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Dividends / Sale of Equipment

My problem is, I do not see how my instructor reached in the "indirect methodology" for "financing activities" how he achieved divdends of; -61,200

And for the "investing activities", how my professor reached 36,000 for sale of equip.

Please help show me how he reached these values.

Thank you

1. New equipment costing $59,000 was purchased during the
year.

2. Equipment sold during the year produced a loss of $12,000.

3. You obtained selected industry average ratios for publicly traded furniture
companies of this type for 2005. These are as follows:

2005
Industry Average
Return on equity
(NI/equity) 10 %
Return on Assets
(NI+int.(1-tax rate)/T Assets) 8 %
Current ratio (CA/CL) 1.8:1
Debt/T. Liabilities & equity ratio 0.44
Sales/ Accounts receivable 6 times
Inventory turnover
(C. of G. Sold/Invent.) 4 times
Earnings per share $1.60

Sighing deeply, and trying to remember if things were ever this difficult in graduate school, you commenced the project.

Required : Assume your role as administrative assistant to the president of Aldrig. Prepare a Cash Flow Statement for Baltog Ltd..
Baltog Ltd.
Balance Sheets
As as December 31

2005 2004
Assets
Cash $ 83,000 $ 61,000
Marketable securities 5,000 0
Accounts receivable(net) 250,000 211,000
Inventories 269,000 245,000
Total current assets $607,000 $517,000
Land $50,000 $ 0
Plant and equipment 950,000 958,000
Accumulated amortization (180,000) (102,000)
Patents(net) 65,000 74,000
Total Long-term assets $885,000 $930,000
Total Assets $1,492,000 $1,447,000

Liabilities and Equities
Accounts payable $ 218,000 $ 179,000
Dividends payable 0 15,000
Other current liabilities 64,000 161,000
Total current liabilities $282,000 $355,000
Loans payable 340,000 300,000
Deferred income taxes 24,000 20,000
Total Long-term Liabilities $364,000 $320,000
Total Liabilities $646,000 $675,000
Shareholders' equity
Common stock(60,000 shares in $350,000 $ 300,000
2002; 70,000 in 2003)
Retained earnings 496,000 472,000
Total Owners' equity $846,000 $772,000
Total Liab.& Owners' equity $1,492,000 $1,447,000

Baltog Ltd.
Statement of Income
for the year ended December 31, 2005

Sales $1,083,000
Cost of goods sold 596,000
Gross margin $487,000
Less: Operating expenses
Operating, selling & admin $240,000
Interest 13,000
Amortization 106,000
Other operating 8,000 367,000
Net operating income 120,000
Loss on sale of
equipment (12,000)
Net income before taxes $108,000
Less: Income taxes (tax rate is 35%) 37,800
Net income $70,200

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Solution Preview

Let us start with dividends.

Ending Retained Earnings = Beginning Retained Earnings + Net income - Dividends
or
Change in Retained Earnings = Net Income - Dividends
From the balance sheet, the change in retained earnings is 496,000-472,000=24,000
Net Income us 70,200
So dividend declared for the current period is
Dividends = 24,000-70,200=46,200
In the balance sheet ...

Solution Summary

The solution explains how to amount of dividends and the cash inflow from sale of assets was calculated in the statement of cash flows

$2.19