Robinson Inc. Balance Sheets As at December 31 Assets 2021 2020 Cash 600,000 $ 400,000 Accounts receivable 1,100,000 1,300,000 Inventory 400,000 600,000 Investments-held to meet short-term cash commitments 200,000 Investments-financial asset at amortized cost 100,000 Property, plant, and equipment 4,200,000 3,400,000 Accumulated depreciation (2,000,000) (1,500,000) $ 4,600,000 $ 4,200,000 Total Liabilities and shareholders' equity Accounts payable 100,000 $ 150,000 Bank loans 2,700,000 2,400,000 Bonds payable 413,860 416,849 Preferred shares 300,000 Ordinary shares 300,000 400,000 Retained earnings 786,140 833,151 $ 4,600,000 $ 4,200,000 Total other Information: Ordinary shares were redeemed during the year at their book value. The face value of the bonds is $400,000; they pay a coupon rate of 7% per annum. The effective rate of interest is 6% per annum. Net income was $100,000. There was an ordinary stock dividend valued at $20,000, and cash dividends were also paid. Interest expense for the year was $100,000. Income tax expense was $50,000. Robinson arranged for a $500,000 bank loan to finance the purchase of equipment. Robinson sold equipment with a net book value of $150,000 (original cost $200,000) for $180,000 cash. Robinson leased right-of-use equipment valued at $250,000. Robinson has adopted a policy of reporting cash flows arising from the payment of interest and dividends as operating activities. a. Prepare a statement of cash flows for the year ended December 31, 2021, using the indirect method. b. Discuss how the transaction(s) above that are not reported on the statement of cash flows are reported in the financial statements. Balance sheet:
Robinson Inc. Balance Sheets As at December 31 Assets 2021 2020 Cash 600,000 $ 400,000 Accounts receivable 1,100,000 1,300,000 Inventory 400,000 600,000 Investments-held to meet short-term cash commitments 200,000 Investments-financial asset at amortized cost 100,000 Property, plant, and equipment 4,200,000 3,400,000 Accumulated depreciation (2,000,000) (1,500,000) $ 4,600,000 $ 4,200,000 Total Liabilities and shareholders' equity Accounts payable 100,000 $ 150,000 Bank loans 2,700,000 2,400,000 Bonds payable 413,860 416,849 Preferred shares 300,000 Ordinary shares 300,000 400,000 Retained earnings 786,140 833,151 $ 4,600,000 $ 4,200,000 Total other Information: Ordinary shares were redeemed during the year at their book value. The face value of the bonds is $400,000; they pay a coupon rate of 7% per annum. The effective rate of interest is 6% per annum. Net income was $100,000. There was an ordinary stock dividend valued at $20,000, and cash dividends were also paid. Interest expense for the year was $100,000. Income tax expense was $50,000. Robinson arranged for a $500,000 bank loan to finance the purchase of equipment. Robinson sold equipment with a net book value of $150,000 (original cost $200,000) for $180,000 cash. Robinson leased right-of-use equipment valued at $250,000. Robinson has adopted a policy of reporting cash flows arising from the payment of interest and dividends as operating activities. a. Prepare a statement of cash flows for the year ended December 31, 2021, using the indirect method. b. Discuss how the transaction(s) above that are not reported on the statement of cash flows are reported in the financial statements. Balance sheet:
Chapter14: Security Structures And Determining Enterprise Values
Section: Chapter Questions
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Transcribed Image Text:Robinson Inc.
Balance Sheets
As at December 31
Assets
2021
2020
Cash
600,000 $
400,000
Accounts receivable
1,100,000
1,300,000
Inventory
400,000
600,000
Investments-held to meet short-term cash commitments
200,000
Investments-financial asset at amortized cost
100,000
Property, plant, and equipment
4,200,000
3,400,000
Accumulated depreciation
(2,000,000) (1,500,000)
$ 4,600,000 $ 4,200,000
Total
Liabilities and shareholders' equity
Accounts payable
100,000 $
150,000
Bank loans
2,700,000
2,400,000
Bonds payable
413,860
416,849
Preferred shares
300,000
Ordinary shares
300,000
400,000
786,140
833,151
Retained earnings
$ 4,600,000 $ 4,200,000
Total
Other Information:
Ordinary shares were redeemed during the year at their book value.
The face value of the bonds is $400,000; they pay a coupon rate of 7% per annum. The effective rate of interest is 6%
per annum.
Net income was $100,000.
There was an ordinary stock dividend valued at $20,000, and cash dividends were also paid.
Interest expense for the year was $100,000. Income tax expense was $50,000.
Robinson arranged for a $500,000 bank loan to finance the purchase of equipment.
Robinson sold equipment with a net book value of $150,000 (original cost $200,000) for $180,000 cash.
Robinson leased right-of-use equipment valued at $250,000.
Robinson has adopted a policy of reporting cash flows arising from the payment of interest and dividends as operating
activities.
a.
Prepare a statement of cash flows for the year ended December 31,
2021,
using the indirect method.
Discuss how the transaction(s) above that are not reported on the statement of cash
flows are reported in the financial statements.
b.
Balance sheet:
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