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Selected financial information for Frank Corporation is presented below. Selected transactions for the current year are as follows: a. Purchased investment securities for $5,400
Selected financial information for Frank Corporation is presented below. Selected transactions for the current year are as follows: a. Purchased investment securities for $5,400 cash. b. Borrowed $15,800 on a two-year, 8 percent interest-bearing note. c. During the year, sold machinery for its carrying amount; received $11,600 in cash. d. Purchased machinery for $50,800; paid $9,400 in cash and signed a four-year note payable to the dealer for $41,400. e. Declared and paid a cash dividend of $10,400 on December 31 of the current year. Selected account balances at December 31 of the current and prior years are as follows: December 31 Current Prior Cash Accounts receivable Year $78,800 $21,400 Year 17,400 12,200 52,400 60,800 7,400 10,800 Accrued wages payable 1,000 1,400 5,400 3,200 Inventory Accounts payable Income tax payable One-fourth of the sales and one-third of the purchases were made on credit. FRANK CORPORATION Statement of Earnings For the Current Year Ended December 31 Sales revenue $408,000 Cost of sales 272,000 Gross profit 136,000 Expenses Salaries and wages $51,400 Depreciation 9,600 Rent (no accruals) 6,200 Interest (no accruals) 12,600 Income tax 12,200 Total expenses 92,000 Net earnings $ 44,000 Required: 1. Prepare a statement of cash flows for the year ended December 31 of the current year by using the indirect method. (Negative answers should be indicated by a minus sign.) Answer is complete but not entirely correct. FRANK CORPORATION Statement of Cash Flows For the Year Ended December 31 Current Year Cash flows from operating activities: Net loss Add (deduct) items not affecting cash: Depreciation expense Increase in accounts receivable Increase in inventory Decrease in income tax payable Decrease in wages payable Increase in income tax payable Net cash flows from operating activities Cash flows from investing activities: Purchase of investments Sale of machinery Purchase of machinery 9,600 504,080 (8,480) 1,320 2,200 2,200 (5,400) 11,600 50,800x Net cash flows used in investing activities Cash flows from financing activities: Borrowing on long-term note Payment of cash dividend Net cash flows from financing activities Net decrease in cash during the year 15,800 (10,400) Cash, beginning of the year Cash, end of the year $ (5,000) 510,920 $ 505,920 57,000 5,400 568,320 78,800 x 647,120 2. This part of the question is not part of your Connect assignment. 3. Compute the quality of earnings ratio and the capital expenditures ratio. (Enter your answers in numbers and not in percentages. Round the final answers to 2 decimal places.) Answer is complete but not entirely correct. Quality of eamings ratio (4.33) Capital expenditures ratio (5.53)
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