The financial statements for Linked Ltd. are shown below: During the year, the company purchased a capital
Question:
The financial statements for Linked Ltd. are shown below:
During the year, the company purchased a capital asset valued at $30,000; payment was made by issuing common shares. Additional capital assets were acquired for cash. Changes in other accounts were typical transactions.
Required:
1. Prepare the SCF using the indirect method. Include required note disclosure of non-cash transactions. Omit the separate disclosure of cash flow for interest, investment income, and income tax.
2. Explain the company’s cash transactions for the year, based on the SCF.
Statement of Comprehenslve Income For the year ended 31 December 20X5 Sales revenue $1,821,300 Investment revenue 37,500 Operating expenses, including cost of goods sold 793,200 Depreciation expense 105,000 Goodwill impairment 116,100 Administrative expenses 621,000 Interest expense 45,300 Gain on sale of investment 6,000 Income tax expense 73,800 Net earnings and comprehensive income $ 110.400 Statement of Financlal Position As of 31 December 20X5 20X4 Assets $ 82,500 $ 90,000 Cash Accounts receivable 307,500 210,000 Merchandise inventory 694,200 630,000 Prepaid insurance 7,800 19,200 Investments 75,000 120,000 Land 270,000 270,000 Capital assets, net of accumulated depreciation 1,434,000 930,000 Goodwill, net of impairment 173,700 289,800 $3.044.700 $2,559,000
Step by Step Answer:
Requirement 1 LINKED LIMITED Statement of Cash Flows Year ended 31 December 20x5 Noncash transaction ...View the full answer
Intermediate Accounting Volume 1
ISBN: 9781260306743
7th Edition
Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod Dick
Related Video
Depreciation of non-current assets is the process of allocating the cost of the asset over its useful life. The cost of the asset includes the purchase price, any additional costs incurred to bring the asset to its current condition and location, and any other costs that are directly attributable to the asset. The useful life of the asset is the period over which the asset is expected to be used by the company. To calculate the depreciation, companies use different methods such as straight-line, declining-balance, sum-of-the-years\'-digits, units-of-production, and group depreciation. The chosen method will depend on the type of asset, the company\'s accounting policies, and the accounting standards that are applicable. The straight-line method allocates an equal amount of the asset\'s cost over its useful life, while the declining-balance method calculates depreciation at a fixed rate, typically double the straight-line rate, but the amount of depreciation decreases over time. The sum-of-the-years\'-digits method is similar to the declining-balance method, but the rate of depreciation is calculated using a fraction that is based on the useful life of the asset. It\'s important to note that the depreciation expense will be recorded on the company\'s income statement and the accumulated depreciation will be recorded on the company\'s balance sheet. This will decrease the value of the asset on the balance sheet over time.
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