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Kazaam Company, a merchandiser, recently completed its calendar-year.docx

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Kazaam Company, a merchandiser, recently completed its calendar-year.docx

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Kazaam Company, a merchandiser, recently completed its calendar-year 2011 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s balance sheets and income statement follow.

KAZAAM COMPANY
Comparative Balance Sheets
December 31, 2011 and 2010

2011

2010
  Assets





  Cash
$
49,800   

$
74,000   
  Accounts receivable

65,810   


51,000   
  Merchandise inventory

278,000   


251,500   
  Prepaid expenses

1,000   


1,900   
  Equipment

158,000   


106,000   
  Accum. depreciation—Equipment

(41,750)  


(52,000)  


  Total assets
$
510,860   

$
432,400   


  Liabilities and Equity





  Accounts payable
$
69,735   

$
115,000   
  Short-term notes payable

12,000   


7,000   
  Long-term notes payable

60,000   


48,750   
  Common stock, $5 par value

162,000   


150,250   
  Paid-in capital in excess of par, common stock

35,250   


0   
  Retained earnings

171,875   


111,400   


  Total liabilities and equity
$
510,860   

$
432,400   



KAZAAM COMPANY
Income Statement
For Year Ended December 31, 2011
  Sales



$
583,500  
  Cost of goods sold




286,000  




  Gross profit




297,500  
  Operating expenses





       Depreciation expense
$
20,000  



       Other expenses

132,400  


152,400  




  Other gains (losses)





       Loss on sale of equipment




5,125  




  Income before taxes




139,975  
  Income taxes expense




23,000  




  Net income



$
116,975  





Additional Information on Year 2011 Transactions
a.
The loss on the cash sale of equipment was $5,125 (details in
b
).
b.
Sold equipment costing $46,875, with accumulated depreciation of $30,250, for $11,500 cash.
c.
Purchased equipment costing $98,875 by paying $25,000 cash and signing a long-term note payable for the balance.
d.
Borrowed $5,000 cash by signing a short-term note payable.
e.
Paid $62,625 cash to reduce the long-term notes payable.
f.
Issued 2,350 shares of common stock for $20 cash per share.
g.
Declared and paid cash dividends of $56,500.

Required:
Prepare a complete statement of cash flows using a spreadsheet report its operating activities using the indirect method.
(Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

a.
Net income was $116,975.
b.
Accounts receivable increased.
c.
Merchandise inventory increased.
d.
Prepaid expenses decreased.
e.
Accounts payable decreased.
f.
Depreciation expense was $20,000.
g.
Sold equipment costing $46,875, with accumulated depreciation of $30,250, for $11,500 cash. This yielded a loss of $5,125.
h.
Purchased equipment costing $98,875 by paying $25,000 cash and
(i.)
by signing a long-term note payable for the balance.
j..

Kazaam Company, a merchandiser, recently completed its calendar-year 2011 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s balance sheets and income statement follow.

KAZAAM COMPANY
Comparative Balance Sheets
December 31, 2011 and 2010

2011

2010
  Assets





  Cash
$
49,800   

$
74,000   
  Accounts receivable

65,810   


51,000   
  Merchandise inventory

278,000   


251,500   
  Prepaid expenses

1,000   


1,900   
  Equipment

158,000   


106,000   
  Accum. depreciation—Equipment

(41,750)  


(52,000)  


  Total assets
$
510,860   

$
432,400   


  Liabilities and Equity





  Accounts payable
$
69,735   

$
115,000   
  Short-term notes payable

12,000   


7,000   
  Long-term notes payable

60,000   


48,750   
  Common stock, $5 par value

162,000   


150,250   
  Paid-in capital in excess of par, common stock

35,250   


0   
  Retained earnings

171,875   


111,400   


  Total liabilities and equity
$
510,860   

$
432,400   



KAZAAM COMPANY
Income Statement
For Year Ended December 31, 2011
  Sales



$
583,500  
  Cost of goods sold




286,000  




  Gross profit




297,500  
  Operating expenses





       Depreciation expense
$
20,000  



       Other expenses

132,400  


152,400  




  Other gains (losses)





       Loss on sale of equipment




5,125  




  Income before taxes




139,975  
  Income taxes expense




23,000  




  Net income



$
116,975  





Additional Information on Year 2011 Transactions
a.
The loss on the cash sale of equipment was $5,125 (details in
b
).
b.
Sold equipment costing $46,875, with accumulated depreciation of $30,250, for $11,500 cash.
c.
Purchased equipment costing $98,875 by paying $25,000 cash and signing a long-term note payable for the balance.
d.
Borrowed $5,000 cash by signing a short-term note payable.
e.
Paid $62,625 cash to reduce the long-term notes payable.
f.
Issued 2,350 shares of common stock for $20 cash per share.
g.
Declared and paid cash dividends of $56,500.

Required:
Prepare a complete statement of cash flows using a spreadsheet report its operating activities using the indirect method.
(Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

a.
Net income was $116,975.
b.
Accounts receivable increased.
c.
Merchandise inventory increased.
d.
Prepaid expenses decreased.
e.
Accounts payable decreased.
f.
Depreciation expense was $20,000.
g.
Sold equipment costing $46,875, with accumulated depreciation of $30,250, for $11,500 cash. This yielded a loss of $5,125.
h.
Purchased equipment costing $98,875 by paying $25,000 cash and
(i.)
by signing a long-term note payable for the balance.
j..

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Kazaam Company, a merchandiser, recently completed its calendar-year.docx

  1. 1. Kazaam Company, a merchandiser, recently completed its calendar-year 2011 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s balance sheets and income statement follow. KAZAAM COMPANY Comparative Balance Sheets December 31, 2011 and 2010 2011 2010 Assets Cash $ 49,800 $ 74,000 Accounts receivable 65,810 51,000 Merchandise inventory
  2. 2. 278,000 251,500 Prepaid expenses 1,000 1,900 Equipment 158,000 106,000 Accum. depreciation—Equipment (41,750) (52,000) Total assets $ 510,860 $ 432,400 Liabilities and Equity
  3. 3. Accounts payable $ 69,735 $ 115,000 Short-term notes payable 12,000 7,000 Long-term notes payable 60,000 48,750 Common stock, $5 par value 162,000 150,250 Paid-in capital in excess of par, common stock 35,250 0 Retained earnings 171,875
  4. 4. 111,400 Total liabilities and equity $ 510,860 $ 432,400 KAZAAM COMPANY Income Statement For Year Ended December 31, 2011 Sales $ 583,500 Cost of goods sold 286,000 Gross profit
  5. 5. 297,500 Operating expenses Depreciation expense $ 20,000 Other expenses 132,400 152,400 Other gains (losses) Loss on sale of equipment
  6. 6. 5,125 Income before taxes 139,975 Income taxes expense 23,000 Net income $ 116,975 Additional Information on Year 2011 Transactions a. The loss on the cash sale of equipment was $5,125 (details in b
  7. 7. ). b. Sold equipment costing $46,875, with accumulated depreciation of $30,250, for $11,500 cash. c. Purchased equipment costing $98,875 by paying $25,000 cash and signing a long-term note payable for the balance. d. Borrowed $5,000 cash by signing a short-term note payable. e. Paid $62,625 cash to reduce the long-term notes payable. f. Issued 2,350 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $56,500. Required: Prepare a complete statement of cash flows using a spreadsheet report its operating activities using the indirect method. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.) a. Net income was $116,975. b. Accounts receivable increased. c. Merchandise inventory increased. d. Prepaid expenses decreased. e. Accounts payable decreased. f. Depreciation expense was $20,000. g. Sold equipment costing $46,875, with accumulated depreciation
  8. 8. of $30,250, for $11,500 cash. This yielded a loss of $5,125. h. Purchased equipment costing $98,875 by paying $25,000 cash and (i.) by signing a long-term note payable for the balance. j. Borrowed $5,000 cash by signing a short-term note payable. k. Paid $62,625 cash to reduce the long-term notes payable. l. Issued 2,350 shares of common stock for $20 cash per share. m. Declared and paid cash dividends of $56,500. KAZAAM COMPANY Spreadsheet for Statement of Cash Flows For Year Ended December 31, 2011 December 31, 2010 Analysis of Changes December 31, 2011 Debit Credit Balance sheet—debit bal. accounts Cash $ [removed] $ [removed]
  9. 9. $ [removed] $ [removed] Accounts receivable [removed] [removed] [removed] [removed] Merchandise inventory [removed] [removed] [removed] [removed] Prepaid expenses [removed] [removed] [removed] [removed] Equipment [removed] [removed] [removed] [removed] $ [removed] $ [removed] Balance sheet—credit bal. accounts
  10. 10. Accum. depreciation—Equip. $ [removed] [removed] [removed] $ [removed] Accounts payable [removed] [removed] [removed] [removed] Short-term notes payable [removed] [removed] [removed] [removed] Long-term notes payable [removed] [removed] [removed] [removed] Common stock, $5 par value [removed] [removed] [removed] [removed] Paid-in capital in excess of par value, common stock [removed] [removed] [removed] [removed] Retained earnings [removed] [removed]
  11. 11. [removed] [removed] $ [removed] $ [removed] Statement of cash flows Operating activities Net income [removed] [removed] Increase in accts. receivable [removed] [removed] Increase in merch. inventory [removed]
  12. 12. [removed] Decrease in prepaid expenses [removed] [removed] Decrease in accounts payable [removed] [removed] Depreciation expense [removed] [removed] Loss on sale of equipment [removed] [removed] Investing activities Receipt from sale of equipment [removed] [removed] Payment to purchase equipment [removed] [removed]
  13. 13. Financing activities Borrowed on short-term note [removed] [removed] Payment on long-term note [removed] [removed] Issued common stock for cash [removed] [removed] Payments of cash dividends [removed] [removed] Noncash investing and financing activities Purchase of equip. financed by long-term note payable [removed] [removed]
  14. 14. $ [removed] $ [removed]

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