Posted: May 1st, 2016

Prepare a statement of cash flows using the direct method?

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23
Sep
The accounting records of Dolphin Company
Categories: Business
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The accounting records of Dolphin Company revealed the following information:

Total Manufacturing Costs….. $530,000
Work-In-Process Inventory, Jan 1 ….. $56,000
Work-In-Process Inventory, Dec 31 ….. $78,000
Finished-Goods Inventory, Jan 1 ….. $146,000
Finished-Goods Inventory, Dec 31 ….. $123,000

Dolphin’s cost of goods sold is:
A. $508,000.
B. $529,000.
C. $531,000.
D. $553,000.
E. some other amount.
23
Sep
On the income statement
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a. On the income statement, there is a line item called “Interest expense of Financial Products” in the Operating Costs section of the income statement and a line item called “Interest expense excluding Financial Products” in between Operating Profit and Consolidated Profit Before Taxes. Why might the company report its interest expense in two sections in this way?

b. Caterpillar reported $2.466 billion in research and development expenses during 2012. What argument could you make for recording those expenditures as assets? Why are they not recorded as assets?

c. On the asset section of Caterpillar’s balance sheet, there are two line items for “deferred and refundable income taxes.” Why aren’t they combined and shown on one line?

d. Caterpillar reports $6.942 billion in Goodwill on December 31, 2012. What does this represent?

e. The balance sheet has a line called “Profit employed in the business.” What do you think that means? What would most companies call this line item?

f. On the balance sheet, Caterpillar reports Treasury Stock of ($10.074 billion) and Common Stock of $4.481 billion. If Treasury Stock represents a company’s purchases of it’s own stock, how can the Treasury Stock number be larger than the Common Stock number?

g. Would you recommend someone who works for this company to continue staying with them? Give 3 reasons why.
23
Sep
FANCY FOOTWORK COMPANY
Categories: Business
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Financial data of Fancy Footwork Company for 2013 and 2012 are presented below.

FANCY FOOTWORK COMPANY
COMPARATIVE BALANCE SHEET
AS OF DECEMBER 31, 2013 AND 2012

2013 2012
Cash $ 260,000 $ 230,000
Receivables $ 156,000 $ 120,000
Inventory $ 180,000 $ 220,000
Plant assets $ 160,000 $ 135,000
Accumulated depreciation $ (80,000) $ (76,000)
Long-term investments (held-to-maturity) $ 80,000 $ 93,000
$ 756,000 $ 722,000

Accounts payable $ 135,000 $ 122,000
Accrued liabilities $ 30,000 $ 33,100
Bonds payable $ 135,000 $ 166,000
Common stock $ 180,000 $ 165,000
Retained earnings $ 276,000 $ 235,900
$ 756,000 $ 722,000

FANCY FOOTWORK COMPANY
INCOME STATEMENT
For the year ended Dec 31, 2013
Sales 750000
Cost of Goods Sold 530000
Gross Margin 220000
Selling and administrative expenses 106000
Income from Operations 114000
Other revenues and gains
Gain on sale of investments 7000
Income before tax 121000
Income tax expense 48400
Net Income 72600

Additional information:
During the year, $9000 of common stock was issued in exchange for plant assets. No plant assets were sold in 2012. Cash dividends were $32500.

Required: Use Excel
A) Prepare a statement of cash flows using the indirect method
B) Prepare a statement of cash flows using the direct method. (Do not prepare a reconciliation schedule.)