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    P23-8 Comparative Balance Sheet Accounts of Jensen Company

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    P23-8 Comparative balance sheet accounts of Jensen Company are presented below.

    JENSEN COMPANY
    COMPARATIVE BALANCE SHEET ACCOUNTS
    DECEMBER 31,
    Debit Balances 2007 2006
    Cash $80,000 $51,000
    Accounts receivable 145,000 130,000
    Merchandise inventory 75,000 61,000
    Investments
    (Available-for-sale) 55,000 85,000
    Equipment 70,000 48,000
    Buildings 145,000 145,000
    Land 40,000 25,000
    Totals $610,000 $545,000
    Credit Balances
    Allowance for Doubtful Accounts $10,000 $8,000
    Accumulated Depreciation - Equipment 21,000 14,000
    Accumulated Depreciation - Building 37,000 28,000
    Accounts payable 70,000 60,000
    Income taxes payable 12,000 10,000
    Long-term notes payable 62,000 70,000
    Common stock 310,000 260,000
    Retained earnings 88,000 95,000
    Totals $610,000 $545,000

    Additional data:

    1. Equipment that cost $10,000 and was 40% depreciated was sold in 2007.
    2. Cash dividends were declared and paid during the year.
    3. Common stock was issued in exchange for land.
    4. Investments that cost $35,000 were sold during the year.

    Jensen's 2007 income statement is as follows.

    Sales $950,000
    Less: Cost of goods sold 600,000
    Gross profit 350,000
    Less: Operating expenses (includes deprecation and bad debt expense)
    250,000
    Income from operations 100,000
    Other revenues and expenses
    Gain on sale of investments $15,000
    Loss on sale of equipment (3,000) 12,000
    Income before taxes 112,000
    Income taxes 45,000
    Net income $67,000

    Instructions

    a. Prepare a statement of cash flows using the indirect method.

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    Solution Preview

    JENSEN COMPANY
    Comparative Balance Sheet Accounts
    December 31,
    Increase Activity
    Debit Balances 2007 2006 (Decrease)
    Assets
    Cash 80,000 51,000 29,000 Cash
    Accounts receivable 145,000 130,000 15,000 Operating
    Merchandise Inventory 75,000 61,000 14,000 Operating
    Investments (Available-for-Sale) 55,000 85,000 -30,000 Investing
    Equipment 70,000 48,000 22,000 Investing
    Buildings 145,000 145,000 0 Investing
    Land 40,000 25,000 15,000 Investing
    Totals 610,000 545,000

    Credit Balances
    Allowance for Doubtful Accounts 10,000 8,000 2,000 Operating
    Accumulated Depr. - Equipment 21,000 14,000 7,000 Operating
    Accumulated Depr. - Building 37,000 28,000 9,000 Operating
    Accounts payable 70,000 60,000 10,000 Operating
    Income taxes payable 12,000 10,000 2,000 Operating
    Long-term notes payable 62,000 70,000 -8,000 Financing
    Common stock 310,000 260,000 50,000 Financing
    Retained earnings 88,000 95,000 -7,000
    Total liabilities and equity 610,000 545,000

    Jensen Company's Income Statement
    Sales $950,000
    Less cost of goods sold 600,000
    Gross profit 350,000
    Less: Operating expenses (includes
    depreciation and bad debt expense) 250,000
    Income from ...

    Solution Summary

    This solution is comprised of a detailed explanation to prepare a statement of cash flows using the indirect method.

    $2.19

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