Question

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. The directors have asked each student from your accounting course to assist with the needed clarification and have put forward the following financial information. 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 H

Simple Things Industries Ltd.

Comparative Balance Sheet

December 31, 2014 and 2013

 

2014

2013

Increase/(Decrease)

        Assets

 

 

 

   Cash

     238,000

        138,000

 ?

   Accounts Receivable

     325,000

        300,000

 ?

   Inventories

     280,000

        350,000

 ?

   Prepaid expenses

       28,000

           35,000

 ?

   Intangible assets

     328,000

        328,000

 ?

Plant assets, net

 1,200,000

        980,000

 ?

Total Assets

 2,399,000

     2,131,000

 

      Liabilities

 

 

 

   Accounts payable

     180,000

        240,000

 ?

   Accrued liabilities

     310,000

        415,000

 ?

   Income tax payable

     105,000

        100,000

 ?

Long-term notes payable

 1,350,000

        800,000

 ?

      Stockholders' Equity

 

 

 

Common Stock

     330,000

        295,000

 ?

Retained earnings

     450,000

        345,500

 ?

Treasury stock

   (326,000)

         (64,500)

 ?

Total liabilities and stockholders' equity

 2,399,000

     2,131,000

 

 

 

Simple Things Industries Ltd

 

Income Statement

 

Year Ended December 31,2014

 

Revenues and gains:

 

 

 

   Sales revenue

 2,450,000

 

 

   Gain on sale of plant assets

     103,200

 

 

      Total revenues and gains

 

     2,553,200

 

Expenses

 

 

 

   Cost of goods sold

     945,000

 

 

   Depreciation expense

     185,000

 

 

   Other operating expense

     398,500

 

 

      Total expenses

 

     1,528,500

 

Income before income taxes

 

     1,024,700

 

Income tax expense

 

        245,000

 

Net Income

 

        779,700

Notes

   

 

Acquisition of plant asset during 2014

 

        610,000

 

Sale proceed from sale of plant asset

 

        308,200

 

Receipt for issuance of notes payable

 

        870,000

 

Payment for note payable

 

        320,000

 

Dividend paid

 

        675,200

 

Book value of equipment sold

 

        205,000

 

             

 

 

 

RequiremenT

 

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

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