I have completed all of my assignment except this one last question. I am having a heck of a time figuring out where to even start. Can anyone help me?
The comparative year-end balance sheets of Sign Graphics, Inc., revealed the following activity in the company's current accounts:
20X5 20X4 Increase / Decrease)
Current assets
Cash $55,400 $35,200 $20,200
Accounts receivable (net) 83,800 88,000 -4,200
Inventory 243,400 233,800 9,600
Prepaid expenses 25,400 24,200 1,200
Current liabilities
Accounts payable $123,600 $140,600 ($17,000)
Taxes payable 43,600 49,200 -5,600
Interest payable 9,000 6,400 2,600
Accrued liabilities 38,800 60,400 -21,600
Note payable 44,000 — 44,000
The accounts payable were for the purchase of merchandise. Prepaid expenses and accrued liabilities relate to the firm's selling and administrative expenses. The company's condensed income statement follows.
SIGN GRAPHICS INC.
Income Statement
for the Year Ended December 31, 20x5
Sales $713,800
Less: Cost of goods sold 323,000
Gross profit $390,800
Less: Selling & administrative expenses $186,000
Depreciation expense 17,000
Interest expense 27,000 230,000
Add: gain on sale of land $160,800
21,800
Income before taxes $182,600
Income taxes 36,800
Net income $145,800
Other data:
1. Long-term investments were purchased for cash at a cost of $74,600.
2. Cash proceeds from the sale of land totaled $76,200.
3. Store equipment of $44,000 was purchased by signing a short-term note payable. Also, a $150,000 telecommunications system was acquired by issuing 3,000 shares of preferred stock.
4. A long-term note of $49,400 was repaid.
5. Twenty thousand shares of common stock were issued at $5.19 per share.
6. The company paid cash dividends amounting to $128,600.
Instructions:
a. Prepare the operating activities section of the company's statement of cash flows, assuming use of:
1. The direct method.
2. The indirect method.
b. Prepare the investing and financing activities sections of the statement of cash flows.
I have completed all of my assignment except this one last question. I am having a heck of a time figuring out where to even start. Can anyone help me?
The comparative year-end balance sheets of Sign Graphics, Inc., revealed the following activity in the company's current accounts:
20X5 20X4 Increase / Decrease)
Current assets
Cash $55,400 $35,200 $20,200
Accounts receivable (net) 83,800 88,000 -4,200
Inventory 243,400 233,800 9,600
Prepaid expenses 25,400 24,200 1,200
Current liabilities
Accounts payable $123,600 $140,600 ($17,000)
Taxes payable 43,600 49,200 -5,600
Interest payable 9,000 6,400 2,600
Accrued liabilities 38,800 60,400 -21,600
Note payable 44,000 — 44,000
The accounts payable were for the purchase of merchandise. Prepaid expenses and accrued liabilities relate to the firm's selling and administrative expenses. The company's condensed income statement follows.
SIGN GRAPHICS INC.
Income Statement
for the Year Ended December 31, 20x5
Sales $713,800
Less: Cost of goods sold 323,000
Gross profit $390,800
Less: Selling & administrative expenses $186,000
Depreciation expense 17,000
Interest expense 27,000 230,000
Add: gain on sale of land $160,800
21,800
Income before taxes $182,600
Income taxes 36,800
Net income $145,800
Other data:
1. Long-term investments were purchased for cash at a cost of $74,600.
2. Cash proceeds from the sale of land totaled $76,200.
3. Store equipment of $44,000 was purchased by signing a short-term note payable. Also, a $150,000 telecommunications system was acquired by issuing 3,000 shares of preferred stock.
4. A long-term note of $49,400 was repaid.
5. Twenty thousand shares of common stock were issued at $5.19 per share.
6. The company paid cash dividends amounting to $128,600.
Instructions:
a. Prepare the operating activities section of the company's statement of cash flows, assuming use of:
1. The direct method.
2. The indirect method.
b. Prepare the investing and financing activities sections of the statement of cash flows.
To prepare the operating activities section of the statement of cash flows using the direct method:
1. Start by listing all the cash inflows and outflows related to operating activities:
- Cash received from customers (sales): $713,800
- Cash paid for merchandise (cost of goods sold): $323,000
- Cash paid for selling and administrative expenses: $186,000
- Cash paid for interest expense: $27,000
- Cash paid for income taxes: $36,800
2. Calculate the net cash provided by operating activities by subtracting cash outflows from cash inflows:
Net cash provided by operating activities = Cash received from customers - Cash paid for merchandise - Cash paid for selling and administrative expenses - Cash paid for interest expense - Cash paid for income taxes
In this case, it will be:
Net cash provided by operating activities = $713,800 - $323,000 - $186,000 - $27,000 - $36,800
To prepare the operating activities section of the statement of cash flows using the indirect method:
1. Start with net income ($145,800) from the income statement.
2. Adjust net income for non-cash expenses and changes in working capital accounts:
- Add back depreciation expense: $17,000
- Add back interest expense: $27,000
- Deduct the increase in accounts receivable: -$4,200
- Deduct the increase in inventory: -$9,600
- Deduct the increase in prepaid expenses: -$1,200
- Deduct the decrease in accounts payable: -$17,000
- Deduct the increase in taxes payable: -$5,600
- Deduct the increase in interest payable: -$2,600
- Deduct the decrease in accrued liabilities: -$21,600
- Deduct the increase in note payable: -$44,000
3. Calculate the net cash provided by operating activities:
Net cash provided by operating activities = Net income + Depreciation expense + Interest expense + Decrease in working capital accounts
In this case, it will be:
Net cash provided by operating activities = $145,800 + $17,000 + $27,000 - $4,200 - $9,600 - $1,200 - $17,000 - $5,600 - $2,600 - $21,600 - $44,000
To prepare the investing activities section of the statement of cash flows:
1. Identify cash inflows and outflows related to investing activities:
- Cash inflow from the sale of land: $76,200
- Cash outflow for long-term investments: $74,600
2. Calculate the net cash used in investing activities:
Net cash used in investing activities = Cash inflow from sale of land - Cash outflow for long-term investments
In this case, it will be:
Net cash used in investing activities = $76,200 - $74,600
To prepare the financing activities section of the statement of cash flows:
1. Identify cash inflows and outflows related to financing activities:
- Cash inflow from the issuance of preferred stock: $150,000
- Cash inflow from the issuance of common stock: $5.19 per share * 20,000 shares
- Cash outflow for repayment of a long-term note: $49,400
- Cash outflow for payment of cash dividends: $128,600
2. Calculate the net cash provided by financing activities:
Net cash provided by financing activities = Cash inflow from issuance of preferred stock + Cash inflow from issuance of common stock - Cash outflow for repayment of long-term note - Cash outflow for payment of cash dividends
In this case, it will be:
Net cash provided by financing activities = $150,000 + ($5.19 * 20,000) - $49,400 - $128,600
After completing these calculations, you can present the information in the operating activities, investing activities, and financing activities sections of the statement of cash flows.