The 2014 comparative balance sheet and 2014 income statement of Conrad 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. Conrad Industries Ltd. Comparative Balance Sheet December 31, 2014 and 2013   2014 2013 Increase/(Decrease)        Assets          Cash      238,000        215,200 ?    Accounts Receivable      303,200        259,300 ?    Inventories      358,300        348,200 ?    Prepaid expenses        35,350            43,100 ?    Intangible assets      205,000        205,000 ? Plant assets, net 1,105,000        910,000 ? Total Assets 2,244,850      1,980,800        Liabilities          Accounts payable      254,300        240,000 ?    Accrued liabilities      415,300        410,000 ?    Income tax payable      115,000        135,400 ? Long-term notes payable      845,400        910,500 ?      Stockholders' Equity       Common Stock      295,500        275,300 ? Retained earnings      345,600        295,400 ? Treasury stock        (26,250)        (285,800) ? Total liabilities and stockholders' equity 2,244,850      1,980,800     Conrad Industries Ltd Income Statement Year Ended December 31,2014 Revenues and gains:        Sales revenue 2,224,000      Gain on sale of plant assets      115,500        Total revenues and gains        2,339,500 Expenses        Cost of goods sold 1,305,000      Depreciation expense      165,400      Other operating expense      405,400        Total expenses        1,875,800 Income before income taxes           463,700 Income tax expense        265,000 Net Income          198,700     Notes     Acquisition of plant asset during 2014          600,900 Sale proceed from sale of plant asset          356,000 Receipt for issuance of notes payable          384,900 Payment for note payable        450,000 Dividend paid          148,500 Book value of equipment sold          240,500   Requirements 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.   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.

Question

Scenario:

The 2014 comparative balance sheet and 2014 income statement of Conrad 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.

Conrad Industries Ltd.

Comparative Balance Sheet

December 31, 2014 and 2013

 

2014

2013

Increase/(Decrease)

       Assets

 

 

 

   Cash

     238,000

       215,200

?

   Accounts Receivable

     303,200

       259,300

?

   Inventories

     358,300

       348,200

?

   Prepaid expenses

       35,350

           43,100

?

   Intangible assets

     205,000

       205,000

?

Plant assets, net

1,105,000

       910,000

?

Total Assets

2,244,850

     1,980,800

 

     Liabilities

 

 

 

   Accounts payable

     254,300

       240,000

?

   Accrued liabilities

     415,300

       410,000

?

   Income tax payable

     115,000

       135,400

?

Long-term notes payable

     845,400

       910,500

?

     Stockholders' Equity

 

 

 

Common Stock

     295,500

       275,300

?

Retained earnings

     345,600

       295,400

?

Treasury stock

       (26,250)

       (285,800)

?

Total liabilities and stockholders' equity

2,244,850

     1,980,800

 

 

Conrad Industries Ltd

Income Statement

Year Ended December 31,2014

Revenues and gains:

 

 

   Sales revenue

2,224,000

 

   Gain on sale of plant assets

     115,500

 

     Total revenues and gains

 

     2,339,500

Expenses

 

 

   Cost of goods sold

1,305,000

 

   Depreciation expense

     165,400

 

   Other operating expense

     405,400

 

     Total expenses

 

     1,875,800

Income before income taxes

 

        463,700

Income tax expense

 

     265,000

Net Income

 

       198,700

 

 

Notes

   

Acquisition of plant asset during 2014

 

       600,900

Sale proceed from sale of plant asset

 

       356,000

Receipt for issuance of notes payable

 

       384,900

Payment for note payable

 

     450,000

Dividend paid

 

       148,500

Book value of equipment sold

 

       240,500

 

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.

 

  1. Which category of the statement of cash flow is considered as the most important? Why?

 

  1. Prepare a complete statement of cash flows for 2014 using the indirect method.

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