For the just completed year, Hanna Company had net income of $134,000. Balances in the company’s...

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Accounting

For the just completed year, Hanna Company had net income of$134,000. Balances in the company’s current asset and currentliability accounts at the beginning and end of the year were asfollows:
December 31
End of
Year Beginning of Year
Current assets:
Cash and cash equivalents $ 61,000 $ 83,000
Accounts receivable $ 166,000 $ 196,000
Inventory $ 435,000 $ 367,000
Prepaid expenses $ 11,500 $ 13,800
Current liabilities:
Accounts payable $ 356,000 $ 392,000
Accrued liabilities $ 8,000 $ 12,700
Income taxes payable $ 38,000 $ 33,000
The Accumulated Depreciation account had total credits of$58,000 during the year. Hanna Company did not record any gains orlosses during the year.
The company’s income statement for the year appears below:
Sales $ 1,080,000
Cost of goods sold 600,000
Gross margin 480,000
Selling and administrative expenses 310,000
Income before taxes 170,000
Income taxes 36,000
Net income $ 134,000
Required:
Using the direct method, convert the company's income statementto a cash basis. (Adjustment amounts that are to bededucted should be indicated with a minus sign.)

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4.2 Ratings (652 Votes)

Hanna Company Income Statement Particulars Computation Amount Sales collection from Debtors a Working note 1 111000000 Cost of Goods sold b Working note 2 63600000 Gross margine ab See Answer

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	December 31
	End of Year		Beginning of Year
Current assets:
Cash and cash equivalents	$	61,000	$	83,000
Accounts receivable	$	166,000	$	196,000
Inventory	$	435,000	$	367,000
Prepaid expenses	$	11,500	$	13,800
Current liabilities:
Accounts payable	$	356,000	$	392,000
Accrued liabilities	$	8,000	$	12,700
Income taxes payable	$	38,000	$	33,000


Sales	$	1,080,000
Cost of goods sold		600,000
Gross margin		480,000
Selling and administrative expenses		310,000
Income before taxes		170,000
Income taxes		36,000
Net income	$	134,000