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

Ken 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

 

 

Ken 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

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

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