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Chapter 5: Q1Q (page 237)
How does information from the balance sheet help users of the financial statements?
Financial capacity and financial flexibility can be determined using the company鈥檚 balance sheet.
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Using the information in BE5-14, determine Martinez鈥檚 free cash flow, assuming that it reported net cash provided by operating activities of \(400,000.
BE5-14 (L05) Martinez Corporation engaged in the following cash transactions during 2017.
Sale of land and building \)191,000
Purchase of treasury stock 40,000
Purchase of land 37,000
Payment of cash dividend 95,000
Purchase of equipment 53,000
Issuance of common stock 147,000
Retirement of bonds 100,000
Compute the net cash provided (used) by investing activities.
IFRS5-2 Briefly describe some of the similarities and differences between GAAP and IFRS with respect to statement of financial position (balance sheet) reporting.
EXCEL (Current Assets Section of the Balance Sheet) Presented below are selected accounts of Yasunari Kawabata Company at December 31, 2017.
Inventory | \(52,000 | Cost of goods sold | 2,100,000 | |
Unearned service revenue | 90,000 | Note receivable | 40,000 | |
Equipment | 253,000 | Account receivable | 161,000 | |
Inventory (Work-in-process) | 34,000 | Inventory (raw material) | 207,000 | |
Cash | 37,000 | Supplies Expenses | 60,000 | |
Debt investment (Short-term) | 31,000 | Allowance for doubtful accounts | 12,000 | |
Customer advances | 36,000 | License | 18,000 | |
Restricted cash for plant expansion | 50,000 | Additional paid-in-capital | 88,000 | |
Treasury stock | 22,000 |
The following additional information is available.
1. Inventories are valued at lower-of-cost or market using LIFO.
2. Equipment is recorded at cost. Accumulated depreciation, computed on a straight-line basis, is \)50,600.
3. The short-term investments have a fair value of \(29,000. (Assume they are trading securities.)
4. The notes receivable are due April 30, 2019, with interest receivable every April 30. The notes bear interest at 6%. (Hint: Accrue interest due on December 31, 2017.)
5. The allowance for doubtful accounts applies to the accounts receivable. Accounts receivable of \)50,000 are pledged as collateral on a bank loan.
6. Licenses are recorded net of accumulated amortisation of $14,000.
7. Treasury stock is recorded at cost.
Instructions
Prepare the current assets section of Yasunari Kawabata Company鈥檚 December 31, 2017, balance sheet, with appropriate disclosures.
E5-9 (L02,3) (Current Assets and Current Liabilities) The current assets and current liabilities sections of the balance sheet of Allessandro Scarlatti Company appear as follows.
ALLESSANDRO SCARLATTI COMPANY | ||||
BALANCE SHEET PARTIAL | ||||
December 31, 2017 | ||||
Cash | \(40,000 | Account payable | \)61,000 | |
Accounts receivables | \(89,000 | Note payable | 67,000 | |
Less: Allowance for doubtful accounts | (7,000) | 82,000 | \)128,000 | |
Inventory | 171,000 | |||
Prepaid expenses | 9,000 | |||
\(302,000 |
The following errors in the corporation鈥檚 accounting have been discovered:
1. January 2018 cash disbursements entered as of December 2017 included payments of accounts payable in the amount of \)39,000, on which a cash discount of 2% was taken.
2. The inventory included \(27,000 of merchandise that had been received at December 31 but for which no purchase invoices had been received or entered. Of this amount, \)12,000 had been received on consignment; the remainder was purchased f.o.b. destination, terms 2/10, n/30.
3. Sales for the first four days in January 2018 in the amount of \(30,000 were entered in the sales journal as of December 31, 2017. Of these, \)21,500 were sales on account and the remainder were cash sales.
4. Cash, not including cash sales, collected in January 2018 and entered as of December 31, 2017, totaled \(35,324. Of this amount, \)23,324 was received on account after cash discounts of 2% had been deducted; the remainder represented the proceeds of a bank loan.
Instructions
(a) Restate the current assets and current liabilities sections of the balance sheet in accordance with good accounting practice. (Assume that both accounts receivable and accounts payable are recorded gross.)
(b) State the net effect of your adjustments on Allessandro Scarlatti Company鈥檚 retained earnings balance.
Grant Wood Corporation鈥檚 balance sheet at the end of 2016 included the following items.
Current assets (\(Cash 82,000) | \)235,000 | Current liabilities | \(150,000 |
Land | 30,000 | Bond payable | 100,000 |
Building | 120,000 | Common stock | 180,000 |
Equipment | 90,000 | Retained earnings | 44,000 |
Accumulated depreciation 鈥� Building | (30,000) | ||
Accumulated depreciation 鈥� Equipment | (11,000) | ||
Patents | 40,000 | ||
Total | \)474,000 | Total | \(474,000 |
The following information is available for 2017.
1. Net income was \)55,000.
2. Equipment (cost \(20,000 and accumulated depreciation \)8,000) was sold for \(10,000.
3. Depreciation expense was \)4,000 on the building and \(9,000 on equipment.
4. Patent amortization was \)2,500.
5. Current assets other than cash increased by \(29,000. Current liabilities increased by \)13,000.
6. An addition to the building was completed at a cost of \(27,000.
7. A long-term investment in stock was purchased for \)16,000.
8. Bonds payable of \(50,000 were issued.
9. Cash dividends of \)30,000 were declared and paid.
10. Treasury stock was purchased at a cost of $11,000.
Instructions
(Show only totals for current assets and current liabilities.)
(a) Prepare a statement of cash flows for 2017.
(b) Prepare a balance sheet at December 31, 2017.
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