View the step-by-step solution to:

Question

1.       (15 points) G Company's balance sheets as of 12-31-18 and 12-31-19 and its income statement for

the year ended 12-31-19 follow:

 

                                                                                                                                          12-31-18                      12-31-19    

 

           Cash                                                                                                                         $1,513,000                        $992,000

           Short-term accounts receivables from customers, net                                                  750,000                          700,000

           Prepaids                                                                                                                        275,000                          300,000

           Plant assets                                                                                                                2,800,000                       3,784,000

           Accumulated depreciation                                                                                       (1,300,000)                    (1,540,000)

                                                                                                                                               $4,038,000                     $4,236,000

           

 

           Short-term debt                                                                                                             250,000                          224,000

           Accrued liabilities                                                                                                         137,428                          233,183

           Asset retirement obligations                                                                                           13,727                            20,904

           Bonds payable, net                                                                                                       748,845                          545,913

           Common stock ($1 par value)                                                                                      100,000                          100,000

           Additional paid-in-capital, common stock                                                                1,925,000                       1,925,000

           Retained earnings                                                                                                        863,000                      1,187,000

                                                                                                                                             $4,038,000                     $4,236,000

 

Sales                                                                             $4,500,000

Operating expenses                                                       3,800,000

Other gains/losses, net                                                          5,517

Interest expense                                                                  23,000

Income before taxes                                                          671,483

Income tax expense                                                          147,483

Net income                                                                     $524,000

 

 

Additional information for G follows:

 

·        During 2019, G recorded a $10,000 impairment loss on one of its plant assets.

·        On 01-01-17. G purchased a machine for $100,000. G started using the machine on 01-01-17. G estimates it will use the machine for 5 years. At the end of the 5th year, G will have to dispose of the machine at an estimated cost of $15,000. Assume as of 01-01-17 the interest rate on US Treasury securities was 1% and G's credit standing required a 2% risk premium.

·        On 01-01-19. G purchased a machine for $80,000. G started using the machine on 01-01-19. G estimates it will use the machine for 4 years. At the end of the 4th year, G will have to dispose of the machine at an estimated cost of $7,500. Assume as of 01-01-19 the interest rate on US Treasury securities was 1.25% and G's credit standing required a 2.25% risk premium.

·        On 12-31-15, G issued $350,000 of its 4%, 5-year term bonds. The bonds pay interest every 06-30 and 12-31. At the time G issued the bonds, similar bonds paid 4% interest. At the time of issuance, G incurred and paid $4,000 of bond issuance costs.

·        On 12-31-16, G issued $400,000 of its 4.25%, 6-year term bonds. The bonds pay interest every 06-30 and 12-31. At the time G issued the bonds, similar bonds paid 4%. At the time of issuance, G incurred and paid $4,500 of bond issuance costs. On 06-30-19, after making its semi-annual interest payment, G retired the bonds at 99.

·        On 12-31-19, G issued $200,000 of its 3%, 3-year term bonds. The bonds pay interest every 06-30 and 12-31. At the time G issued the bonds, similar bonds paid 3.25% interest. At the time of issuance, G incurred and paid $1,800 of bond issuance costs.

·        During 2019, G declared and distributed cash dividends on its outstanding common stock.

·        On G's income statement, the "operating expenses" caption includes, but is not limited to, depreciation AND accretion expenses.

·        G's interest expense reported on its income statement is only on money borrowed on both a short-term and long-term basis.

·        On G's income statement, the "Other gains/losses, net" caption represents any gains/losses on bond retirements and any impairment losses.

·        G records adjusting journal entries only once a year as of year-end.

 

Prepare G's statement of cash flows using the indirect method for the year ended 12-31-19. Label each section amount as cash provided by OR cash used in. Make sure the description of the items within each section are clear.

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Let our 24/7 Accounting tutors help you get unstuck! Ask your first question.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors