Reference no: EM131570278

Part A -

Cannon Company has the following information for the year ending December 31, 2015.

• Long-term debt of $18,000 was issued for cash.
• Cash paid for labor during 2015 amounted to $489,500.
• During the year, Cannon experienced a pension outflow of $14,000.
• Dividends of $34,000 were received.
• Cannon's cash balance at the beginning of 2015 was $975,000; at the end of 2015 the cash balance was $839,500.
• The company made an investment of $310,000 in an affiliate company.
• A lease payment of $110,000 was made on November 1, 2015. There is no asset recorded in connection with the lease.
• During the year, Cannon collected $780,000 cash from customers.
• Cash paid for income taxes amounted to $56,000 for all of 2015.
• During 2015, Cannon discontinued its consumer electronics division. The business was sold resulting in a $12,000 net cash inflow.

1. Prepare Cannon Company's statement of cash flows for the year ending December 31, 2015 using the indirect method.

2. Explain how the indirect statement of cash flows that you prepared would differ under IFRS rules. Assume this is a nonfinancial entity.

Part B -

The following Income Statement and Operating Cash Flow information pertain to Receivership Inc.'s operations for the year ended December 31, 2014. Prepare the net cash flow from operating activities section of the cash flow statement using the direct method.

Income statement for the year ended December 31, 2014
Revenues		1,328
COGS	587
Rent expenses	152
Wages expenses	136
Insurance expenses	53
Other SG&A (includes depreciation expenses)	198
Interest expenses	30
Gain on sale of asset	(5)
		1,151
Income before tax		177
Tax		62
Net income		115

 

Cash flow provided by operating activities (indirect method), for the year ended December 31, 2014
Net income		115
Depreciation		32
Gain on sale of asset		(5)
		142
Increases/decreases in A/R	26
Inventories	(35)
Prepaid rent	13
A/P	28
Wages payable	(20)
Tax payable	5
Interest payable	(2)
Advances from customers	(3)
Other accrued SG&A	5
		17
Net cash provided by operating activities		159

Part C - The following information and financial statements excerpts pertain to Liquidity Inc.

a. All short term investments (securities available for sale) were purchased on 12/31/14 and sold during 2015.

b. The company entered a lease agreement on 12/31/15.

c. Fixed assets with a net book value of $15 were sold during the year.

d. The company repaid the current portion of long-term debt during the year.

e. Dividend was declared and partially paid.

	2014	2015
Assets
Cash	54	45
Short term investments	95	0
Accounts receivable	45	85
Inventory	52	75
Prepaid general expenses	11	15
Fixed assets under capital lease, net	0	50
Fixed assets, net	165	228
	422	498
Liabilities and stockowners' equity
Accounts payable	38	48
Wages payable	12	6
Tax payable	3	5
Dividend payable	0	4
Current portion of long term debt	10	12
Obligations under capital leases	0	50
Long term debt	183	180
Common stock	150	163
Retained earnings	26	30
	422	498

 

	2014	2015
Revenues, net		426
Cost of goods sold		310
Gross margin		116
General expenses	30
Wages expenses	42
Depreciation expense	24
Interest expense	11
Loss on sale of fixed assets	3
Gain on sale of securities available for sale	-12
Tax expenses	8
		106
Net income		10

1. Prepare the statement of cash flows for the year 2015 using the direct method.

2. Reconcile net income and net cash flows from operating activities for the year 2015.