Question

Melcher Arts, which owns an art gallery, reported net income of $380,000. In addition, the following information was taken from its general ledger:  beginning balances in Accounts Receivable and Accounts Payable were $58,000 and $52,000, respectively; ending balances in these accounts were $52,000 and$48,000, respectively. Dresser’s net cash flows from operating activities would be:

Beatles Enterprises is in the process of preparing a Cash Slow Statement. Beatles analyzed the financial statements and additional information.  Based on the statements and the additional information which transaction below would notcreate a cash flow?

Whataburger Franchise wants to improve its Debt to Equity ratio, so it decides to retire a $24 million bond issue.  At the time of retirement, the market value of the bonds was $33 million and the carrying value of the bonds is $32 million.  Which of the following would be included in the journal entry to record the retirement of the bonds?

Zack’s House Builders issues bonds to raise capital. The last $100,000 of bonds were issued at a discount.  How is the interest payment, interest expense and carrying value shown on the bond amortization schedule?

On each interest payment date, Company XYZ mails a check to the bondholders for Interest.  How is this cash payment calculated?  

Answer 1

1)	Net Cash Flows from Operating Activities
	Particulars	Amount	Amount
	Net Income		$        3,80,000.00
	Accounts Receivable:
	- Beginning	$        58,000.00
	- Ending	$        52,000.00	$              6,000.00
	Accounts Payable:
	- Beginning	$        52,000.00
	- Ending	$        48,000.00	$            -4,000.00
	Net Cash Flows from Operating Activities		$        3,82,000.00

2). Beatles Enterprises analyzed the financial statements and additional information. Non cash Items , prepaid & post paid are not cash related items. Following are not included in Cash Flow statement:

- Depreciation Expenses

- Prepaid Expenses

- Income Tax Provision & Other Provisions

- Credit Sales & Purchases & Expenses

- Advance Payment already made in previous year but included in Financial Statement.

3) Whataburger Franchise wants to improve its Debt to Equity ratio, it retires Bond issue. at the time of retirement Carrying Value of Bond is $32Million. While calculating Debt Equity Ratio. Carriying Value will be considered in Debt Equity Ratio.

Hence, while recording Journal Entries, $32Million will be considered.

4) Zack’s House Builders issues bonds to raise capital. The last $100,000 of bonds were issued at a discount. Interest payment will be calculated at Interest rate on Bonds issue value. Bond Value will be discounted at yield to maturity rate. then interest expense will be calculated. Difference between these will be treated as amortised discount. Carrying value will be present value of bond plus amortisation discount.