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    Preparing operating activities section

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    Prepare the operating activities
    section?indirect method.
    (SO 3)

    E14-3 The current sections of Blues Traveler Co. balance sheets at December 31, 2005 and
    2006, are presented below.

    BLUES TRAVELER CO.
    Comparative Balance Sheets (partial)
    December 31, 2006
    2005 2006
    Current assets
    Cash $105,000 $99,000
    Accounts receivable $110,000 $85,000
    Inventory $171,000 $186,000
    Prepaid expenses $27,000 $32,000
    Total current assets $413,000 $402,000

    Current liabilities
    Accrued expenses payable $15,000 $5,000
    Accounts payable $88,000 $92,000
    Total current liabilities $103,000 $97,000

    Blues Traveler's net income for 2006 was $163,000. Depreciation expense was $30,000.

    Instructions
    Prepare the operating activities section of Blues Traveler's statement of cash flows for the year
    ended December 31, 2006, using the indirect method.

    Compute selected ratios.
    (SO 5)

    E15-7 Marcus Company has the following comparative balance sheet data.

    Balance Sheets
    December 31, 2006
    2006 2005
    Cash $15,000 $30,000
    Receivables (net) $70,000 $60,000
    Inventories $60,000 $50,000
    Plant assets (net) $20,000 $180,000
    $345,000 $320,000

    Accounts payable $40,000 $60,000
    Mortgage payable (15%) $100,000 $100,000
    Common stock, $10 par $140,000 $120,000
    Retained earnings $65,000 $40,000
    $345,000 $320,000

    Additional information for 2006:
    1. Net income was $25,000.
    2. Sales on account were $420,000. Sales returns and allowances were $20,000.
    3. Cost of goods sold was $198,000.
    4. The allowance for doubtful accounts was $2,500 on December 31, 2006, and $2,000 on December
    31, 2005.

    Instructions
    Compute the following ratios at December 31, 2006.
    (a) Current.
    (b) Acid-test.
    (c) Receivables turnover.
    (d) Inventory turnover.

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    Solution Summary

    Excel file contains operating activity section and calculations of Current ratio, Acid-test ratio , Receivables turnover ratio and Inventory turnover ratio.

    $2.19

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