The 2014 comparative balance sheet and 2014 income statement of Byfield Co 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. Simple Things Industries Ltd. Comparative Balance Sheet December 31, 2014 and 2013   2014 2013 Increase/(Decrease) Assets       Cash 110,000 70,000 ? Accounts Receivable 300,000 325,000 ? Supplies 350,000 280,000 ? Prepaid expenses 35,000 28,000 ? Intangible assets 215,000 215,000 ? Equipment, net 1,200,000 980,000 ? Total Assets 2,210,000 1,898,000   Liabilities       Accounts payable 250,000 140,000 ? Accrued liabilities 210,000 215,000 ? Income tax payable 78,000 98,500 ? Long-term notes payable 602,000 725,000 ? Stockholders' Equity       Common Stock 410,000 330,000 ? Retained earnings 730,000 450,000 ? Treasury stock (70,000) (60,500) ? Total liabilities and stockholders' equity 2,210,000 1,898,000   Income Statement Year Ended December 31,2014 Revenues and gains:     Sales revenue 2,100,000   Gain on sale of Equipment 85,000   Total revenues and gains   2,185,000 Expenses     Cost of goods sold 900,000   Depreciation expense 150,000   Other operating expense 350,000   Total expenses   1,400,000 Income before income taxes   785,000 Income tax expense   210,000 Net Income   575,000 Notes     Acquisition of Equipment during 2014   540,000 Sale proceed from sale of Equipment   255,000 Receipt for issuance of notes payable   27,000 Payment for note payable   150,000 Dividend paid   295,000 Book value of equipment sold   170,000 Requirements 1. Reconstruct the company’s comparative balance sheet for 2013/2014 using the information 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. Expert Answer Simple Things Industries Ltd. Comparative Balance Sheet December 31, 2014 and 2013   2014 2013 Increase/(Decrease) Assets       Cash $110,000 $70,000 $40,000 Accounts Receivable $300,000 $325,000 -$25,000 Supplies $350,000 $280,000 $70,000 Prepai... view the full answer  This problem has been solved!  See the answer

Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter16: Statement Of Cash Flows
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The 2014 comparative balance sheet and 2014 income statement of Byfield Co 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.

Simple Things Industries Ltd.

Comparative Balance Sheet

December 31, 2014 and 2013

 

2014

2013

Increase/(Decrease)

Assets

     

Cash

110,000

70,000

?

Accounts Receivable

300,000

325,000

?

Supplies

350,000

280,000

?

Prepaid expenses

35,000

28,000

?

Intangible assets

215,000

215,000

?

Equipment, net

1,200,000

980,000

?

Total Assets

2,210,000

1,898,000

 

Liabilities

     

Accounts payable

250,000

140,000

?

Accrued liabilities

210,000

215,000

?

Income tax payable

78,000

98,500

?

Long-term notes payable

602,000

725,000

?

Stockholders' Equity

     

Common Stock

410,000

330,000

?

Retained earnings

730,000

450,000

?

Treasury stock

(70,000)

(60,500)

?

Total liabilities and stockholders' equity

2,210,000

1,898,000

 

Income Statement

Year Ended December 31,2014

Revenues and gains:

   

Sales revenue

2,100,000

 

Gain on sale of Equipment

85,000

 

Total revenues and gains

 

2,185,000

Expenses

   

Cost of goods sold

900,000

 

Depreciation expense

150,000

 

Other operating expense

350,000

 

Total expenses

 

1,400,000

Income before income taxes

 

785,000

Income tax expense

 

210,000

Net Income

 

575,000

Notes

   

Acquisition of Equipment during 2014

 

540,000

Sale proceed from sale of Equipment

 

255,000

Receipt for issuance of notes payable

 

27,000

Payment for note payable

 

150,000

Dividend paid

 

295,000

Book value of equipment sold

 

170,000

Requirements

1. Reconstruct the company’s comparative balance sheet for 2013/2014 using the information 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.

Expert Answer

Simple Things Industries Ltd. Comparative Balance Sheet December 31, 2014 and 2013   2014 2013 Increase/(Decrease) Assets       Cash $110,000 $70,000 $40,000 Accounts Receivable $300,000 $325,000 -$25,000 Supplies $350,000 $280,000 $70,000 Prepai... view the full answer 

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