You are the controller for Attrex Corp. Your staff has prepared an income statement for the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You are the controller for Attrex Corp. Your staff has prepared an income statement for the current year and has developed the following additional information by analysing the changes in the company's balance sheet accounts for year end. Revenue: Net sales... $3,200,000 Interest revenue . 40,000 Gain on sales of marketable securities. Total revenue and gains... 34,000 $3,274,000 Costs and expenses: Cost of goods sold .... Operating expenses (including depreciation of $150,000).. Interest expense.. Income tax expense. $1,620,000 1,240,000 42,000 100,000 Loss on sales of plant assets. 12,000 Total costs, expenses, and losses 3,014,000 $ 260,000 Net income.. Additional Information 1. Accounts receivable increased by S60,000. 2. Accrued interest receivable decreased by $2,000. 3. Inventory decreased by $60,000, and accounts payable to suppliers of merchandise decreased by $16,000. 4. Short-term prepayments of opex increased by $6,000, and accrued liabilities for opex decreased by $8,000. 5. The liability for accrued interest payable increased by $4,000 during the year. 6. The liability for accrued income taxes payable decreased by $14,000 during the year. 7. The following schedule summarizes the total debit and credit entries during the year in other balance sheet accounts: Debit Entries Credit Entries Marketable Securities .. $ 60,000 $ 38,000 Notes Receivable (cash loans made to borrowers) 44,000 28,000 Plant Assets (see paragraph 8) .... Notes Payable (short-term borrowing) Capital Stock Additional Paid-in Capital-Capital Stock 500,000 36,000 92,000 82,000 20,000 160,000 Retained Earnings (see paragraph 9) . 120,000 260,000 8. The $36,000 in credit entries to the Plant Assets account is net of any debits to Accumulated Depreciation when plant assets were retired. Thus, the $36,000 in credit entries represents the book value of all plant assets sold or retired during the year. 9. The $120,000 debit to Retained Earnings represents dividends declared and paid during the year. The $260,000 credit entry represents the net income shown in the income statement. 10. All investing and financing activities were cash transactions. 11.Cash and cash equivalents amounted to $244,000 at the beginning of the year and to $164,000 at year-end. Instructions a) Prepare a statement of cash flows for the current year. Use the indirect method of reporting cash flows. Place brackets around dollar amounts representing cash out-flows. Prepare the usual 3 sections: CF from ops, CF from Investing & CF from Financing activities. b) Explain the primary reason why: 1. The amount of cash provided by operating activities was substantially greater than the company's net income. 2. There was a net decrease in cash over the year, despite the substantial amount of cash provided by operating activities. c) As Attrex's controller, you think that through more efficient cash management, the company could have held the increase in accounts receivable for the year to $10,000, without affecting net income. Explain how holding down the growth in receivables affects cash. Compute the effect that limiting the growth in receivables to $10,000 would have had on the company's net increase or decrease in cash (and cash equivalents) for the year. You are the controller for Attrex Corp. Your staff has prepared an income statement for the current year and has developed the following additional information by analysing the changes in the company's balance sheet accounts for year end. Revenue: Net sales... $3,200,000 Interest revenue . 40,000 Gain on sales of marketable securities. Total revenue and gains... 34,000 $3,274,000 Costs and expenses: Cost of goods sold .... Operating expenses (including depreciation of $150,000).. Interest expense.. Income tax expense. $1,620,000 1,240,000 42,000 100,000 Loss on sales of plant assets. 12,000 Total costs, expenses, and losses 3,014,000 $ 260,000 Net income.. Additional Information 1. Accounts receivable increased by S60,000. 2. Accrued interest receivable decreased by $2,000. 3. Inventory decreased by $60,000, and accounts payable to suppliers of merchandise decreased by $16,000. 4. Short-term prepayments of opex increased by $6,000, and accrued liabilities for opex decreased by $8,000. 5. The liability for accrued interest payable increased by $4,000 during the year. 6. The liability for accrued income taxes payable decreased by $14,000 during the year. 7. The following schedule summarizes the total debit and credit entries during the year in other balance sheet accounts: Debit Entries Credit Entries Marketable Securities .. $ 60,000 $ 38,000 Notes Receivable (cash loans made to borrowers) 44,000 28,000 Plant Assets (see paragraph 8) .... Notes Payable (short-term borrowing) Capital Stock Additional Paid-in Capital-Capital Stock 500,000 36,000 92,000 82,000 20,000 160,000 Retained Earnings (see paragraph 9) . 120,000 260,000 8. The $36,000 in credit entries to the Plant Assets account is net of any debits to Accumulated Depreciation when plant assets were retired. Thus, the $36,000 in credit entries represents the book value of all plant assets sold or retired during the year. 9. The $120,000 debit to Retained Earnings represents dividends declared and paid during the year. The $260,000 credit entry represents the net income shown in the income statement. 10. All investing and financing activities were cash transactions. 11.Cash and cash equivalents amounted to $244,000 at the beginning of the year and to $164,000 at year-end. Instructions a) Prepare a statement of cash flows for the current year. Use the indirect method of reporting cash flows. Place brackets around dollar amounts representing cash out-flows. Prepare the usual 3 sections: CF from ops, CF from Investing & CF from Financing activities. b) Explain the primary reason why: 1. The amount of cash provided by operating activities was substantially greater than the company's net income. 2. There was a net decrease in cash over the year, despite the substantial amount of cash provided by operating activities. c) As Attrex's controller, you think that through more efficient cash management, the company could have held the increase in accounts receivable for the year to $10,000, without affecting net income. Explain how holding down the growth in receivables affects cash. Compute the effect that limiting the growth in receivables to $10,000 would have had on the company's net increase or decrease in cash (and cash equivalents) for the year.
Expert Answer:
Answer rating: 100% (QA)
Answer Answer1 Answer 2 I Because the operating cash flow is no more net inc... View the full answer
Related Book For
Accounting Information Systems
ISBN: 9780132871938
11th edition
Authors: George H. Bodnar, William S. Hopwood
Posted Date:
Students also viewed these accounting questions
-
You are the controller for Minuteman Enterprises, a manufacturer of rocket booster engines and various aerospace products. Though there are many commercial customers for most of the companys...
-
You are the controller for a medium- sized electronic parts manufacturer. Your company already has ISO 9001 certification, which has immensely helped in impressing new customers. Your CEO now wants...
-
Current Ratio Loan Provision Assume that you are the controller of a small, growing sporting goods company. The prospects for your firm in the future are quite good, but like many other firms, it has...
-
Transfer pricing is a significant area of concern for taxing authorities and multinational entities (MNE). Examine at least two (2) potential transfer pricing issues that create concern for both...
-
1. Develop a financial income statement and balance sheet by combining the chart of account items on the DP Systems income statement and balance sheet in Tables 39 and 310. 2. List the chart of...
-
The following accounting events apply to Marys Designs for the year 2016: Asset Source Transactions 1. Began operations by acquiring $90,000 of cash from the issue of common stock. 2. Performed...
-
The actual confidence level conf_level does not equal the theoretical confidence level 0.01 in Example 3.2. Explain why. Data from Example 3.2 Data form Figure 3.3 Example 3.2 (Confidence interval...
-
As of December 31, 2016, Flowers Company had total assets of $130,000, total liabilities of $50,000, and common stock of $70,000. The companys 2016 income statement contained revenue of $30,000 and...
-
A girl delivering newspapers covers her route by traveling 8.66 blocks north, 3.28 blocks west, and 4.00 blocks south. Find the angle (a positive value in , between 0 and 360) of her resultant...
-
C&C Properties is an S corporation that owns two rental real estate undertakings: Carrot Plaza and Cantaloupe Place. Both properties produce an annual $10,000 operating loss. C&Cs Schedule K...
-
HH2H has three departments: accounting, engineering, and sales. All three departments have been using the same computer system which operates bookkeeping software, engineering design software, and...
-
According to a New York Times article in April 2019, the Boeing Company cut its production of Boeing 737 Max jets after two of these jets crashed. If the company lays off some workers as a result of...
-
Customer relationship management software is used to manage and nurture a firms interactions with its current and potential clients. What information would Airbus want to know about its current and...
-
How might an airline use data analytics to evaluate different services provided to business and casual travelers to maximize revenue?
-
Which of the following software tools is more associated with getting the data ready for analysis? a. Tableau Desktop b. Tableau Prep c. Python d. SAS e. None of the above
-
COPAS has no statutory authority. However, if a COPAS model accounting procedure is included in a contract, the participating companies are contractually bound to comply with the provisions of the...
-
The following totals are used to create a CVP Income Statement for... The following totals are used to create a CVP Income Statement for Frederick Company for FY2020: Frederick Company Selected...
-
Les has collected stamps in his spare time for years. He purchased many of his stamps at a price much lower than the current market value. Les recently lost his job as a carpenter. Since his wife...
-
The Good Burger Company owns and operates a chain of fast-food restaurants located throughout the southeastern portion of the United States. The companys main headquarters is in Atlanta. A major...
-
Barbara Darko is an independent CPA and Certified Fraud Examiner hired by a joint task force of the SEC and the U. S. attorneys office to investigate a case of financial statement fraud. The case...
-
Why do accountants tend to prefer process- oriented flowcharts rather than object- oriented diagrams?
-
The following extracts have been taken from the subsidiary books of the business owned by D. Jenkinson for the month of April 2017. Required: (a) The name of the source document which will have been...
-
In which book should all the correcting double entries first be entered?
-
After preparing its draft final accounts for the year ended 31 March 2013 and its draft statement of financial position as at 31 March 2013 a business discovered that the inventory lists used to...
Study smarter with the SolutionInn App