Question

In: Accounting

1.a The comparative balance sheet of Yellow Dog Enterprises Inc. at December 31, 20Y8 and 20Y7,...

1.a

The comparative balance sheet of Yellow Dog Enterprises Inc. at December 31, 20Y8 and 20Y7, is as follows:

Dec. 31, 20Y8 Dec. 31, 20Y7
Assets
Cash $53,520 $65,930
Accounts receivable (net) 82,240 88,890
Inventories 117,500 110,170
Prepaid expenses 4,790 3,340
Equipment 239,330 197,390
Accumulated depreciation-equipment (62,230) (48,410)
Total assets $435,150 $417,310
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors) $91,380 $87,220
Mortgage note payable 0 125,190
Common stock, $1 par 14,000 9,000
Paid-in capital in excess of par-common stock 213,000 118,000
Retained earnings 116,770 77,900
Total liabilities and stockholders’ equity $435,150 $417,310

Additional data obtained from the income statement and from an examination of the accounts in the ledger for 20Y8 are as follows:

  1. Net income, $99,510.
  2. Depreciation reported on the income statement, $30,200.
  3. Equipment was purchased at a cost of $58,320 and fully depreciated equipment costing $16,380 was discarded, with no salvage realized.
  4. The mortgage note payable was not due for six years, but the terms permitted earlier payment without penalty.
  5. 5,000 shares of common stock were issued at $20 for cash.
  6. Cash dividends declared and paid, $60,640.

Required:

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

Yellow Dog Enterprises Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y8
Cash flows from (used for) operating activities:
$
Adjustments to reconcile net income to net cash flow from operating activities:
Changes in current operating assets and liabilities:
Net cash flow from operating activities $
Cash flows from (used for) investing activities:
$
Net cash flow used for investing activities
Cash flows from (used for) financing activities:
$
Net cash flow used for financing activities
$
Cash balance, January 1, 20Y8
Cash balance, December 31, 20Y8 $

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2.a

Sampson Co. sold merchandise to Batson Co. on account, $33,100, terms 2/15, net 45 on December 26. The cost of the goods sold is $24,825. The Batson Co. paid the invoice on December 31, within the discount period. Assume both Sampson and Batson use a perpetual inventory system.

Required:

Prepare the entries that both Sampson and Batson Companies would record for the above. Refer to the Chart of Accounts for exact wording of account titles. If no entry is required, simply skip to the next transaction.

Solutions

Expert Solution

1(a) Yellow Dog Enterprises Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y8
Cash flows from (used for) operating activities:
Net income $99,510
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation $30,200
Changes in current operating assets and liabilities:
Decrease in account receivable $6,650
Increase in inventory -$7,330
Increase in prepaid expense -$1,450
Increase in account payable $4,160
Net cash flow from operating activities $131,740
Cash flows from (used for) investing activities:
Purchase of property plant and equipment -$58,320
Net cash flow used for investing activities -$58,320
Cash flows from (used for) financing activities:
Payment of Mortgage note -$125,190
Money received from issue of common stock $100,000
Cash dividend paid -$60,640
Net cash flow used for financing activities -$85,830
-$12,410
Cash balance, January 1, 20Y8 $65,930
Cash balance, December 31, 20Y8 $53,520
1(b) Journal entry in books of Sampson
Account receivable A/c $33,100
    Sales $33,100
(Being sales recognised)
Cost of goods sold A/c $24,825
    Merchandise inventory $24,825
(Being COGS recognised)
Journal Entries in books of Batson
Merchandise inventory $33,100
   To, Account payable $33,100
(Being purchase of inventory recognised)

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