Question

In: Accounting

use chart for ALL questions Hernandez Inc. was founded on 12/1/2017. The initial balance sheet is...

use chart for ALL questions

Hernandez Inc. was founded on 12/1/2017. The initial balance sheet is as follows:

Balance Sheet-12/1/2017

Assets

Liabilities and Owners Equity

Cash 2500

Debt

0

Long Term Assets 1800

Stock

5200

Inventory 900

Total 5200

Total

5200

Suppose that the following transactions occurred between 12/1/2017 and 12/31/2017:

Inventory purchase of $600 (paid in cash)

$1600 worth of credit sales (due on 1/31/2018)

Operating Accruals of $50

Depreciation of $200

Taxes of $100 (paid 12/20/2017)

Ending inventory of $400

QUESTIONS:

47. What is the company’s net income on 12/31/2017?

48. Find the amount of cash the company paid to its suppliers from 12/1-12/31.  

49. What is the company’s cash flow from operations on 12/31/2017?

50. What is the retained earnings balance on 12/31/2017?

51. Find Hernandez Inc.'s operating cash margin from 1/1-1/31.

Solutions

Expert Solution

Solution:

(47) : Computation of Company’s Net income on 12/3/2017 –

(48) : Amount of cash the company paid to its suppliers from 12/1-12/31 –

                Amount of cash paid to its suppliers              = 600

(49) : Computation of Company’s Cash Flow from operations on 12/31/2017

(50) : Retained earnings balance on 12/31/2017 –

             Retained earnings = 150

                                             =(same as Net income)

(51) : Computation of Hernandez Inc.'s operating cash margin from 1/1-1/31.

operating cash margin        = Cashflow from operation / sales

= 250/1600

=0.15625*100

                                                                = 15.63%


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