You are the chief accountant for Jared Jo Your assistant hasprepared an income statement for the current year and has developedthe following additional information by analyzing changes in thecompany’s balance sheet accounts.
FOR THE YEAR ENDED DECEMBER 31, 2019
Revenue:
Net sales $9,500,000
Interest income 320,000
Gain on sales of marketable securities 70,000
Total revenue and gains $9,890,000
Costs and expenses:
Cost of goods sold $4,860,000
Operating expenses (including depreciation of $700,000)3,740,000
Interest expense 270,000 Income tax expense 300,000
Loss on sales of plant assets 90,000
Total costs, expenses, and losses 9,260,000
Net income $ 630,000
Changes in the company’s balance sheet accounts over the yearare summarized as follows.
1. Accounts Receivable decreased by $85,000.
2. Accrued Interest Receivable increased by $15,000.
3. Inventory decreased by $280,000, and Accounts Payable tosuppliers of merchandise decreased by $240,000.
4. Short-term prepayments of operating expenses decreased by$18,000, and accrued liabilities for operating expenses increasedby $35,000.
5. The liability for Accrued Interest Payable decreased by$16,000 during the year.
6. The liability for Accrued Income Taxes Payable increased by$25,000 during the year.
7. The following schedule summarizes the total debit and creditentries during the year in other balance sheet accounts.
Marketable Securities $ 120,000 $ 210,000
Notes Receivable (cash loans made to others) 250,000 190,000
Plant Assets (see paragraph 8) 3,800,000 360,000
Notes Payable (short-term borrowing) 620,000 740,000
Bonds Payable 1,100,000
Capital Stock 50,000
Additional Paid-in Capital (from issuance of stock) 840,000
Retained Earnings (see paragraph 9) 320,000 630,000
8. The $360,000 in credit entries to the Plant Assets account isnet of any debits to accumulated depreciation when plant assetswere retired. The $360,000 in credit entries represents the bookvalue of all plant assets sold or retired during the year.
9. The $320,000 debit to Retained Earnings represents dividendsdeclared and paid during the year. The $630,000 credit entryrepresents the net income for the year.
10. All investing and financing activities were cashtransactions.
11. Cash and cash equivalents amounted to $448,000 at thebeginning of the year and to $330,000 at year-end.
Instructions You are to prepare a statement of cash flows forthe current year. Cash flows from operating activities are to bedetermined by the direct method. Uses of cash should be reflectedas negative balances. Show your calculations for the following: a.Cash received from customers. b. Interest received. c. Cash paid tosuppliers and employees. d. Interest paid. e. Income taxes paid. f.Proceeds from sales of marketable securities. g. Proceeds fromsales of plant assets. h. Proceeds from issuing capital stock.
