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Chapter 14: Q14-7SE (page 770)

Question: Computing investing and financing cash flows Preston Media Corporation had the following income statement and balance sheet for 2018:

PRESTON MEDIA CORPORATION

Income Statement

Year Ended December 31, 2018

Sales Revenue \(80,000

Depreciation Expense鈥撯�揚lant Assets \)11,000

Other Expenses \(50,000

Net Income \)19,000

Requirements

1. Compute the acquisition of plant assets for Preston Media Corporation during 2018. The business sold no plant assets during the year. Assume the company paid cash for the acquisition of plant assets.

2. Compute the payment of a long-term note payable. During the year, the business issued a $4,400 note payable.

Short Answer

Expert verified

Answer

Requirement (1): cash paid to purchase new plant is $21,000.

Requirement (2): Payment of a long-term note payable is $7,400.

Step by step solution

01

(Requirement 1.) Computation of acquisition of plant assets for Preston Media Corporation during 2018

Particulars

Amount ($)

Plant assets (31st December, 2018)

105,350

Plant assets (31st December, 2017)

(84,350)

Cash paid to purchase new plant

21,000

02

(Requirement 2.) Computation of the payment of a long-term note payable

Particulars

Amount($)

Particulars

Amount($)

Payment

7,400

Opening balance (31/12/2017)

12,000

Closing balance (31/12/2018)

9,000

New issuance

4,400

Total

16,400

Total

16,400

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Most popular questions from this chapter


Question: Computing cash flows for investing and financing activities Consider the following facts for Java Jolt:

  1. Beginning and ending Retained Earnings are \(45,000 and \)70,000, respectively. Net income for the period is \(60,000.
  2. Beginning and ending Plant Assets are \)124,500 and \(134,500, respectively.
  3. Beginning and ending Accumulated Depreciation鈥擯lant Assets are \)21,500 and \(26,500, respectively.
  4. Depreciation Expense for the period is \)17,000, and acquisitions of new plant assets total \(29,000. Plant assets were sold at a \)5,000 gain. Requirements
  5. How much are cash dividends?
  6. What was the amount of the cash receipt from the sale of plant assets?

Question: Computing cash flow items鈥攄irect method Consider the following facts:

  1. Beginning and ending Accounts Receivable are \(24,000 and \)20,000, respectively. Credit sales for the period total \(68,000.
  2. Cost of goods sold is \)77,000.
  3. Beginning Merchandise Inventory balance is \(29,000, and ending Merchandise Inventory balance is \)26,000.
  4. Beginning and ending Accounts Payable are \(12,000 and \)16,000, respectively.

Requirements

  1. Compute cash collections from customers.
  2. Compute cash payments for merchandise inventory

Question: What types of transactions are reported in the non-cash investing and financing activities section of the statement of cash flows?

Question: Kalapono Company expects the following for 2018:

鈥� Net cash provided by operating activities of \(100,000.

鈥� Net cash provided by financing activities of \)10,000.

鈥� Net cash used for investing activities of \(20,000 (no sales of long-term assets).

鈥� Cash dividends paid to stockholders was \)2,000.

How much free cash flow does Kalapono expect for 2018?

Preparing the direct method statement of cash flows Red Toy Company reported the following comparative balance sheet:

Requirements

1. Compute the collections from customers during 2018 for Red Toy Company. Sales Revenue totaled \(134,000.

2. Compute the payments for inventory during 2018. Cost of Goods Sold was \)79,000.
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