Given the information provided by the financial statements in Situation 2, what would you tell Abrahams? (As part of your answer, calculate the firm's cash flows.) The Donahoo Western Furnishings Company was formed on December 31, 2017, with $1,000,0oo in equity plus $500,000 in long-term debt. On January 1, 2018, all the firm's capital was held in cash. The following transactionsoccurred during January 2018:• January 2: Donahoo purchased $1,000,000 worth of furniture for resale. It paid $500,000 in cash and financed the balance using trade credit that required payment in 60 days.• January 3: Donahoo sold $250,000 worth of furniture that it had paid $200,000 to acquire. The entire sale was on credit terms of net 90 days.• January 15: Donahoo purchased more furniture for $200,000. This time, it used trade credit for the entire amount of the purchase, with credit terms of net 60 days.January 31: Donahoo sold $500,000 worth of furniture, for which it had paid $400,000. The furniture was sold for 10 percent cash down, with the remainder payable in 90 days. In addition, the firm paid a cash dividend of$100,000 to its stockholders and paid off $250,000 of its long-term debt.Situation 2At the beginning of 2018, Mary Abrahams purchased a small business, the Maitz Company, whose income statement and balance sheets are shown below.Income Statement for the Maitz Company for 2018$ 175,000(105,000$ 70,000SalesCost of goods soldGross profitsOperating expenses:DepreciationAdministrative expensesSelling expensesTotal operating expensesOperating profitsInterest expenseProfits before taxes$ 5,00020,00026,000S (51,000$ 19,000(3,000$ 16,000(8,000)$ 8,000TaxesNet profitsBalance Sheets for the Maitz Company for 2017 and 2018Assets20172018Current assets:Cash$ 8,000$ 10,000Accounts receivable15,00022,000$ 45,00020,00025,000InventoryTotal current assets$ 55,000Fixed assets:$ 50,000(15,000$ 35,00012,000$ 92,000$ 55,000(20,000)$ 35,00010,000$100,000Grossfixed assetsAccumulated depreciationNet fixed assetsOther assetsTOTAL ASSETSDebt (Liabilities) and EquityCurrent debt:Accounts payable$ 10,000$ 12,0008,0005,000$ 25,000Accruals7,0005,000$ 22,00015,000$ 37,000$ 55,000$ 92,000Short-term notesTotal current debtLong-tem debt15,000$ 40,000S 60,000$100,000Total debtEquityTOTAL DEBT AND EQUITYThe firm has been profitable, but Abrahams has been disappointed by the lack of cash flows. She had hoped to have about $10,000 a year available for personal living expenses. However, there never seems to be much cash available forpurposes other than business needs. Abrahams has asked you to examine the financial statements and explain why, although they show profits, she does not have any discretionary cash for personal needs. She observed, "I thought thatI could take the profits and add back depreciation to find out how much cash I was generating. However, that doesn't seem to be the case. What's happening?"

Cash flow statement The purpose of preparing the cash flow statement which provides the details of…

Answered: Given the information provided by the…

Given the information provided by the financial statements in Situation 2, what would you tell Abrahams? (As part of your answer, calculate the firm's cash flows.)

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter14: Statement Of Cash Flows (cashflow)

Section: Chapter Questions

Problem 1R: The comparative balance sheet of Prime Sports Gear, Inc., at December 31, the end of the fiscal...

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The comparative balance sheet of Prime Sports Gear, Inc., at December 31, the end of the fiscal year, is as follows: Additional data obtained from the records of Prime Sports Gear are as follows: a. Net income for 2013 was 121,610. b. Depreciation reported on income statement for 2013 was 46,500. c. Purchased 165,000 of new equipment, putting 90,000 cash down and issuing 75,000 of bonds for the balance. d. Old equipment originally costing 19,500, with accumulated depreciation of 7,950, was sold for 8,000. e. Retired 60,000 of bonds. f. Declared cash dividends of 64,000. g. Issued 1,500 shares of common stock at 27 cash per share. You have been asked to prepare a statement of cash flows for Prime Sports Gear for 2013. Review the worksheet called CASHFLOW that has been provided to assist you in preparing the statement. The worksheet has been designed so that as you make entries in columns D and F, column G will be automatically updated. For example, FORMULA1 should be entered as =B17+D17F17. Columns C and E are to be used to enter letter references for each of the debit and credit entries on the worksheet.
The Donahoo Western Furnishings Company was formed on December 31, 2017, with $1,000,000 in equity plus $500,000 in long-term debt. On January 1, 2018, all the firm's capital was held in cash. The following transactions occurred during January 2018: January 2: Donahoo purchased $1,000,000 worth of furniture for resale. It paid $500,000 in cash and financed the balance using trade credit that required payment in 60 days. January 3: Donahoo sold $250,000 worth of furniture that it had paid $200,000 to acquire. The entire sale was on credit terms of net 90 days. January 15: Donahoo purchased more furniture for $200,000. This time, it used trade credit for the entire amount of the purchase, with credit terms of net 60 days. January 31: Donahoo sold $500,000 worth of furniture, for which it had paid $400,000. The furniture was sold for 10 percent cash down, with the remainder payable in 90 days. In addition, the firm paid a cash dividend of $100,000 to its stockholders and paid off…
The Donahoo Western Furnishings Company was formed on December 31, 2017, with $1,000,000 in equity plus $500,000 in long-term debt. On January 1, 2018, all the firm's capital was held in cash. The following transactions occurred during January 2018: January 2: Donahoo purchased $1,000,000 worth of furniture for resale. It paid $500,000 in cash and financed the balance using trade credit that required payment in 60 days. January 3: Donahoo sold $250,000 worth of furniture that it had paid $200,000 to acquire. The entire sale was on credit terms of net 90 days. January 15: Donahoo purchased more furniture for $200,000. This time, it used trade credit for the entire amount of the purchase, with credit terms of net 60 days. January 31: Donahoo sold $500,000 worth of furniture, for which it had paid $400,000. The furniture was sold for 10 percent cash down, with the remainder payable in 90 days. In addition, the firm paid a cash dividend of $100,000 to its stockholders and paid off…
The Donahoo Western Furnishings Company was formed on December 31, 2017, with $1,000,000 in equity plus $500,000 in long-term debt. On January 1, 2018, all the firm's capital was held in cash. The following transactions occurred during January 2018: January 2: Donahoo purchased $1,000,000 worth of furniture for resale. It paid $500,000 in cash and financed the balance using trade credit that required payment in 60 days. January 3: Donahoo sold $250,000 worth of furniture that it had paid $200,000 to acquire. The entire sale was on credit terms of net 90 days. January 15: Donahoo purchased more furniture for $200,000. This time, it used trade credit for the entire amount of the purchase, with credit terms of net 60 days. January 31: Donahoo sold $500,000 worth of furniture, for which it had paid $400,000. The furniture was sold for 10 percent cash down, with the remainder payable in 90 days. In addition, the firm paid a cash dividend of $100,000 to its stockholders and paid off…
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Robbin Corporation ended its fiscal year on September 30, 2018, with cash of $77 million, accounts receivable of $25 million, property and equipment of $31 million, and other long-term assets of $19 million. The company's liabilities consist of accounts payable of $33 million and long-term notes payable of $23 million. Robbin Corporation has total stockholders' equity of $96 million; of this total, common stock is $26 million. Solve for the company's ending retained earnings and then prepare Robbin Corporation's balance sheet at September 30, 2018. Use a proper heading on the balance sheet. Begin by solving for the company’s ending retained earnings. (Enter your answer in millions.) Robbin Corporation’s ending retained earnings balance is $ million.
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On July 1, 2020, Brigham Corporation purchased Young Company by paying $250,000 cash and issuing a $100,000 note payable to Steve Young. At July 1, 2017, the balance sheet of Young Company was as follows. Cash $ 50,000 Accounts payable $200,000 Accounts receivable 90,000 Stockholders' equity 235,000 Inventory 100,000 $435,000 Land 40,000 Buildings (net) 75,000 Equipment (net) 70,000 Trademarks 10,000 $435,000 The recorded amounts all approximate current values except for land (fair value of $60,000), inventory (fair value of $125,000), and trademarks (fair value of $15,000). Instructions a. Prepare the July 1 entry for Brigham Corporation to record the purchase. b. Prepare the December 31 entry for Brigham Corporation to record amortization of intangibles. The trademark has an estimated useful life of 4 years with a residual value of $3,000.
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