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ForCustomerThis is a big question and one that I have worked on for about a week.Show the direct method of calculating cash from operations with the following information:Income Statement:Net Sales 1,195,000Operating expenses Cost of sales 1,150,000 Selling and Admin expenses 505,000 Depreciation 53,000 ----------------------------- 1,708,000Operating income 242,000Other income expenses Interest expense 15,000 Equity in net income of Hall (13,000) Loss on sale of equipment 5,000 Amortization of Patent 4,000 -------------------------------Income before taxes 231,000Income taxes Current 79,000 Deferred 11,000 ---------------------Provision for income taxes 90,000Net income 141,000Retained earnings, Jan 1, 1987 334,000 --------------------- 475,000Cash dividends 43,000Retained earnings, 12/31/1987 432,000This is what I have:Cash generated from operations:Net Income 141,000Depr. Exp. 53,000Tax exp. deferred 11,000Patent Amtz. 4,000Loss on sale of equip. 5,000Increase in A/P 51,000Decrease in A/R 10,000Increase in inventory (118,000)Increase in accrued exp. (10,000)Cash from operations $147,000I figured it out under the indirect method but cannot figure it out under the indirect method. Please help.
Hi, I am a Moderator for this topic. I sent your requested Professional a message to follow up with you here, when they are back online. If I can help further, please let me know. Thank you for your continued patience.
Hi,Thanks for requesting me.I think the balance sheets are missing. Please provide the balance sheets. Also, please let me know if you have a certain deadline for this.41021.8883017361
Balance sheet 1987 1896 ChangesAssets:Cash & cash equivalents 275,000 180,000 95,000A/R, net 295,000 305,000 (10,000)Inventories 549,000 431,000 118,000Investment at Hall at equity 73,000 60,000 13,000Plant & equipment 624,000 606,000 18,000Less Accum. Depr. (139,000) (107,000) (32,000)Patent 16,000 20,000 (4,000) ------------------------------------ Totals 2,043,000 1,695,000 348,000Liabilities & stockholders equity:A/P 504,000 453,000 51,000Accrued expenses- selling and admin 100,000 110,000 (10,000)Note payable-long term 150,000 150,000Bonds payable 160,000 210,000 (50,000)Deferred income tax 41,000 30,000 11,000C/S, par $10 430,000 400,000 30,000APIC 226,000 175,000 51,000Retained earnings 432,000 334,000 98,000Treasury stock at cost (17,000) (17,000) ------------------------------------ Totals 2,043,000 1,695,000 348,000Additional information:1. On Jan, 2, 1987 sold equip costing 45,000 with a book value of 24,000, for 19,000.2. April 1, 1987 issued 1000 shares of c/s3. May 15, 1987 sold all treasury stock for 25,000 cash4. June 1, 1987 those holding 50,000 face value of bonds exercised their conversion privilege. each of the 50 bonds was converted into 40 shares of c/s.5. July 1, 1987 Purchased equip for 63,000 cash6. Dec 31, 1987 land with a fmv of 150,000 was purchased through the issuance of a long term note in the amount of 150,000, that bears an interest rate of15% and is due on 12/31/92
The deadline is tomorrow at 9:00am. I really appreciate any help at all you could give me. Thank you
Hi,Thanks for the info. Please click here for the solution. Hope this helps!
Experience: Bachelors degree and CPA with Accounting experience.
I just want to say thank you for helping me, and for explaining it to me as well. I over think things. Thank you.
Hello,Thanks for the accept. I just noticed the income statement looks incorrect. Please double check the net sales amount as this does not add up:Net sales 1,195,000 ???- Operating expenses $1,708,000 (total)= Operating income $242,000If it should be $1,950,000 let me know and I will update my answer file. 41021.945340081
Net sales is 1,95,000.This is what I have:Cash flows from op. activities: Cash collections 1,960,000 pymts to suppliers 1,217,000 pymts for op. exp 515,000 pymts for income taxes 79,000 1,811,000------------------------------------------- Net cash used by op. activities 149,000My only problem is that I should be getting 147,000. Thats the number I got with the indirect method. Any help?
I don't know if this will help but this is what I have for the indirect method:Cash flows from operating activitiesNet income 141,000 Adjustments to reconcile NI to net cash provided by op. activities: Depr. exp. 53,000 Tax exp. deferred 11,000 Patent Amtz 4,000 Loss on sale of equip. 5,000 Increase in A/P 51,000 Decrease in A/R 10,000 Increase in Inventory (118,000) Increase in Accrued exp (10,000) 6,000--------------------------------------------------------Net cash provided by op activities 147,000Cash flows from investing activities Sold equip 19,000 Purchased equip (63,000) Investment in hall (13,000)-----------------------------------------------------------Net cash flows provided, used, by investing activities (57,000)Cash flows from financing activities: Issued C/S 23,000 Treasury Stock 25,000 Paid dividends (43,000)------------------------------------------------------------Net cash flows provided, used, by financing activities 5,000Net increase in cash 95,000Cash, Jan. 1, 1987 180,000Cash, Dec. 31, 1987 275,000
Hi,OK, I think I tracked down the problems. I left off the interest expense on my direct method. This reduces the cash flow from op activities to $134k. Please click here for corrected solution. On your indirect method, you need to add "Equity in net income of Hall (13,000)"This will reduce your indirect method result to to $134k which matches the direct method.Whew, I must say that was a good one!41022.0559999653
I have to agree, it was haunting me! I cannot say thank you enough. Also, thank you for explaining it as well. You are an incredible help!
I would like to leave another tip but cannot figure out how to.
Thanks for the first bonus. That's ok, I don't think you can add another one. Just add it to the next question you ask if you want. :)
Will do, Thanks