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Prepare a statement of cash flows explaining the change

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Reference no: EM131715035

QUESTION - EXPANDED STATEMENT OF CASH FLOWS

Financial statements for McDowell Company as well as additional information relevant to cash flows during the period are given on pages 930-931.

McDowell Company Income Statement For Year Ended December 31, 20-2

Net sales                                                                           1890000  

Cost of goods sold                                                              940000

Gross profit                                                                        950000

Operating expenses                                                             572300

Operating income                                                                377700   

Other revenues and expenses:

Interest revenue                                         3900

Interest expense                                         (890)

Loss on sale of store equipment                    (15000)            (11990)

Income before taxes                                                           365710

Income tax expense                                                           133000

Net income                                                                         232710

 

McDowell Company Statement of Retained Earnings For Year Ended December 31, 20-2

Retained earnings, January 1, 20-2                                                  360000

Net income                                                           232710

Less dividends                                                      60000

Net increase in retained earnings                                                     172710

Net increase in retained earnings                                                     532710

Additional information:

1. Store equipment was sold in 20-2 for $25,000. Additional information on the store equipment sold is provided below.

Cost                                                               70000

Accumulated depreciation                                 (30000)

Book value                                                      40000

Market value                                                   25000

Loss on sale                                                    15000

2. Depreciation expense for the year was $112,000.

3. The following purchases were made for cash:

Store equipment                                              64000

Delivery equipment                                          140000

Office equipment                                              30,000

                                                                      $234,000

4. Declared and paid cash dividends of $60,000.

5. Issued 10,000 shares of $10 par common stock for $14 per share.

6. Acquired additional store equipment by issuing a note payable for $16,000

McDowell Company Comparative Balance Sheet December 31, 20-2 and 20-1

Current assets:

20-2

20-1

 

   Cash

75365

40325

35040

   Government notes

6800

18000

(11200)

   Accrued interest receivable

720

610

110

   Accounts receivable (net)

310700

325800

(15100)

   Merchandise inventory

685400

540200

145200

   Supplies and prepayments

27000

39000

(12000)

      Total current assets

1105985

963935

142050

Property, plant, and equipment:

 

 

 

   Store equipment

470000

460000

10000

   Less accumulated depreciation-store equipment

18000/290000

150000/310000

30000

   Delivery equipment

530000

390000

140000

   Less accumulated depreciation-delivery equipment

140000/390000

100000/290000

40000

   Office equipment

430000

400000

30000

   Less accumulated depreciation-office equipment

88000/342000

76000/324000

12000

      Total property, plant, and equipment

1022000

924000

98000

          Total assets

2127985

1887935

240050

Liabilities:

 

 

 

   Notes payable

118000

102000

16000

   Accounts payable

110000

195000

(85000)

   Income tax payable

20000

25000

(5000)

   Accrued and withheld payroll taxes

16400

14900

1500

   Accrued interest payable

875

1035

(160)

      Total current liabilities

265275

337935

(72660)

Stockholders' Equity

 

 

 

   Common stock ($10 par, 300,000 shares authorized;

 

 

 

     Issued: 90,000 in 20-2 and 80,000 in 20-1)

900000

800000

100000

Paid-in capital in excess of par-common stock

430000

390000

40000

Retained earnings

532710

360000

172710

   Total stockholders' equity

1862710

1550000

312710

Total liabilities and stockholders' equity

2127985

1887935

240050

REQUIRED - Prepare a statement of cash flows explaining the change in cash and cash equivalents for the year ended December 31, 20-2.

Attachment:- Assignment Files.rar

Reference no: EM131715035

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