In: Accounting
Martinez Inc., a greeting card company that follows ASPE, had
the following statements prepared as at December 31,
2020:
MARTINEZ
INC. Comparative Statement of Financial Position December 31 |
|||||||
---|---|---|---|---|---|---|---|
2020 | 2019 | ||||||
Cash |
$45,745 | $25,080 | |||||
Accounts receivable |
58,150 | 51,170 | |||||
Inventory |
39,950 | 60,100 | |||||
Prepaid rent |
5,030 | 4,020 | |||||
Equipment |
164,730 | 130,100 | |||||
Accumulated depreciation–equipment |
(35,030 | ) | (25,020 | ) | |||
Goodwill |
34,000 | 70,000 | |||||
Total assets |
$312,575 | $315,450 | |||||
Accounts payable |
$46,130 | $40,100 | |||||
Income tax payable |
3,950 | 6,100 | |||||
Salaries and wages payable |
8,080 | 4,080 | |||||
Short–term loans payable |
8,150 | 10,170 | |||||
Long–term loans payable |
74,000 | 89,000 | |||||
Common shares |
130,000 | 130,000 | |||||
Retained earnings |
42,265 | 36,000 | |||||
Total liabilities and shareholders’ equity |
$312,575 | 315,450 |
MARTINEZ
INC. Income Statement Year Ending December 31, 2020 |
|||||
---|---|---|---|---|---|
Sales revenue |
$343,365 | ||||
Cost of goods sold |
165,000 | ||||
Gross margin |
178,365 | ||||
Operating expenses |
120,000 | ||||
Operating income |
58,365 | ||||
Interest expense |
$11,600 | ||||
Impairment loss–goodwill |
36,000 | ||||
Gain on disposal of equipment |
(3,000 | ) | 44,600 | ||
Income before income tax |
13,765 | ||||
Income tax expense |
4,100 | ||||
Net income |
$9,665 |
Additional information:
1. | Dividends on common shares in the amount of $3,400 were declared and paid during 2020. | |
2. | Depreciation expense is included in operating expenses, as is salaries and wages expense of $72,500. | |
3. | Equipment with a cost of $38,000 that was 70% depreciated was sold during 2020. |
Prepare a statement of cash flows using the DIRECT
method. (Show amounts that decrease cash flow with
either a - sign e.g. -10,000 or in parenthesis e.g.
(10,000).)