Statement of Cash Flows—Indirect Method

The comparative balance sheet of Merrick Equipment Co. for December 31, 20Y9 and 20Y8, is as follows:

		Dec. 31, 20Y9		Dec. 31, 20Y8
Assets
Cash		$236,660		$218,630
Accounts receivable (net)		85,730		78,520
Inventories		242,020		232,490
Investments		0		90,070
Land		124,140		0
Equipment		267,020		205,540
Accumulated depreciation—equipment		(62,510)		(55,430)
	Total assets	$893,060		$769,820
Liabilities and Stockholders' Equity
Accounts payable		$161,640		$151,650
Accrued expenses payable		16,080		20,020
Dividends payable		8,930		6,930
Common stock, $10 par		48,230		37,720
Paid-in capital: Excess of issue price over par-common stock		181,290		104,700
Retained earnings		476,890		448,800
	Total liabilities and stockholders’ equity	$893,060		$769,820

Additional data obtained from an examination of the accounts in the ledger for 20Y9 are as follows:

1. Equipment and land were acquired for cash.
2. There were no disposals of equipment during the year.
3. The investments were sold for $81,060 cash.
4. The common stock was issued for cash.
5. There was a $64,270 credit to Retained Earnings for net income.
6. There was a $36,180 debit to Retained Earnings for cash dividends declared.

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.

SawPro Company, owned and operated by Heather Moore, opened for business in 2015. The company sells a single model of commercial grade chain saws that it purchases from the manufacturer. Heather’s customers, primarily businesses offering landscaping and tree-services, purchase saws on account, with payment typically due within thirty-days.  

The following transactions occurred during the calendar year ending December 31, 2018:

1. Acquired equipment that automated sharpening chain saw blades. Instead of paying cash, Heather signed an agreement with a lease financing company. The equipment was delivered, installed, and ready for service on March 1, 2018. Terms of the lease require twenty-four equal monthly payments of $270, with the first payment due at signing on March 1st. The annual rate is 4.75 percent. Heather made all payments on the dates required. The fair value of the equipment is $6,500 with an expected service life of thirty months. Heather has the option to purchase the equipment for $250 at the end of the lease term; she expects to exercise that option. (Note: use the old rule percent’s to determine whether the lease is financing or operating).

Post a journal entry of this transaction!

Amounts are in thousands of dollars (except number of shares and price per share):

  

Kiwi Fruit Company Balance Sheet
Cash and equivalents	$	570
Operating assets		650
Property, plant, and equipment		2,700
Other assets		110
Total assets	$	4,030
Current liabilities	$	920
Long-term debt		1,280
Other liabilities		120
Total liabilities	$	2,320
Paid in capital	$	340
Retained earnings		1,370
Total equity	$	1,710
Total liabilities and equity	$	4,030

    

Kiwi Fruit Company Income Statement
Net sales	$	7,800
Cost of goods sold		(5,900	)
Gross profit	$	1,900
Operating expense		(990	)
Operating income	$	910
Other income		105
Net interest expense		(200	)
Pretax income	$	815
Income tax		(285	)
Net income	$	530
Earnings per share	$	2.00
Shares outstanding		265,000
Recent price	$	34.50

   

Kiwi Fruit Company Cash Flow Statement
Net income	$	530
Depreciation and amortization		175
Changes in operating assets		(90	)
Changes in current liabilities		(120	)
Operating cash flow	$	495
Net additions to properties	$	180
Changes in other assets		(80	)
Investing cash flow	$	100
Issuance/redemption of long-term debt	$	(190	)
Dividends paid		(220	)
Financing cash flow	$	(410	)
Net cash increase	$	185

  

Prepare a pro forma income statement, balance sheet, and cash flow statement for Kiwi Fruit assuming a 10 percent increase in sales. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Input all amounts as thousands of dollars. Round earnings per share to 2 decimal places. Omit the "$" sign in your response.)

    

Kiwi Fruit Company Pro Forma Income Statement
Net sales	$
Cost of goods sold
Gross profit	$
Operating expense
Operating income	$
Other income
Net interest expense
Pretax income	$
Income tax
Net income	$
Earnings per share	$
Shares outstanding

  

Kiwi Fruit Company Pro Forma Cash Flow Statement
Net income	$
Depreciation and amortization
Changes in operating assets
Changes in current liabilities
Operating cash flow	$
Net additions to property	$
Changes in other assets
Investing cash flow	$
Issuance/redemption of long-term debt	$
Dividends paid
Financing cash flow	$
Net cash increase	$

   

Kiwi Fruit Company Pro Forma Balance Sheet
Cash and equivalents	$
Operating assets
Property, plant, and equipment
Other assets
Total assets	$
Current liabilities	$
Long-term debt
Other liabilities
Total liabilities	$
Paid in capital	$
Retained earnings
Total equity	$
Total liabilities and equity	$

Answer in ~ 600-700 words

Explain the Australian dividend imputation credit system and how it applies in Australia. Include an analysis of how the receipt of franking credits will result in differing returns for Australian resident and international investors.

Select a large U.S. public corporation you are familiar with or which interests you. It should be on the Fortune 500 list. Using the company's most recent annual report (or Form 10-K) from the company's Investor Relations web page and other credible internet sources, develop a short (1.5 to 2 page) profile of the corporation. Obtain and attach a PDF version of the most recent annual report (or Form 10-K) from the company's web site. Include the following information:

1. Name of the corporation and location of corporate headquarters.
2. State of incorporation.
3. The stock exchange on which the company's stock is traded.
4. Nature of its operations.
5. The fiscal year end date of the annual report you used.
6. Total assets on the balance sheet.
7. Total revenues on the recent income statement.
8. Net income on the income statement.
9. The basic earnings per share reported on the recent income statement.
10. The depreciation method used by the corporation.
11. The inventory method used by the corporation. If the company does not report inventory on its balance sheet, state that in your report.
12. Description of classes of stock (e.g. common, preferred, Class A, etc.) and the number of shares authorized, issued and outstanding for each class, from the balance sheet or notes.
13. Market price of the stock on 1/31/19 (Yahoo finance or other stock quote site).
14. High and low prices of stock for the past 12 months (Yahoo finance or other stock quote site).
15. Dividends paid for each of share of stock during the year covered by the annual report from the income statement or notes.
16. The name of the Registered Public Accounting Firm who audited the company's financial statements.
17. Discuss something that you found interesting in the annual report, that you didn't know before.
18. If you had $10,000 to invest, would you invest in the stock of the corporation you chose. Provide your opinion and support your opinion with evidence from your research.

Please include the links for the cited info, annual report & try to do a more recent report.

Schrader Cellars uses the FIFO method in its two department process costing system: Fermenting (grape sorting is part of the fermentation process) and Packaging. Direct materials (grapes) are added at the beginning of the fermenting process and at the end of the packaging process (bottles). Conversion costs are added evenly throughout each process. Data from the month of december for the Fermenting Department are below:

Beginning work in process inventory:

            Units in beginning work in process inventory            3,000 gallons

            Materials costs                                                            $122,000

            Conversion costs                                                         $7,000

            Percentage complete with respect to materials           100%

            Percentage complete with respect to conversion        50%

Units started into production during the month                      5,000 gallons

Materials costs added during the month                                 $250,000

Conversion costs added during the month                             $30,000

Ending work in process inventory:

            Units in ending work in process                                 2,000 gallons

            Percentage complete with respect to materials           100%

            Percentage complete with respect to conversion        75%

REQUIRED:

1. Prepare a FIFO production report for the Fermentation Department for Schrader Cellars for the month ended December 31, 2018.

Schrader Cellars uses the FIFO method in its two department process costing system: Fermenting (grape sorting is part of the fermentation process) and Packaging. Direct materials (grapes) are added at the beginning of the fermenting process and at the end of the packaging process (bottles). Conversion costs are added evenly throughout each process. Data from the month of december for the Fermenting Department are below:

Beginning work in process inventory:

            Units in beginning work in process inventory            3,000 gallons

            Materials costs                                                            $122,000

            Conversion costs                                                         $7,000

            Percentage complete with respect to materials           100%

            Percentage complete with respect to conversion        50%

Units started into production during the month                      5,000 gallons

Materials costs added during the month                                 $250,000

Conversion costs added during the month                             $30,000

Ending work in process inventory:

            Units in ending work in process                                 2,000 gallons

            Percentage complete with respect to materials           100%

            Percentage complete with respect to conversion        75%

REQUIRED:

1. Prepare a FIFO production report for the Fermentation Department for Schrader Cellars for the month ended December 31, 2018.

If you desire to have $5,000,000 in your retirement account at the age of 65, how much must you invest each year, if you start investing at the age of 25, 35, and 45. Assuming you can earn an average annual return of 8%.

A company is manufacturing building bricks and fire bricks. Both production require two processes. Brick forming and Heat treatment. The requirements for the two bricks are:

	Building Bricks	Fire Bricks
Forming per 100 bricks	3 hours	2 hours
Heating treatment per 100 bricks	2 hours	5 hours
Total cost of the two departments in one months were:
Forming	$ 21 200
Heat treatment	$ 48 800
Units produced during the month was:	130 000	70 000

Require:

Prepare statement of manufacturing costs for the two types of bricks.

Explain the types of Intangible Assets.

Cost of Goods Sold

Pietro Frozen Foods, Inc., produces frozen pizzas. For next year, Pietro predicts that 49,400 units will be produced, with the following total costs:

Direct materials	?
Direct labor	69,000
Variable overhead	27,000
Fixed overhead	240,000

Next year, Pietro expects to purchase $124,500 of direct materials. Projected beginning and ending inventories for direct materials and work in process are as follows:

	Direct materials Inventory	Work-in-Process Inventory
Beginning	$6,000	$13,000
Ending	$5,900	$15,000

Pietro expects to produce 49,400 units and sell 48,700 units. Beginning inventory of finished goods is $42,500, and ending inventory of finished goods is expected to be $34,000.

Required:

1. Prepare a statement of cost of goods sold in good form.

Pietro Frozen Foods, Inc.
Statement of Cost of Goods Sold
For the Coming Year
	$
	$
	$

2. What if the beginning inventory of finished goods decreased by $5,000? What would be the effect on the cost of goods sold?
  by $

New-Project Analysis

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $940,000, and it would cost another $19,500 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $500,000. The machine would require an increase in net working capital (inventory) of $8,000. The sprayer would not change revenues, but it is expected to save the firm $444,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 40%.

1. What is the Year 0 net cash flow?
   $
2. 
   
3. 
   
4. What are the net operating cash flows in Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar.

   Year 1	$
   Year 2	$
   Year 3	$

5. 
   
6. What is the additional Year 3 cash flow (i.e, the after-tax salvage and the return of working capital)? Do not round intermediate calculations. Round your answer to the nearest dollar.
   $
7. 
   
8. 
   
9. If the project's cost of capital is 10 %, what is the NPV of the project? Do not round intermediate calculations. Round your answer to the nearest dollar.
   $
   
   Should the machine be purchased?

Fred’s Fun-Time Arcade Rentals-Accounting Cycle On December 1, 2018, Fred and Patsy Forrest formed a corporation called Fred’s Fun-Time Arcade Rentals. The newly formed corporation rents retro video arcade games, pinball machines, dunk tanks, photo booths, moon bounces and more for businesses, community centers, schools, group events, and parties. Fred’s Fun-Time Arcade Rentals immediately began operations by taking over the location of Arcade Alley Games, a vintage classic arcade game rental company that closed. Fred’s Fun-Time Arcade Rentals, uses the following accounts: Cash                                                    Income Taxes Payable Accounts Receivable                          Capital Stock Prepaid Rent                                                   Retained Earnings Unexpired Insurance                                      Dividends Office Supplies                                               Income Summary Arcade Game Machines                                 Rental Fees Revenue Accumulated Depreciation:                       Salaries Expense Arcade Game Machines                          Maintenance Expense Notes Payable                                  Utilities Expense Accounts Payable                                           Rent Expense Interest Payable                                           Office Supplies Expense Salaries Payable                                           Depreciation Expense: Arcade Game Machines Dividends Payable                                          Interest Expense Unearned Rental Fees                                Income Taxes Expense                                              The corporation performs adjusting entries monthly. Closing entries are performed annually on December 31. During December, the corporation entered into the following transactions: Dec. 1   Issued to Fred and Patsy Forrest 30,000 shares of capital stock in exchange for a total of $300,000 cash. Dec. 1   Purchased for $240,000 all of the arcade game machines formerly owned by Arcade Alley Games. Paid $90,000 cash and issued a one-year note payable for $150,000. The note, plus all 12-months of accrued interest, are due November 30, 2019. Dec. 1   Paid $15,000 to Sunshine Realty as three months’ advance rent for warehouse used to store the arcade game machines and office formerly occupied by Arcade Alley Games. Dec. 4 Purchased office supplies on account from Office Depot, $1,300. Payment is due in 30 days. (These supplies are expected to last for several months; debit the Office Supplies asset account.) Dec. 8 Received $6,000 cash as advance payment on pinball arcade game rentals from Party Planners, Inc. (Credit Unearned Rental Fees.) Dec. 12 Paid salaries for the first two weeks in December, $5,400. Dec. 15 Excluding the advance from Party Planners, Inc., arcade game rental fees earned during the first 15 days of December amounted to $22,000, of which $14,000 was received in cash. Dec. 17 Purchased on account from Arcade Restoration, Inc., $400 in parts needed to repair a dunk tank machine. (Debit an expense account.) Payment is due in 10 days. Dec. 23 Collected $2,100 of the accounts receivable recorded on December 15. Dec. 26 Rented a video poker machine to O’Malley’s Pub at a price of $150 per day, to be paid when the video poker machine is returned. O’Malley’s Pub expects to keep the video poker machine for a month. Dec. 26 Paid biweekly salaries, $5,400. Dec. 27 Paid the account payable to Arcade Restoration, Inc., $400. Dec. 28 Declared a dividend of 10 cents per share, payable on January 15, 2019. Dec. 29 Purchased a 12-month insurance policy for $6,000. The policy goes into effect on January 1, 2018. Dec. 31 Received a bill from Verizon Communications for phone service for the month of December, $700. Payment is due in 30 days. Dec. 31 Arcade game rental fees earned during the second half of December amounted to $25,000, of which $19,000 was received in cash. Data for Adjusting Entries a. The advance payment of rent on December 1 covered a period of three months. b. The annual interest rate on the note payable to Arcade Alley Games is 6 percent. c. The arcade game machines are being depreciated by the straight-line method over a period of eight years. d. Office supplies on hand at December 31 are estimated at $700. e. During December, the company earned $3,700 of the rental fees paid in advance from Party Planners, Inc. on December 8. f. As of December 31, six days’ rent on the pinball machines rented to O’Malley’s Pub on December 26 has been earned. g. Salaries earned by employees since the last payroll date (December 26) amounted to $1,600 as of month-end. h. It is estimated that the company is subject to a combined federal and state income tax rate of 30 percent of income before income taxes (total revenue minus all expenses other than income taxes). These taxes will be paid in 2019. Instructions Perform the following steps of the accounting cycle for the month of December: 1.    Journalize the December transactions. Do not record adjusting entries at this point. 2.    Post the December transactions to the appropriate ledger accounts. 3.    Prepare the unadjusted trial balance. 4.    Prepare the necessary adjusting entries for December. 5.    Post the December adjusting entries to the appropriate ledger accounts. 6.    Prepare an income statement and statement of retained earnings for the year ended December 31, and a balance sheet (in report form) as of December 31 7.    Prepare closing entries and post to ledger accounts. 8.    Prepare an after-closing trial balance as of December 31.

What do you understand by impairment of long-lived tangible asset?

Expenditures made to extend an asset's life are called revenue expenditures.

True False

Arnez Company’s annual accounting period ends on December 31, 2017. The following information concerns the adjusting entries to be recorded as of that date.

1. An analysis of the company's insurance policies provided the following facts.
     

Policy	Date of Purchase	Months of Coverage	Cost
A	April 1, 2015	24	$	11,832
B	April 1, 2016	36		10,584
C	August 1, 2017	12		9,432