Question

In: Accounting

The comparative Balance Sheets and the Income statement for the Marine Corporation are as follow:

The comparative Balance Sheets and the Income statement for the Marine Corporation are as follow:

Marine Corporation

Balance Sheet

Assets

2018

2019

Cash

$45,000

$50,000

Marketable Securities

175,000

160,000

Accounts Receivable

240,000

220,000

Inventories

230,000

275,000

Investments

70,000

55,000

Total current assets

$760,000

$760,000

Plant and Equipment

1,300,000

1,550,000

Less Accumulated Amortization

450,000

600,000

Net plant and Equipment

$850,000

$950,000

Total Assets

1,610,000

1,710,000

LIABILITIES AND SHAREHOLDERS’ EQUITY

Accounts payable

$110,000

$85,000

Notes payable

65,000

10,000

Accrued Expenses

30,000

5,000

Income Taxes Payable

5,000

10,000

Bonds Payable (2016)

800,000

900,000

Common Stock (100,000 shares)

200,000

200,000

Retained Earnings

400,000

500,000

Total Liabilities’ and Shareholders’ Equity

$1,610,000

$1,710,000

Marine Corporation
Income Statement
For the Year Ended December 31, 2019

Sales

$ 5,500,000

Less: Cost of Goods Sold

4,200,000

Gross Profit

1,300,000

Less: Selling, General & Administrative Expenses

260,000

Operating profit

1,040,000

Less: Amortization Expense

150,000

Earnings Before Interest and Taxes

890,000

Less: Interest Expense

90,000

Earnings Before Taxes

800,000

Less: Taxes (50%)

400,000

Net Income

$ 400,000

Required:

Prepare a Statement of Cash Flows in good form for the year ended December 31, 2019 using the Indirect Method?

Solutions

Expert Solution

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Workings- Indirect Method
Decrease in Marketable Securities Amount $
Closing Balance      160,000.00
Less: Opening Balance      175,000.00
Decrease in Marketable Securities      (15,000.00)
Decrease in Accounts Receivable
Closing Balance      220,000.00
Less: Opening Balance      240,000.00
Decrease in Accounts Receivable      (20,000.00)
Increase in Inventory
Closing Balance      275,000.00
Less: Opening Balance      230,000.00
Increase in Inventory        45,000.00
Decrease in Investments
Closing Balance        70,000.00
Less: Opening Balance        55,000.00
Decrease in Investments        15,000.00
Decrease in Accounts Payable
Closing Balance        85,000.00
Less: Opening Balance      110,000.00
Decrease in Accounts Payable      (25,000.00)
Decrease in Accrued Expenses
Closing Balance          5,000.00
Less: Opening Balance        30,000.00
Decrease in Accrued Expenses      (25,000.00)
Increase in Income Taxes Payable
Closing Balance        10,000.00
Less: Opening Balance          5,000.00
Increase in Income Taxes Payable          5,000.00
Decrease in Notes payable
Closing Balance        10,000.00
Less: Opening Balance        65,000.00
Decrease in Notes payable      (55,000.00)
Plant and Equipment purchased
Closing Balance 1,550,000.00
Less: Opening Balance 1,300,000.00
Plant and Equipment purchased      250,000.00
Bonds Payable Issued
Closing Balance      900,000.00
Less: Opening Balance      800,000.00
Bonds Payable Issued      100,000.00
Dividends paid
Opening Balance- Retained Earnings      400,000.00
Add: Net Income      400,000.00
Less: Closing Balance- Retained Earnings      500,000.00
Dividends paid      300,000.00
Marine
Cashflow statement Amount $ Amount $
Particulars
Net Income     400,000.00
Adjustment to reconcile Net Income to Net Cash
Add:
Amortization Expense     150,000.00
Cash flow from Operations     550,000.00
Changes in Current Assets/Current Liabilities
Decrease in Marketable Securities      15,000.00
Decrease in Accounts Receivable      20,000.00
Increase in Inventory     (45,000.00)
Decrease in Investments      15,000.00
Decrease in Accounts Payable     (25,000.00)
Decrease in Notes payable     (55,000.00)
Decrease in Accrued Expenses     (25,000.00)
Increase in Income Taxes Payable        5,000.00     (95,000.00)
Net cash provided by operating activities     455,000.00
Cash flow from investing activities
Plant and Equipment purchased (250,000.00)
Net cash use for investing activities (250,000.00)
Cash flow from financing activities
Bonds Payable Issued    100,000.00
Dividends paid (300,000.00)
Net cash used for financing activities (200,000.00)
Net Increase/(Decrease) in cash         5,000.00
Cash Balance, beginning       45,000.00
Cash Balance, ending       50,000.00

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