PLEASE CORRECT AND SOLVE THE FOLLOWING QUESTIONS, AND PLEASE PUT IN TABLES FOR BETTER UNDERSTANDING.

Q2

Preparing Operating Activities Section of the Statement of Cash Flows-Direct Method The income statement and comparative balance sheets for Mug Shots, Inc., (a photography studio) are presented below. MUG SHOTS, INC. MUG SHOTS, INC. Income Statement Comparative Balance Sheets For Month Ended December 31 Dec. 31 Nov. 30 Revenue Assets Sales revenue Cash $12,840 $6,000 Expenses $37.200 Accounts receivable 3,000 Cost of goods sold $20,040 Inventory 38,760 28,800 Wages expense 5,640 Prepaid rent 9,000 10,800 Interest expense 360 Equipment 36,000 21.600 Advertising expense 2,160 Accumulated depreciation 840 Rent expense 1,800 Total assets $98,760 $67.200 Depreciation expense 840 Liabilities Total expenses 30.840 Accounts payable $30,000 $28,800 Income before taxes 6,360 Interest payable 360 Income tax expense 2.226 Wages payable 2,640 Net income $4.134 Income tax payable 2,226 Unearned revenue 600 Notes payable 36,000 14,400 Equity Common stock 24,000 24,000 Retained earnings 2,934 0 Total liabilities and equity $98,760 $67.200 Use the information in these financial statements and the frameworks in Exhibits 4.5 and 4.6 to compute Mug Shots' cash flow from operating activities using the direct method. Note: Do not use a negative sign with any of your answers.Note: Do not use a negative sign with any of your answers. MUG SHOTS, INC. Computation of Cash Flow from Operating Activities For Month Ended December 31 Net Sales Cost of Wage Interest Advertising Rent Depreciation Income tax income revenue goods sold expenses expense expense expense expense expense 4,134 2.226 v $ $ 37,200 5 20.040 $ 5,640 360 2,610 * $ 1,800 840 Adjustments: 0 x Add depreciation expense Subtract (add) nonoperating gains (losses) Subtract the change in operating assets - $ 3,000 - 5 9.960 v - $ Ov - 5 $-1,800 (operating investments) Change in Change in Change in Change in Change in Change in Change in Change in accounts payable inventory IN/A N/A N/A prepaid rent 500 v + 5 1.200 v + $ 360 v + 5 Ov+ $ Ov+s 2,226 v Add the change in operating liabilities 2.640 v + $ (operating financing) Change in Change in Change in Change in Change in Change in Change in Change in IN/A unearned revenue accounts payable wages payable interest payable IN/A IN/A income tax payable $ 0 x = $ 840 x - 5 34,800 x - $ 28,800 x - $ 3,000 x - 0 x - $ 2,160 x - $ - $ Cash from Receipts Payments for Payments Payments Payments Payments Payments from customers merchandise for wages for interest for advertising for rent for income tax operationsReconciling Cash Flows from Operations to Net Income The income statement and comparative balance sheets for Mug Shots, Inc., (a photography studio) are presented below. MUG SHOTS, INC. MUG SHOTS, INC. Income Statement Comparative Balance Sheets For Month Ended December 31 Dec. 31 Nov. 30 Revenue Assets Sales revenue Cash $12,840 $6,000 Expenses $37.200 Accounts receivable 3,000 Cost of goods sold $20,040 Inventory 38,760 28,800 Wages expense 5,640 Prepaid rent 9,000 10.800 Interest expense 360 Equipment 36,000 21,600 Advertising expense 2,160 Accumulated depreciation -840 0 Rent expense 1,800 Total assets $98,760 $67.200 Depreciation expense 340 Liabilities Total expenses 30.840 Accounts payable $30,000 $28.800 Income before taxes 6.360 Interest payable 360 Income tax expense 2.226 Wages payable 2,640 Net income $4,134 Income tax payable 2,226 Unearned revenue 600 Notes payable 36,000 14,400 Equity Common stock 24,000 24,000 Retained earnings 2,934 0 Total liabilities and equity $98,760 $67.200Required Compute cash flows from operating activities for Mug Shots, Inc., using the indirect method. MUG SHOTS, INC. Cash Flow from Operating Activities-Indirect Method Net income 4.134 Adjustments: Depreciation expense 5 840 Adjust for changes in: Accounts receivable (3.000) Inventory (9.960) Prepaid rent 1,800 Unearned revenue 600 Accounts payable 1,200 Wages payable 2,640 Interest payable 360 Income tax payable 2,226 w Total adjustments (4.654) * Cash flow from operating activities 840Preparing a Complete Statement of Cash Flows The income statement and comparative balance sheets for Mug Shots, Inc., (a photography studio) are presented below. MUG SHOTS, INC. MUG SHOTS, INC. Income Statement Comparative Balance Sheets For Month Ended December 31 Dec. 31 Nov. 30 Revenue Assets Sales revenue Cash $21,400 $10,000 Expenses $62,000 Accounts receivable 5,000 Cost of goods sold $33,400 Inventory 64,600 48,000 Wages expense 9,400 Prepaid rent 15,000 18,000 Interest expense 600 Equipment 60,000 36,000 Advertising expense 3,600 Accumulated depreciation -1,400 Rent expense 3,000 Total assets $164,600 $112,000 Depreciation expense 1,400 Liabilities Total expenses 51,40 Accounts payable $50,000 $48,000 Income before taxes 10.600 Interest payable 600 Income tax expense 3.710 Wages payable 4,400 Net income $6,890 Income tax payable 3,710 Unearned revenue 1,000 Notes payable 60,000 24,000 Equity Common stock 40,000 40,000 Retained earnings 4,890 Total liabilities and equity $164,600 $112,000Required Prepare a complete statement of cash flows for December using the indirect method for cash flows from operating activities. MUG SHOTS, INC. Statement of Cash Flows For Month Ended December 31 Cash flow from operating activities Net income 6.890 Adjustments: Depreciation expense S 1,400 Adjust for changes in: Accounts receivable (5,000) Inventory (16,600] Prepaid rent 3,000 Unearned revenue 1,000 Accounts payable 2,000 Wages payable 4,400 Interest payable 600 Income tax payable 3.710 Total adjustments (6.890) x Net cash provided by operating activities 1,400 Cash flow from investing activities Purchase of equipment (24,000) Net cash provided by investing activities (24,000) Cash flow from financing activities Bank loan 36,000 Payment of dividend (2.000) Net cash provided by financing activities 34,000 Net cash increase 11,400 Cash beginning of period 10,000 Cash end of period S 21,400Reconstructing Investing Cash Flows The balance sheet of Jack's Snacks, Inc., reports the following amounts: End-of-Year Beginning-of-Year Property, plant, and equipment at cost $1,340,000 $1,200,000 Accumulated depreciation -300,000 -280,000 Property, plant, and equipment, net 1.040,000 920,000 Additional information During the year, Jack's Snacks disposed of a used piece of equipment. The original cost of the equipment was $160,000 and, at the time of disposal, the accumulated depreciation on the equipment was $120,000. The purchaser of the used piece of equipment paid in cash, and Jack's Snacks reported a gain of $70,000 on the disposal. All acquisitions of new property, plant, and equipment were paid for in cash. Answer the following questions using the FSET. Note: Indicate a decrease in an account category by including a negative sign with the amount in the FSETs below. a 1. How much cash did Jack's Snacks receive from the used equipment disposal? Disposal using FSET: Balance Sheet Income Statement Cash Noncash Contra Contrib Earned Net Transaction Asset Assets Assets = Liabilities + Capital Capital Revenues - Expenses = Income 110,000 (160,000) 120,000 x 70,000 70,000 0 x Cash Gain on equipment disposal x - Accum Dep'n Retained earnings |Gain on equipment disposal Cash Jack's Snacks receive from the used equipment disposal: $a 2. How would this amount be reported on the statement of cash flows? The company would report: Cash inflow of * $ 110,000 in the investing * section of the statement of cash flows. b 1. How much cash did Jack's Snacks spend to acquire new property, plant, and equipment during the year? Balance Sheet Income Statement Cash Noncash Contra Contrib Earned Net Transaction Asset Assets Assets Liabilities + Capital + Capital Revenues Expenses = Income Beg. Bal Disposal 0 x 0 * 0 x = +x 4x - Purchase 0 x 0 x = End. Bal. 0 x Cash Jack's Snacks spent to acquire new property, plant, and equipment (do not use a negative sign with your answer): $ 0 b 2. How would this amount be reported on the statement of cash flows? The company would report (do not use a negative sign with your answer): Cash outflow of * $ 300,000 in the investing * section of the statement of cash flows.c. How much depreciation expense did Jack's Snacks record during the year? Balance Sheet Income Statement Contra Contrib Earned Net Cash Noncash Asset Assets Assets = Liabilities + Capital + Capital Revenues Expenses Income Transaction Beg. Bal. 0 x Disposal 0 * = 0 X 0 * - = 0 * 0 * 0 x - 0 * = 0 x = 0 X Dep'n expense End. Bal. 0 x Depreciation expense: $ 140,000 d. Now assume that Jack's Snacks issued common stock (instead of using cash) to acquire the new property, plant, and equipment. How would this transaction be reported on the statement of cash flows? Net cash used for investing activities * xCalculating Ratios to Assess Liquidity and Solvency Select information from One World Cafe's statement of cash flows and comparative balance sheets follow. Statement of Cash Flows, Year Ended Dec. 31, 2021 Operating cash flows $88,000 Investing cash flow Purchase of plant assets $(90,000) Proceeds from sale of plant assets 8,000 Investing cash flows (82,000) Financing cash flows (14,000) Net cash decrease (E,GOD) Cash at beginning of year 24,000 Cash at end of the year $16,000 Balance Sheet, Dec. 31 2021 2020 Assets Cash $16,000 $24,000 Accounts receivable 44,000 56,000 Inventory 188,000 132,000 Prepaid advertising 24,000 18,000 Plant assets, net 272,000 218,000 $544,000 $448,000 Liabilities and Equity Accounts payable $54,000 $28,000 Wages payable 12,000 5,000 Income tax payable 6,000 9.000 Notes payable 10,000 Equity 462,000 406,000 $544,000 $448,000Required 1. Calculate the operating cash flow to current liabilities (OCFCL) ratio for One World Cafe. Assume that the notes payable are due within the year and are a current liability. Numerator Denominator OCFCL: Net operating cash flow w / Average current liabilities 48,000 / 5 62,000 - 1.42 2. Calculate One World Cafe's operating cash flow to capital expenditures (OCFCX] ratio. What observations can you make about your findings for parts 1 and 2? Numerator Denominator OCFOX: Net operating cash flow * / Annual capital expenditures BB,000 * / $ 90,000 - 0.98 Choose the statement that best summarizes your observations. Operating cash flows exceeded average current liabilities but not capital expenditures. 3. Calculate the free cash flow (FCF) for One World Cafe. (2,000)Using a Spreadsheet to Create a Statement of Cash Flows The comparative balance sheets and income statement for Rocky Road Bicycles, Inc., are as follows. ROCKY ROAD BICYCLES, INC. Comparative Balance Sheets At December 31 2021 2020 Assets Cash $212,000 $192,000 Accounts receivable 312,000 448,000 Inventory 1,504,000 1,056,000 Prepaid rent 136,000 144,000 Plant assets 3,384,000 2,720,000 Less accumulated depreciation (1.124,000 (976,000) Total assets $4,424,000 $3,584,000 Liabilities Accounts payable $432,000 $224,000 Wages payable 36,000 40,000 Income tax payable BE,000 72,000 Equity Common stock 2,284,000 2,000,000 Retained earnings 1,584,000 1,248,000 Total liabilities and equity $4,424,000 $3,584,000 Additional Information Rocky Road reported net income of $652,000 in 2021. Depreciation expense was $244,000 in 2021. Rocky Road sold plant assets during 2021. The plant assets originally cost $176,000, with accumulated depreciation of $96,000 , and were sold for a gain of $32,000. Rocky Road declared and paid a $316,000 cash dividend in 2021.Required Use a spreadsheet to create a statement of cash flows for Rocky Road Bicycles, Inc. Cash Flow Spreadsheet for Rocky Road Bicycles, Inc. G O, I, Effect of Change on Cash Flow No Effect Total or F? 2021 2020 Change Operating Investing Financing on Cash F. G. H. I Assets Cash 212,000 192,000 20,000 Accounts receivable 312,000 448,000 (136,000] 136,000 136,000 Inventory +x 1,504,000 1,056,000 448,000 (448,000) (448,000] Prepaid rent 136,000 144,000 (8,000] 8,000 B,0Q0 Plant assets, net 1 * 3,384,000 * 2,720,000 * Depreciation expense 564,000 x Plant assets purchased 244,000 x (B40,000] x Plant assets sold (32,000) 112,000 Liabilities Accounts payable 0 X 432,000 * 224,000 * 208,000 208,000 Wages payable O X 36,000 x 40,000 X [4,000) (4,000] Income tax payable 38,000 * 72,000 x 16,000 16,000 Notes payable New borrowing Borrowing repayments Shareholders' Equity Common Stock New issue of common stock 0 * 2,284,000 x 2,000,000 * 284,000 284,000 Repurchase of common stock O X O X O X Retained earnings Net income 652,000 Dividends (316,000) (316,000) * Totals 780,000 (728,000) (32,000) 20,000ROCKY ROAD BICYCLES, INC. Statement of Cash Flows For Year Ended December 31, 2021 Cash flows from operating activities Net income 652,000 Add (deduct) items to convert net income to cash basis Depreciation 244,000 Gain on sale of plant assets (32,000) Accounts receivable 136,000 Inventory (448,000) Prepaid rent 8,000 Accounts payable 208,000 Wages payable [4,000) Income tax payable 16,000 Net cash provided by operating activities 780,000 Cash flows from investing activities Purchase of plant assets ($40,000) Proceeds from sale of plant assets 112,000 Net cash used for investing activities (728,000) Cash flows from financing activities Issuance of common stock 284,000 Payment of dividends (316,000) Net cash provided by financing activities (32,000) Net cash increase 20,000 Cash beginning of period 192,000 Cash end of period 212,000