Scenario:  The 2014 comparative balance sheet and 2014 income statement of Simple Things Industries Ltd have just been distributed at a meeting of the company’s board of directors. The members of the board of directors were desirous of knowing the reason or reasons why the cash balance different from the net income. The company uses the indirect method to prepare the statement of cash flows and it is expected that this should be able to provide the needed clarity required by the directors. The directors have asked each student from your accounting course to assist with the needed clarification and have put forward the following financial information grouped according to your surname initial. (Hint!!!! Example surname Brown will use the initial B and that person should only use the info presented in line with the heading with their surname initial. You are not allowed to use info associated with initials other than that of your own as this will result in the forfeiture of the grade.) Having identified the information in line with your surname you are next required to address the requirements outline below. Financial info to be used by surname with initial (W)   Simple Things Industries Ltd. Comparative Balance Sheet December 31, 2014 and 2013   2014 2013 Increase/(Decrease)         Assets          Cash      175,000            15,000  ?    Accounts Receivable      230,000         220,000  ?    Inventories      310,000         340,000  ?    Prepaid expenses        30,000            10,000  ?    Intangible assets      105,000         105,000  ? Equipment, net      860,000         830,000  ? Total Assets  1,710,000      1,520,000         Liabilities          Accounts payable        90,000         140,000  ?    Accrued liabilities      190,000         160,000  ?    Income tax payable      120,000         140,000  ? Long-term notes payable      360,000         450,000  ?       Stockholders' Equity       Common Stock      400,000         250,000  ? Retained earnings      640,000         400,000  ? Treasury stock      (90,000)          (20,000)  ? Total liabilities and stockholders' equity  1,710,000      1,520,000     Simple Things Industries Ltd   Income Statement   Year Ended December 31,2014   Revenues and gains:          Sales revenue  1,900,000        Gain on sale of equipment        20,000           Total revenues and gains        1,920,000   Expenses          Cost of goods sold      850,000        Depreciation expense      190,000        Other operating expense      360,000           Total expenses        1,400,000   Income before income taxes           520,000   Income tax expense           180,000   Net Income           340,000   Notes     Acquisition of plant asset during 2014           320,000 Sale proceed from sale of equipment           120,000 Receipt for issuance of notes payable              10,000 Payment for note payable           100,000 Dividend paid           100,000 Book value of equipment sold           100,000 Requirements Reconstruct the company’s comparative balance sheet for 2013/2014 using the information in line with your surname initial and compute and show the missing figures to include the appropriate sign as a positive or negative figure. Which category of the statement of cash flow is considered as the most important? Why? Prepare a complete statement of cash flows for 2014 using the indirect method using the information in line with your surname initial.

Question

Scenario:

 The 2014 comparative balance sheet and 2014 income statement of Simple Things Industries Ltd have just been distributed at a meeting of the company’s board of directors. The members of the board of directors were desirous of knowing the reason or reasons why the cash balance different from the net income. The company uses the indirect method to prepare the statement of cash flows and it is expected that this should be able to provide the needed clarity required by the directors.

The directors have asked each student from your accounting course to assist with the needed clarification and have put forward the following financial information grouped according to your surname initial. (Hint!!!! Example surname Brown will use the initial B and that person should only use the info presented in line with the heading with their surname initial. You are not allowed to use info associated with initials other than that of your own as this will result in the forfeiture of the grade.)

Having identified the information in line with your surname you are next required to address the requirements outline below.

Financial info to be used by surname with initial (W)

 

Simple Things Industries Ltd.

Comparative Balance Sheet

December 31, 2014 and 2013

 

2014

2013

Increase/(Decrease)

        Assets

 

 

 

   Cash

     175,000

           15,000

 ?

   Accounts Receivable

     230,000

        220,000

 ?

   Inventories

     310,000

        340,000

 ?

   Prepaid expenses

       30,000

           10,000

 ?

   Intangible assets

     105,000

        105,000

 ?

Equipment, net

     860,000

        830,000

 ?

Total Assets

 1,710,000

     1,520,000

 

      Liabilities

 

 

 

   Accounts payable

       90,000

        140,000

 ?

   Accrued liabilities

     190,000

        160,000

 ?

   Income tax payable

     120,000

        140,000

 ?

Long-term notes payable

     360,000

        450,000

 ?

      Stockholders' Equity

 

 

 

Common Stock

     400,000

        250,000

 ?

Retained earnings

     640,000

        400,000

 ?

Treasury stock

     (90,000)

         (20,000)

 ?

Total liabilities and stockholders' equity

 1,710,000

     1,520,000

 

 

Simple Things Industries Ltd

 

Income Statement

 

Year Ended December 31,2014

 

Revenues and gains:

 

 

 

   Sales revenue

 1,900,000

 

 

   Gain on sale of equipment

       20,000

 

 

      Total revenues and gains

 

     1,920,000

 

Expenses

 

 

 

   Cost of goods sold

     850,000

 

 

   Depreciation expense

     190,000

 

 

   Other operating expense

     360,000

 

 

      Total expenses

 

     1,400,000

 

Income before income taxes

 

        520,000

 

Income tax expense

 

        180,000

 

Net Income

 

        340,000

 

Notes

   

Acquisition of plant asset during 2014

 

        320,000

Sale proceed from sale of equipment

 

        120,000

Receipt for issuance of notes payable

 

           10,000

Payment for note payable

 

        100,000

Dividend paid

 

        100,000

Book value of equipment sold

 

        100,000

Requirements

  1. Reconstruct the company’s comparative balance sheet for 2013/2014 using the information in line with your surname initial and compute and show the missing figures to include the appropriate sign as a positive or negative figure.
  2. Which category of the statement of cash flow is considered as the most important? Why?
  3. Prepare a complete statement of cash flows for 2014 using the indirect method using the information in line with your surname initial.

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