Exam 16: Understanding Corporate Annual Reports: Basic Financial Statements

The indirect and direct methods of preparing the statement of cash flows show the same amount of net cash provided by operating activities.

The income statement and comparative balance sheets for Sterling Company are presented below: Sterling Company Income Statement For the Year Ended Decamber 31, 2015 Sales \5 86,000 Cost of goods sold 311,000 Depreciation expense 14,000 Amortization expense 3,000 Wage expense 88,000 Rent expense 24,000 Loss on sale of fixed assets 2,600 Interest expense 4,900 Income taxexpense 56,000 Total expenses 503,500 Net income \8 2,500 December 31, 2014 December 31, 2015 Cash \ 16,300 \ 19,900 Accounts receivable 27,900 36,300 Inventory 53,900 48,200 Prepaid rent 1,800 2,000 Land 22,000 32,000 Fixed assets 118,000 130,000 Accumulated depreciation (39,000) (46,000) Patent Total assets \2 11,900 \2 34,400 Accounts payable 21,100 27,700 Wages payable 5,700 6,200 Interest payable 400 1,600 Taxes payable 7,900 6,800 Bonds payable, due 2020 36,000 44,000 Commonstock 32,000 35,000 Retained earnings 108,800 113,100 Total liabilities and Stockholders'equity \2 11,900 \2 34,400 Required: Prepare a statement of cash flows using the indirect method for the year ended December 31,2015.No land was sold in 2015.Land was purchased using bonds payable for $8,000 and cash for $2,000.A fixed asset was sold in 2015 for $4,100.Purchases of fixed assets and patents were for cash.

The balances on December 31,2015 are available for Matthew Company: Accounts payable \ 2,550 Accounts receivable 3,550 Accumulated depreciation 6,250 Retained earnings, December 31, 2014 6,450 Cash 2,300 Cost of goods sold 52,300 Depreciation expense 2,500 Dividends declared 8,800 Equipment 29,000 Income taxexpense 10,700 Interest expense 1,150 Inventory 6,250 Long-term notes payable 11,500 Paid-in capital 4,450 Prepaid rent 350 Rent expense 4,000 Sales 120,000 Wage expense 41,900 Wages payable 3,000 Required: Prepare a multiple-step income statement for the year ended December 31,2015.

What is earnings per share?

Nonoperating items on a multiple-step income statement include interest expense and interest income.

The following balances are available for Thompson Company on December 31,2015: Accumulated depreciation \ 21,800 Accounts payable 11,200 Accounts receivable 9,800 Additional paid-in capital 24,000 Common stock 6,000 Cash 7,400 Fixed assets 89,400 Interest payable 2,400 Inventory 13,600 Long-term notes payable 28,000 Trepaid rent 2,500 Retained earrings ? Nages payable 6,400 Required: Prepare a classified balance sheet at December 31,2015.

What is gross margin?

The cash received from the sale of common stock is included in the ________ section of the statement of cash flows.

Old equipment having a book value of $12,000 was sold for $20,000 cash.New equipment was purchased for $25,000 cash.Additional equipment was acquired in exchange for a $17,000 long-term note payable.The net cash flow from investing activities was ________.

Free cash flow equals net cash from operating activities minus capital expenditures.

Wisconsin Company reported selected accounts as follows: December 31,2014 December 31,2015 Accounts payable \ 20,000 \ 30,000 Gonds payable \ 40,000 \ 28,000 Common stock \ 20,000 \ 24,000 Dividends of $8,800 were declared and paid by December 31,2015.What was the net cash flow from financing activities for the year ended December 31,2015?

Manufacturers have several inventory accounts that do NOT include ________.

Land is not depreciated.

Wyoming Company had the following information for the year ended December 31,2015 and December 31,2016. December 31,2016 December 31,2015 Equipment \ 186,000 \ 156,000 Accumulated depreciation 62,000 54,000 Depreciation expense for the year ended December 31,2016 was $18,000.Equipment that cost $20,000 was sold at a $3,000 loss.The equipment had accumulated depreciation of $10,000. Required: Prepare the investing section of the statement of cash flows for the year ended December 31,2016.

Michael Company had the following data: Retained earnings, January 1, 2015 \4 5,000 Depreciation expense for 2015 \ 7,000 Cost of goods sold for 2015 \1 02,000 Paid-in capital, January 1, 2015 \2 6,000 Rent expense for 2015 \1 2,000 Sales for 2015 \ 194,000 Dividends declared in 2015 \ 15,000 Wage expense for 2015 \4 0,000 Prepaid rent, January 1, 2015 \ 2,000 What is the balance in Retained Earnings on December 31,2015?

The inventory method a company uses does not affect its income statement.

Beth Company reported sales on account of $250,000,an increase in inventory of $70,000,and a decrease in accounts receivable of $20,000.How much cash was collected from customers?

John Company reported cost of goods sold of $910,000,an increase in inventory of $100,000,and an increase in accounts payable of $40,000.How much cash was paid to suppliers?

Details about Property,Plant and Equipment,such as the age of plant assets and the types of plant assets,are typically reported ________.