In: Accounting
Kingbird Company, a major retailer of bicycles and accessories,
operates several stores and is a publicly traded company. The
comparative balance sheet and income statement for Kingbird as of
May 31, 2017, are as follows. The company is preparing its
statement of cash flows.
KINGBIRD COMPANY |
||||
2017 |
2016 |
|||
Current assets | ||||
Cash |
$28,100 |
$20,000 |
||
Accounts receivable |
75,000 |
58,300 |
||
Inventory |
220,600 |
247,900 |
||
Prepaid expenses |
9,100 |
7,000 |
||
Total current assets |
332,800 |
333,200 |
||
Plant assets | ||||
Plant assets |
601,900 |
506,700 |
||
Less: Accumulated depreciation—plant assets |
150,600 |
124,800 |
||
Net plant assets |
451,300 |
381,900 |
||
Total assets |
$784,100 |
$715,100 |
||
Current liabilities | ||||
Accounts payable |
$123,400 |
$113,800 |
||
Salaries and wages payable |
47,600 |
71,900 |
||
Interest payable |
26,900 |
25,100 |
||
Total current liabilities |
197,900 |
210,800 |
||
Long-term debt | ||||
Bonds payable |
70,000 |
100,000 |
||
Total liabilities |
267,900 |
310,800 |
||
Stockholders’ equity | ||||
Common stock, $10 par |
370,000 |
280,000 |
||
Retained earnings |
146,200 |
124,300 |
||
Total stockholders’ equity |
516,200 |
404,300 |
||
Total liabilities and stockholders’ equity |
$784,100 |
$715,100 |
KINGBIRD COMPANY |
||
Sales revenue |
$1,253,000 |
|
Cost of goods sold |
717,300 |
|
Gross profit |
535,700 |
|
Expenses | ||
Salaries and wages expense |
252,500 |
|
Interest expense |
74,600 |
|
Depreciation expense |
25,800 |
|
Other expenses |
8,100 |
|
Total expenses |
361,000 |
|
Operating income |
174,700 |
|
Income tax expense |
43,000 |
|
Net income |
$131,700 |
The following is additional information concerning Kingbird’s
transactions during the year ended May 31, 2017.
1. | All sales during the year were made on account. | |
2. | All merchandise was purchased on account, comprising the total accounts payable account. | |
3. | Plant assets costing $95,200 were purchased by paying $25,200 in cash and issuing 7,000 shares of stock. | |
4. | The “other expenses” are related to prepaid items. | |
5. | All income taxes incurred during the year were paid during the year. | |
6. | In order to supplement its cash, Kingbird issued 2,000 shares of common stock at par value. | |
7. |
Cash dividends of $109,800 were declared and paid at the end of the fiscal year. |
Prepare a statement of cash flows for Kingbird Company for the year ended May 31, 2017, using the direct method. (A reconciliation of net income to net cash provided is not required.)
Below is the cashflow as per Direct Method. the workings for each of the figures is given below
Particulars |
Amount |
Amount |
Cashflow from Operating Activities |
||
Cash Receipts from Customers |
1236300 |
|
Cash paid to suppliers |
-680400 |
|
Prepaid expenses paid |
-10200 |
|
Cash paid to Employees |
-276800 |
|
Taxes paid |
-43000 |
|
Interest Paid |
-72800 |
|
Net Cash from Operating Activities |
153100 |
|
Cashflow from Investing Activities |
||
Purchase of Plant |
-25200 |
|
Net Cash from Investing Activties |
-25200 |
|
Cashflow from Financing Activities |
||
Bonds repaid |
-30000 |
|
Proceeds from Issue of Shares |
20000 |
|
Dividend Paid |
-109800 |
|
Net Cash from Financing Activities |
-119800 |
|
Net increase in cash and cash equivalents |
8100 |
|
Cash and cash equivalents at beginning of period |
20000 |
|
Cash and cash equivalents at end of period |
28100 |
Workings:
Opening Balance of Accounts Receivable (A) |
58300 |
Opening Balance for Stock |
247900 |
|
Sales Revenue (B) |
1253000 |
Closing Stock |
220600 |
|
Closing Balance of Accounts Rceivable ( C) |
75000 |
COGS |
717300 |
|
Cash Receipts from Customers (A+B-C) |
1236300 |
Purchases |
690000 |
|
Opening Balance of Accounts Payable |
113800 |
Opening prepaid |
7000 |
|
Purchases |
690000 |
Expenses |
8100 |
|
Closing Balance of Accounts Payable |
123400 |
Closing |
9100 |
|
Cash paid to suppliers |
680400 |
Prepaid expenses paid |
10200 |
|
Opening Balance of Salaries and Wages Payable |
71900 |
Opening Balance of Interest Payable |
25100 |
|
Expense |
252500 |
Expense |
74600 |
|
Closing Balance of Salaries and Wages Payable |
47600 |
Closing Balance of Interest Payable |
26900 |
|
Cash paid to Employees |
276800 |
Cash paid to Employees |
72800 |
|
Opening Balance of Equity |
280000 |
Opening Balance Retained Earnings |
124300 |
|
Shares issued for Plant |
70000 |
Profit Earned |
131700 |
|
Shares issued for Cash |
20000 |
Dividend paid |
109800 |
|
Closing Balance of Equity |
370000 |
Closing Balance Retained Earnings |
146200 |