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Accounting questions

1. Statement of cash flows preparation.

Selected financial statement information and additional data for Stanislaus Co. is presented below.
Prepare a statement of cash flows for the year ending December 31, 2010

December 31
2009 2010
Cash $42,000 $63,000
Accounts receivable (net) 84,000 151,200
Inventory 168,000 201,600
Land 58,800 21,000
Equipment 504,000 789,600
TOTAL $856,800 $1,226,400
Accumulated depreciation $84,000 $115,600
Accounts payable 50,400 86,000
Notes payable - Short-term 67,200 29,400
Notes payable - Long-term 168,000 302,400
Common stock 420,000 487,200
Retained earnings 67,200 205,800
TOTAL $856,800 $1,226,400

Additional data for 2010:
1. Net income was $235,200.
2. Depreciation was $31,600.
3. Land was sold at its original cost.
4. Dividends of $96,600 were paid.
5. Equipment was purchased for $84,000 cash.
6. A long-term note for $201,600 was used to pay for an equipment purchase.
7. Common stock was issued to pay a $67,200 long-term note payable.

2. Multiple-step income statement.

Presented below is information related to Farr Company.

Retained earnings, December 31, 2010 $ 650,000
Sales 1,400,000
Selling and administrative expenses 240,000
Hurricane loss (pre-tax) on plant (extraordinary item) 290,000
Cash dividends declared on common stock 33,600
Cost of goods sold 780,000
Gain resulting from computation error on depreciation charge in 2009 (pre-tax) 520,000
Other revenue 120,000
Other expenses 100,000

Instructions
Prepare in good form a multiple-step income statement for the year 2011. Assume a 30% tax rate and that 80,000 shares of common stock were outstanding during the year.

3. Accrual basis.

Grier & Associates maintains its records on the cash basis. You have been engaged to convert its cash basis income statement to the accrual basis. The cash basis income statement, along with additional information, follows:

Grier & Associates
Income Statement (Cash Basis)
For the Year Ended December 31, 2010
Cash receipts from customers $450,000
Cash payments:
Wages $150,000
Taxes 65,000
Insurance 40,000
Interest 25,000 280,000
Net income $170,000

Additional information: Balances at 12/31
2010 2009
Accounts receivable $50,000 $30,000
Wages payable 10,000 20,000
Taxes payable 14,000 19,000
Prepaid insurance 8,000 4,000
Accumulated depreciation 90,000 75,000
Interest payable 3,000 9,000

No plant assets were sold during 2010.

Solution Summary

The solution explains some accounting questions relating to statement of cash flows, income statement and accrual basis

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