Laurel Street is aware that financing the expansion with debt will increase risk but could also benefit shareholders through financial leverage. Estimates are that the plant expansion will increase operating profit by 20%.The tax rate is expected to stay at 40%. Assume a 100% dividend payout ratio.
Required
a. Calculate the debt ratio, time interest earned, earnings per share, and the financial leverage index under each alternative, assuming the expected increase in operating profit is realized.
b. Discuss the factors the board should consider in making a decision.
Click here for the solution: Laurel Street, president of Uvalde Manufacturing Inc. is preparing a proposal to present to her board of directors
6.6. Laurel Street, president of Uvalde Manufacturing Inc. is preparing a proposal to present to her board of directors regarding a planned plant expansion that will cost $10 million. At issue is whether the expansion should be financed with debt (a long-term note at First National Bank of Uvalde with an interest rate of 15%) or through the issuance of common stock (200,000 shares at $50 per share).
Uvalde Manufacturing currently has a capital structure of:
Debt (12% interest) 40,000,000
Equity 50,000,000
The firm's most recent income statement is presented next:
Sales $100,000,000
Cost of goods sold 65,000,000
Gross profit 35,000,000
Operating expenses 20,000,000
Operating profit 15,000,000
Interest expense 4,800,000
Earnings before tax 10,200,000
Income tax expense (40%) 4,080,000
Net income $ 6,120,000
Earnings per share (800,000 shares) $ 7.65
Laurel Street is aware that financing the expansion with debt will increase risk but could also benefit shareholders through financial leverage. Estimates are that the plant expansion will increase operating profit by 20%.The tax rate is expected to stay at 40%. Assume a 100% dividend payout ratio.
Required
a. Calculate the debt ratio, time interest earned, earnings per share, and the financial leverage index under each alternative, assuming the expected increase in operating profit is realized.
b. Discuss the factors the board should consider in making a decision.
Click here for the solution: Laurel Street, president of Uvalde Manufacturing Inc. is preparing a proposal to present to her board of directors
(ACC 560 Week 6) Roche and Young, CPAs, are preparing their service revenue (sales) budget for the coming year (2008)
ACC 560 Week 6 Assignment
E9-3 Roche and Young, CPAs, are preparing their service revenue (sales) budget for the coming year (2008). The practice is divided into three departments: auditing, tax, and consulting. Billable hours for each department, by quarter, are provided below.
Department Quarter 1 Quarter 2 Quarter 3 Quarter 4
Auditing 2,200 1,600 2,000 2,400
Tax 3,000 2,400 2,000 2,500
Consulting 1,500 1,500 1,500 1,500
Average hourly billing rates are: auditing $80, tax $90, and consulting $100.
Instructions
Prepare the service revenue (sales) budget for 2008 by listing the departments and showing for each quarter and the year in total, billable hours, billable rate, and total revenue.
Click here for the solution: (ACC 560 Week 6) Roche and Young, CPAs, are preparing their service revenue (sales) budget for the coming year (2008)
E9-3 Roche and Young, CPAs, are preparing their service revenue (sales) budget for the coming year (2008). The practice is divided into three departments: auditing, tax, and consulting. Billable hours for each department, by quarter, are provided below.
Department Quarter 1 Quarter 2 Quarter 3 Quarter 4
Auditing 2,200 1,600 2,000 2,400
Tax 3,000 2,400 2,000 2,500
Consulting 1,500 1,500 1,500 1,500
Average hourly billing rates are: auditing $80, tax $90, and consulting $100.
Instructions
Prepare the service revenue (sales) budget for 2008 by listing the departments and showing for each quarter and the year in total, billable hours, billable rate, and total revenue.
Click here for the solution: (ACC 560 Week 6) Roche and Young, CPAs, are preparing their service revenue (sales) budget for the coming year (2008)
Friday, September 11, 2015
What is the difference between preparing the statement of cash flows using the direct method and using the indirect method?
12. What is the difference between preparing the statement of cash flows using the direct method and using the indirect method?
Click here for the solution: What is the difference between preparing the statement of cash flows using the direct method and using the indirect method?
Click here for the solution: What is the difference between preparing the statement of cash flows using the direct method and using the indirect method?
Tuesday, August 4, 2015
Before preparing financial statements for the current year, the chief accountant for Springer Company discovered the following errors in the accounts
E11-16 Before preparing financial statements for the current year, the chief accountant for Springer Company discovered the following errors in the accounts.
The declaration and payment of $50,000 cash dividend was recorded as a debit to Interest Expense $50,000 and a credit to Cash $50,000.
A 10% stock dividend (1,000 shares) was declared on the $10 par value stock when the market value per share was $16. The only entry made was: Retained Earnings (Dr.) $10,000 and Dividend Payable (Cr.) $10,000. The shares have not been issued.
A 4-for-1 stock split involving the issue of 400,000 shares of $5 par value common stock for 100,000 shares of $20 par value common stock was recorded as a debit to Retained Earnings $2,000,000 and a credit to Common Stock $2,000,000.
Instructions
Prepare the correcting entries at December 31.
Click here for the solution: Before preparing financial statements for the current year, the chief accountant for Springer Company discovered the following errors in the accounts
The declaration and payment of $50,000 cash dividend was recorded as a debit to Interest Expense $50,000 and a credit to Cash $50,000.
A 10% stock dividend (1,000 shares) was declared on the $10 par value stock when the market value per share was $16. The only entry made was: Retained Earnings (Dr.) $10,000 and Dividend Payable (Cr.) $10,000. The shares have not been issued.
A 4-for-1 stock split involving the issue of 400,000 shares of $5 par value common stock for 100,000 shares of $20 par value common stock was recorded as a debit to Retained Earnings $2,000,000 and a credit to Common Stock $2,000,000.
Instructions
Prepare the correcting entries at December 31.
Click here for the solution: Before preparing financial statements for the current year, the chief accountant for Springer Company discovered the following errors in the accounts
Friday, July 31, 2015
Jeremy Costa, owner of Costa Cabinets Inc., is preparing a bid on a job that requires $1,800 of direct materials, $1,600 of direct labor, and $800 of overhead
Problem 13-44 Cost-Based Pricing Decision
Jeremy Costa, owner of Costa Cabinets Inc., is preparing a bid on a job that requires $1,800 of direct materials, $1,600 of direct labor, and $800 of overhead. Jeremy normally applies a standard markup based on cost of goods sold to arrive at an initial bid price. He then adjusts the price as necessary in light of other factors (e.g., competitive pressure). Last year’s income statement is as follows:
Sales $130,000
Cost of Goods Sold $48,100
Gross Margin $81,900
Selling and Admin Expense $46,300
Operating Income $35,600
1. Calculate the markup that Jeremy will use.
2. What is Jeremy's initial bid price?
Click here for the solution: Jeremy Costa, owner of Costa Cabinets Inc., is preparing a bid on a job that requires $1,800 of direct materials, $1,600 of direct labor, and $800 of overhead
Jeremy Costa, owner of Costa Cabinets Inc., is preparing a bid on a job that requires $1,800 of direct materials, $1,600 of direct labor, and $800 of overhead. Jeremy normally applies a standard markup based on cost of goods sold to arrive at an initial bid price. He then adjusts the price as necessary in light of other factors (e.g., competitive pressure). Last year’s income statement is as follows:
Sales $130,000
Cost of Goods Sold $48,100
Gross Margin $81,900
Selling and Admin Expense $46,300
Operating Income $35,600
1. Calculate the markup that Jeremy will use.
2. What is Jeremy's initial bid price?
Click here for the solution: Jeremy Costa, owner of Costa Cabinets Inc., is preparing a bid on a job that requires $1,800 of direct materials, $1,600 of direct labor, and $800 of overhead
Thursday, July 30, 2015
Each of the items below must be considered in preparing a statement of cash flows for Alpha-Omega Co. for the year ended December 31, 2014
BE13-1 Each of the items below must be considered in preparing a statement of cash flows for Alpha-Omega Co. for the year ended December 31, 2014. For each item, state how it should be shown in the statement of Cash flows for 2014.
(a) Issued bonds for $150,000 cash.
(b) Purchased equipment for $200,000 cash.
(c) Sold land costing $50,000 for $50,000 cash.
(d) Declared and paid a $20,000 cash dividend.
Click here for the solution: Each of the items below must be considered in preparing a statement of cash flows for Alpha-Omega Co. for the year ended December 31, 2014
(a) Issued bonds for $150,000 cash.
(b) Purchased equipment for $200,000 cash.
(c) Sold land costing $50,000 for $50,000 cash.
(d) Declared and paid a $20,000 cash dividend.
Click here for the solution: Each of the items below must be considered in preparing a statement of cash flows for Alpha-Omega Co. for the year ended December 31, 2014
Wednesday, June 17, 2015
Blackmon Manufacturing Company makes a product that it sells for $50 per unit
Problem 11-28 Determining the Break-even Point and Preparing a Contribution Margin Income Statement
Blackmon Manufacturing Company makes a product that it sells for $50 per unit. The company incurs variable manufacturing costs of $14 per unit. Variable selling expenses are $6 per unit, annual fixed manufacturing costs are $189,000, and fixed selling and administrative costs are $141,000 per year.
a. Determine the break even point in units and dollars
b. Confirm your results by preparing a contribution margin income statement for the break-even sales volume.
Check:
a. 11,000 units
Click here for the solution: Blackmon Manufacturing Company makes a product that it sells for $50 per unit
Blackmon Manufacturing Company makes a product that it sells for $50 per unit. The company incurs variable manufacturing costs of $14 per unit. Variable selling expenses are $6 per unit, annual fixed manufacturing costs are $189,000, and fixed selling and administrative costs are $141,000 per year.
a. Determine the break even point in units and dollars
b. Confirm your results by preparing a contribution margin income statement for the break-even sales volume.
Check:
a. 11,000 units
Click here for the solution: Blackmon Manufacturing Company makes a product that it sells for $50 per unit
Dorough Pointers Inc. expects to begin operations in January 1, 2009
Problem 14-16 Preparing a Sales Budget and Schedule of Cash Receipts
Dorough Pointers Inc. expects to begin operations in January 1, 2009. Dorough expects sales in January 2009 to total $120,000 and to increase 10 percent per month in February and March. All sales are on account. Dorough expects to collect 70 percent of accounts receivable in the month of sale, 20 percent in the month following the sale, and 10 percent in the second month following the sale.
Required
a. Prepare a sales budget for the first quarter of 2009.
b. Determine the amount of sales revenue Dorough will report on the first 2009 quarterly pro forma income statement.
c. Prepare a cash receipts schedule for the first quarter of 2009.
d. Determine the amount of accounts receivable as of March 31, 2009.
Check:
c.Feb.: $116,400
March: $140,040
Click here for the solution: Dorough Pointers Inc. expects to begin operations in January1, 2009
Dorough Pointers Inc. expects to begin operations in January 1, 2009. Dorough expects sales in January 2009 to total $120,000 and to increase 10 percent per month in February and March. All sales are on account. Dorough expects to collect 70 percent of accounts receivable in the month of sale, 20 percent in the month following the sale, and 10 percent in the second month following the sale.
Required
a. Prepare a sales budget for the first quarter of 2009.
b. Determine the amount of sales revenue Dorough will report on the first 2009 quarterly pro forma income statement.
c. Prepare a cash receipts schedule for the first quarter of 2009.
d. Determine the amount of accounts receivable as of March 31, 2009.
Check:
c.Feb.: $116,400
March: $140,040
Click here for the solution: Dorough Pointers Inc. expects to begin operations in January1, 2009
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