1. Use the
following information to prepare a statement of cash flows.
Comparative Balance Sheets, December 31
|
2014 |
2013 |
|
|
Cash |
$ 6,100 |
$ 4,200 |
|
Accounts Receivable |
10,200 |
11,000 |
|
Inventory |
14,900 |
13,500 |
|
Long-term Investments |
8,000 |
6,500 |
|
Equipment |
33,600 |
31,000 |
|
Accumulated Depreciation |
(5,000) |
(4,100) |
|
Total Assets |
$67,800 |
$62,100 |
|
Accounts Payable |
$15,300 |
$14,700 |
|
Wages Payable |
400 |
700 |
|
Long Term Note Payable |
18,200 |
17,000 |
|
Common Stock |
14,100 |
12,200 |
|
Retained Earnings |
19,800 |
17,500 |
|
Total Liab. & Equity |
$67,800 |
$62,100 |
Additional information:
A. Net Income
for the year ended December 31, 2014 was $5,300. Net income included depreciation expense of
$900.
B. Long-term investments
were purchased for $1,500 in cash.
C. Equipment was purchased for $2,600 in cash.
D. The company
paid $3,000 in cash dividends.
E. The company
borrowed $1,200 in cash on the long-term note payable.
F. The company
issued common stock for $1,900 in cash.
Required:
Use the indirect method to prepare a statement of cash
flows for the year ended December 31, 2014.
2. Giles Company
began operations on January 1, 2015.
Following are the income statement and balance sheet for its first year
of operations:
|
Income Statement For the Year Ended December 31, 2015 |
|
|
Sales |
$270,200 |
|
Cost of goods sold |
37,200 |
|
Gross profit |
233,000 |
|
General & |
18,423 |
|
Depreciation expense |
17,500 |
|
Interest expense |
1,000 |
|
Income before tax |
196,077 |
|
Income tax expense (35%) |
68,627 |
|
Net income |
$127,450 |
|
Balance Sheet At December 31, 2015 |
|
|
Cash |
$78,627 |
|
Accounts receivable |
15,000 |
|
Inventory |
12,950 |
|
Buildings and equipment, |
512,500 |
|
Total assets |
$619,077 |
|
Accounts payable |
13,000 |
|
Interest payable |
1,000 |
|
Income taxes payable |
68,627 |
|
Note payable |
69,000 |
|
Total liabilities |
151,627 |
|
Contributed capital |
340,000 |
|
Retained earnings |
127,450 |
|
Total equity |
467,450 |
|
Total liabilities and |
$619,077 |
Required:
a. Giles
Company used specific identification to prepare the above financial statements.
The CEO of Giles would like to know the effect on the financial statements of
using LIFO and FIFO. How would the above
financial statements change if the company used LIFO? If it used FIFO?
Use the
following information regarding Giles Company’s inventory to determine the
effect:
Beginning
Inventory, January 1, 2015: 1,300 units @ $9.00
March
1, 2015 – Purchased 2,000 units @ $10.00
June
5, 2015 – Purchased 500 units @ $10.50
October
10, 2015 – Purchased 1,100 units @ $12.00
Ending
Inventory, December 31, 2015: 1,200 units
b. Giles used
straight-line depreciation to prepare the above financial statements. Explain how the above financial statements
would change if the company used double-declining balance. Assume that the cost of the building and
equipment is $530,000. The salvage value
is $5,000 and the assets have a useful life of 30 years. Note: This question is independent of
question a.
