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ABC Company: Use the information above to "recreate" JEs

Income statement for year end 12/31/2010
Sales 500,000
Cost of goods sold 325,000
Gross profit 175,000
Sales general and admin expenses 125,000
Depreciation expenses 8,000
42,000
Other gains/losses
Gain from sale of equipment 7,000
Income before taxes 4,900
Income taxes 19,600
Net income 29,400

ABC co.
Balance sheet
As of 12/31/10 12/31/09
Cash 12,000 5,000
Accounts receivable 55,000 35,000
Inventory 55,000 65,000
Equipment 285,000 275,000
Accumulated depreciation (50,000) (55,000)
Total assets 357,000 325,000

Accounts payable 40,000 25,000
Income taxes payable 3,500 2,000
Dividends payable 10,000 5,000
Long-term debt 15,000 35,000
Common stock (1 par per share) 15,000 10,000
Common stock, paid in excess 35,000 25,000
Retained earnings 238,500 223,000
357,000 325000
Additional information on year 2010 transactions
New equipment was purchased with cash for 35,000
No unusual transactions affected equipment or accumulated depreciation
Accounts payable is 70% related to inventory, 30% related to other expenses
1 Book value per share
a) Earnings per share
2. Use the information above to "recreate" the journal entries for the following.
a) Purchase of equipment
b) Depreciation expense
c) Sale of the equipment
d) The issuance of new equity shares
e) The cash dividends paid (this one is compound)
3. Use the financials above to prepare statement of cash flows indirect method.
4. Use the financials above to prepare statement of cash flows direct method

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Your tutorial is in Excel (attached). The cash flow statements ...

Solution Summary

Your tutorial is in Excel (attached). The cash flow statements (direct and indirect) are on separate tabs. Click in cells to see computations. Analysis of change in retained earnings, payables, inventory and dividends payable are completed to show you how to find needed amounts.

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