21.1 HW 1 - 3 Award 19.34 out of 33.34 points IncomeStatement ,2016($in000s Sales $1,680 Costofgoodssold(672 Grossmargin 1,00

21.1 HW 1 - 3 Award 19.34 out of 33.34 points...

This preview shows page 1 out of 4 pages.

Unformatted text preview: 3. Award: 19.34 out of 33.34 points Portions of the financial statements for Clear Transmissions Company are provided below. CLEAR TRANSMISSIONS COMPANY Income Statement For the Year Ended December 31, 2016 ($ in 000s) Sales $1,680 Cost of goods sold (672) Gross margin 1,008 Salaries expense $ 292 Depreciation expense 210 Patent amortization expense 22 Interest expense 64 Loss on sale of cash equivalents 12 (600) Income before taxes 408 Income tax expense (204) Net Income $ 204 CLEAR TRANSMISSIONS COMPANY Selected Accounts from Comparative Balance Sheets December 31, 2016 and 2015 ($ in 000s) Year 2016 2015 Change Cash $120 $112 $ 8 Accounts receivable 232 250 (18) Inventory 446 462 (16) Accounts payable 170 158 12 Salaries payable 86 98 (12) Interest payable 43 32 11 Income taxes payable 33 22 11 Required: Prepare the cash flows from operating activities section of the statement of cash flows for Clear Transmissions Company using the direct method. (Enter your answers in thousands (i.e., 5,000 should be entered as 5). Amounts to be deducted should be indicated with a minus sign.) Cash Flows from Operating Activities: Cash received from customers $ 1,698 Cash paid to suppliers (700) Cash paid to employees (304) Cash paid for interest (69) Cash paid for income taxes Net cash flows from operating activities (215) $ 410 *Red text indicates no response was expected in a cell or a formula­based calculation is incorrect; no points deducted. References Financial Statements Learning Objective: 21­03 Determine cash flows from operating activities by the direct method. Portions of the financial statements for Clear Transmissions Company are provided below. CLEAR TRANSMISSIONS COMPANY Income Statement For the Year Ended December 31, 2016 ($ in 000s) Sales $1,680 Cost of goods sold (672) Gross margin 1,008 Salaries expense $ 292 Depreciation expense 210 Patent amortization expense 22 Interest expense 64 Loss on sale of cash equivalents 12 (600) Income before taxes 408 Income tax expense (204) Net Income $ 204 CLEAR TRANSMISSIONS COMPANY Selected Accounts from Comparative Balance Sheets December 31, 2016 and 2015 ($ in 000s) Year 2016 2015 Change Cash $120 $112 $ 8 Accounts receivable 232 250 (18) Inventory 446 462 (16) Accounts payable 170 158 12 Salaries payable 86 98 (12) Interest payable 43 32 11 Income taxes payable 33 22 11 Required: Prepare the cash flows from operating activities section of the statement of cash flows for Clear Transmissions Company using the direct method. (Enter your answers in thousands (i.e., 5,000 should be entered as 5). Amounts to be deducted should be indicated with a minus sign.) Cash Flows from Operating Activities: Cash received from customers $ 1,698 Cash decrease from sale of cash equivalents (12) Cash paid to suppliers (644) Cash paid to employees (304) Cash paid for interest (53) Cash paid for income taxes (193) Net cash flows from operating activities $ 492 Explanation: Calculations using spreadsheet entries: a. Summary Entry General Journal Cash (received from customers) Accounts receivable Sales revenue Debit 1,698 Credit Debit 672 Credit Debit 292 12 Credit 18 1,680 b. Summary Entry General Journal Cost of goods sold Inventory Accounts payable Cash (paid to suppliers of goods) 16 12 644 c. Summary Entry General Journal Salaries expense Salaries payable Cash (paid to employees) 304 d. Summary Entry General Journal Interest expense Interest payable Cash (paid for interest) Debit 64 Credit Debit 204 Credit 11 53 e. Summary Entry General Journal Income tax expense Income tax payable Cash (paid for income taxes) 11 193 Cash decrease from sale of cash equivalents If a cash equivalent investment is sold for either more or less than its acquisition cost, we have a cash flow. Suppose the cost of this investment classified as a cash equivalent had been, say, $27,000 and was sold for $15,000, $12,000 less than that cost. The sale constitutes both a $15,000 increase and a $27,000 decrease in cash and cash equivalents. The cash equivalent was already in the beginning balance in cash and cash equivalents in the balance sheet, so the change in cash is the loss only. The transaction in journal entry format: General Journal Cash Loss on sale of cash equivalent Cash (cash equivalent investment) Depreciation expense and patent amortization are not cash flows. Debit 15,000 12,000 Credit 27,000 ...
View Full Document

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture