Homework Help Forum: Accounting

Posted by Tricia on Sunday, October 21, 2007 at 3:20pm.

I am struggling with the operating activities section of this as in what titles of accounts I should use in this section and do they decrease or increase the net income 2005 2004 Assets Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,875 $ 76,625 Accounts receivable . . . . . . . . . . . . . . . . . 65,000 49,625 Merchandise inventory . . . . . . . . . . . . . . . 273,750 252,500 Prepaid expenses . . . . . . . . . . . . . . . . . . . 5,375 6,250 Equipment . . . . . . . . . . . . . . . . . . . . . . . . 159,500 110,000 Accum. depreciation—Equipment . . . . . . . . (34,625) (44,000) Total assets . . . . . . . . . . . . . . . . . . . . . . . $522,875 $451,000 Liabilities and Equity Accounts payable . . . . . . . . . . . . . . . . . . . $ 88,125 $116,625 Short-term notes payable . . . . . . . . . . . . . 10,000 6,250 Long-term notes payable . . . . . . . . . . . . . 93,750 53,750 Common stock, $5 par value . . . . . . . . . . 168,750 156,250 Contributed capital in excess of par, common stock . . . . . . . . . . . . . . 32,500 0 Retained earnings . . . . . . . . . . . . . . . . . . . 129,750 118,125 Total liabilities and equity . . . . . . . . . . . . . $522,875 $451,000 KAZAAM COMPANY Income Statement For Year Ended December 31, 2005 Sales . . . . . . . . . . . . . . . . . . . . . . . . . $496,250 Cost of goods sold . . . . . . . . . . . . . . 250,000 Gross profit . . . . . . . . . . . . . . . . . . . . 246,250 Operating expenses Depreciation expense . . . . . . . . . . . $ 18,750 Other expenses . . . . . . . . . . . . . . . 136,500 155,250 Other gains (losses) Loss on sale of equipment . . . . . . . 5,125 Income before taxes . . . . . . . . . . . . . . $ 85,875 Income taxes expense . . . . . . . . . . . . 12,125 Net income . . . . . . . . . . . . . . . . . . . . $ 73,750 Larson−Wild−Chiappetta: Fundamental Accounting Principles, Seventeenth Edition 16. Reporting the Statement of Cash Flows Text © The McGraw−Hill Companies, 2004 Chapter 16 Reporting the Statement of Cash Flows 663 Additional Information on Year 2005 Transactions a. The loss on the cash sale of equipment is $5,125 (details in b). b. Sold equipment costing $46,875, with accumulated depreciation of $28,125, for $13,625 cash. c. Purchased equipment costing $96,375 by paying $25,000 cash and signing a long-term note payable for the balance. d. Borrowed $3,750 cash by signing a short-term note payable. e. Paid $31,375 cash to reduce the long-term notes payable. f. Issued 2,500 shares of common stock for $18 cash per share. g. Declared and paid cash dividends of $62,125. Required 1. Prepare a complete statement of cash flows; report its operating activities using the indirect method. Disclose any noncash investing and financing activities in a note.

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