ABBEY CORPORATION Statement of Financial Position December Download

Transcript
E5-11 (Statement of Financial Position Preparation) Presented below is the
adjusted trial balance of Abbey Corporation at December 31, 2015.
23
3
Debit
Credit
Cash
$
?
Supplies
1,200
Prepaid Insurance
1,000
Equipment
48,000
Accumulated Depreciation—Equipment
$9,000
Trademarks
950
Accounts Payable
10,000
Salaries and Wages Payable
500
Unearned Service Revenue
2,000
Bonds Payable (due 2022)
9,000
Share capital- ordinary
10,000
Retained Earnings
20,000
Service Revenue
10,000
Salaries and Wages Expense
9,000
Insurance Expense
1,400
Rent Expense
1,200
Interest Expense
900
Total
$
?
$
?
Additional information:
1. Net loss for the year was $2,500.
2. No dividends were declared during 2015.
Instructions
Prepare a classified balance sheet as of December 31, 2015.
Page 1 of 8
EXERCISE 5-11 (25–30 minutes)
ABBEY CORPORATION
Statement of Financial Position
December 31, 2015
Assets
Property, plant, and equipment
Equipment .............................................................
£48,000
Less: Accumulated depreciation—equipment ..
9,000
Total property, plant, and equipment ...........
£39,000
Intangible assets
Trademark.............................................................
950
Current assets
Supplies ................................................................
1,200
Prepaid insurance ................................................
1,000
Cash ......................................................................
6,850*
Total current assets .......................................
9,050
Total assets.................................................................
£49,000
Equity and Liabilities
Equity
Share capital—ordinary .......................................
£10,000
Retained earnings (£20,000 – £2,500**) ................
17,500
Total equity .....................................................
£27,500
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Non-current liabilities
Bonds payable ......................................................
£ 9,000
Current liabilities
Accounts payable .................................................
£10,000
Salary and Wages payable ...................................
500
Unearned service revenue ...................................
2,000
Total current liabilities..................................
12,500
Total liabilities ...............................................
21,500
Total equity and liabilities ..........................................
£49,000
*[£49,000 – £39,000 – £950 – £1,200 – £1,000]
**[£10,000 – (£9,000 + £1,400 + £1,200 + £900)]
Page 3 of 8
E5-16 (Preparation of a Statement of Cash Flows) A comparative statement of
financial position for Orozce Corporation is presented below.
December 31
Assets
2015
2014
Cash
$ 63,000
$ 22,000
Accounts receivable
82,000
66,000
Inventory
180,000
189,000
Land
71,000
110,000
Equipment
270,000
200,000
Accumulated depreciation—equipment
(69,000)
(42,000)
Total
$597,000
$545,000
Liabilities and Stockholders’ Equity
Accounts payable
$ 34,000 $ 47,000
Bonds payable
150,000
200,000
Share capital- ordinary ($1 par)
214,000 164,000
Retained earnings
199,000 134,000
Total
$597,000 $545,000
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Additional information:
1. Net income for 2015 was $105,000. No gains or losses were recorded in 2015.
2. Cash dividends of $40,000 were declared and paid.
3. Bonds payable amounting to $50,000 were retired through issuance of ordinary
shares.
Instructions
(a) Prepare a statement of cash flows for 2015 for Orozce Corporation.
(b) Determine Orozce Corporation’s current cash debt coverage, cash debt
coverage, and free cashflow. Comment on its liquidity and financial flexibility.
Page 4 of 8
EXERCISE 5-16 (25–35 minutes)
(a)
OROZCO CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2015
Cash flows from operating activities
€105,000
Net income ..............................................................
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense ....................................... €27,000
Decrease in inventory ......................................
9,000
Increase in accounts receivable ...................... (16,000)
Decrease in accounts payable ......................... (13,000)
7,000
€112,000
Net cash provided by operating activities ............
Cash flows from investing activities
Sale of land .............................................................
39,000
Purchase of equipment .......................................... (70,000)
Net cash used by investing activities ...................
(31,000)
Cash flows from financing activities
Payment of cash dividends....................................
(40,000)
Net increase in cash .....................................................
41,000
Cash at beginning of year ............................................
22,000
Cash at end of year ......................................................
€ 63,000
Noncash investing and financing activities were issue of ordinary shares to
retire €50,000 of bonds outstanding.
Page 5 of 8
EXERCISE 5-16 (Continued)
(b) Current cash debt coverage =
Net cash provided by operating activities
=
Average current liabilities
€112,000
=
(€34,000 + €47,000)/2
= 2.77 to 1
Cash debt coverage =
Net cash provided by operating activities
=
Average total liabilities
€184,000 + €247,000
=
€112,000 ÷
2
= 0.52 to 1
Page 6 of 8
Free Cash Flow Analysis
Net cash provided by operating activities .........................
€112,000
Less: Purchase of equipment ............................................
(70,000)
Dividends ..................................................................
(40,000)
Free cash flow .....................................................................
€ 2,000
Orozco has acceptable liquidity. Its financial flexibility is good. It might be
noted that it substantially reduced its long-term debt in 2015 which will help its
financial flexibility.
Page 7 of 8
Page 8 of 8
Similar
Liabilities
Liabilities