The 2011 income statement and the 2011 comparative balance sheet of T-Bar-M Camp, Inc., have just been
Question:
The 2011 income statement and the 2011 comparative balance sheet of T-Bar-M Camp, Inc., have just been distributed at a meeting of the camps board of directors. The directors raise a fundamental question: Why is the cash balance so low? This question is especially troublesome since 2011 showed record profits. As the controller of the company, you must answer the question.
T Bar M Camp, Inc.
Income Statement
Year Ended December 31, 2011
(In thousands)___________________________
Revenues:
Sales revenue.............................................$436
Expenses:
Cost of goods sold.....................................$221
Salary expense........................................... 48
Depreciation expense................................. 46
Interest expense......................................... 13
Amortization expense................................ 11
Total expenses........................................... 339
Net income................................................. $ 97
Requirements
1. Prepare a statement of cash flows for 2011 in the format that best shows the relationship between net income and operating cash flow. The company sold no plant assets or long-term investments and issued no notes payable during 2011. There were no noncash investing and financing transactions during the year. Show all amounts in thousands.
2. Answer the board members question: Why is the cash balance so low? Point out the two largest cash payments during 2011. (Challenge)
3. Considering net income and the company’s cash flows during 2011, was it a good year or a bad year? Give yourreasons.
Step by Step Answer:
Financial accounting
ISBN: 978-0136108863
8th Edition
Authors: Walter T. Harrison, Charles T. Horngren, William Bill Thomas