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P17-5 Preparing and analyzing cash ow statement [LO 171 , LO 172 gl. LO 174 .) The balance sheets of Global Trading Company follow: Balance Sheets as...

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Cash Flow Statement Question.png

P17-5
Preparing and analyzing cash flow statement [LO 17—1 , LO 17—2 gl. LO 17—4 .) The balance sheets of Global Trading Company follow: Balance Sheets as of December 31, 2017 2016 Assets
Cash $120,000 $108,000
Accounts receivable 50.000 300.000
Less: Allowance for doubtful accounts (20.000) (30.000)
Inventory 80,000 250,000
Prepaid insurance —0-— 20,000
Property. plant, and equipment 500,000 500,000
Less: Accumulated depreciation (450.0(1)) (400.011?)
Goodwill —0— 20,000 Total assets $280000 $81 8.000
Liabilities and Ownets' Equity
Accounts payable $100,000 $ 22,000
Salaries payable 17,000 11,000
Bank loan 82 .500 390.000
Capital stock 25.000 75.000
Retained earnings 51520 320.000 Total liabilities and omers‘ equity $280,000 $818,000 Additional Information: page 1044
- The company reported a net loss of $279,500 during 2017. - There are no income taxes. - Goodwill as of December 31. 2016. was part of an acquisition made during 2016. - The company's bank provides a working capital loan to a maximum of 75% of net accounts receivable and inventory. Required:
1 . Prepare a statement of cash flows using the indirect method for the year ended December 31, 2017. 2. On the basis of available information. assess the fmancial performance of the company during 201?. In answering this part.
consider both the net income and cash flows of the company. Also evaluate the future prospects of the Company. 3. Assuming that the bad debt expense during 201? was $55,000. calculate the amount of bad debts written off during the year.
Further assume that the company c011ected $1,250,000 cash from its customers during 2017. and then compute the sales revenue for the year. You may assume that all sales are credit sales 4. In answering this part. assume that Global uses the first—in. first—out (FTC) inventory method. On December 31. 2017. the company purchased $35,000 worth of inventory on credit from a supplier. The transaction was inadvertently not recorded and
the inventory not included in the December 31, 201?, physical inventory count. Discuss the effect of this omission on Global
Trading Company’ 3 financial statements.

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