Reynolds Inc. for 2011 using the indirect method. Be sure to prepare a schedule for any non-cash items for disclosure, if appropriate.

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Problem

 

 1.        Use the following information to prepare a statement of cash flows for Reynolds Inc. for 2011 using the indirect method. Be sure to prepare a schedule for any non-cash items for disclosure, if appropriate.

 

(a)   Net income $10,000 (depreciation expense, 5,000; inventory decrease, $1,000; no changes in accounts receivable or accounts payable).

(b)  Issued capital stock for $4,000 of equipment.

(c)   Sold equipment for $8,000, book value $8,000.

(d)  Paid cash dividend, $3,000 (declared in prior year).

(e)   Paid long-term debt principal, $8,000 and short-term debt principal, $2,000.

(f)   Purchased equipment for $12,000 in exchange for a note payable due in two years.

(g)   The cash balance on January 1, 2010 was $10,000.

 

 

2.          Mucky Corporation was just formed. The following accounts of Mucky

             Corporation, with code letters, are needed to record the transactions given below.   

             You are to indicate the appropriate journal entry for each transaction by entering 

              the code letters and the correct amounts.

           

A.

Cash

 

G.

Bonds payable

B.

Remaining assets

 

H.

Contributed capital in excess of par

C.

Retained earnings

 

I.

Treasury stock

D.

Common stock, par $20

 

J.

Other accounts not listed

E.

Dividends payable

 

K.

Dividends declared

F.

Accounts payable

 

L.

No entry needed

 

 

 

 

 

Transaction

 

Debits

Credits

 

Code

Amount

Code

Amount

1.

Sold and issued 10 common shares at par. Disregard in subsequent transaction.

 

 A

 

 

 $200

 

 

   

$200                     

2.

 

Sold and issued 5,000 shares common stock at $26 per share.

 

A

 

$130000 

 D

H

$100000 

$30000

3.

 

Issued a 10% stock dividend when the stock was selling at $30 per share.

 

 

$10020 

 

E

 

$10020 

4.

 

Declared a cash dividend of $1 per share on the shares outstanding.

 

 

$5010 

 

E

 

$5010 

5.

 

Paid the cash dividend of $1 per share declared earlier (see above).

 

 

$5010 

 

 

$5010 

6.

 

Purchased 100 shares of treasury stock at $27 per share.

 

 

$2700 

 

A

 

$2700 

7.

 

Issued a 2-for-1 stock split when the market price was $30 per share.

 

 

 

 

         

                 

           

3.         The following selected information is taken from the Zachary “is” Us financial statements for the years 2010 & 2011 in millions of dollars:

 

Balance Sheet

2010

2011

Cash and cash equivalents

$    1,250

$    1,432

Short-term investments

953

571

Accounts and other receivables

153

146

Merchandise inventories

1,884

2,094

Prepaid expenses and other current assets

167

486

Total current assets

4,407

4,729

Total property and equipment, net

4,339

4,439

Other assets

1,022

1,097

Total assets

9,768

10,265

Accounts payable

1,023

1,022

Accrued expenses and other current liabilities

881

866

Income taxes payable

245

319

Current portion of long-term debt

452

657

Total current liabilities

2,601

2,864

Total long-term liabilities

2,842

3,427

Total liabilities

5,443

6,291

Total stockholders’ equity

4,325

3,974

Total liabilities and stockholders’ equity

9,768

10,265

Income Statement

 

 

Net sales

11,100

11,320

Cost of sales

7,506

7,646

Gross margin

3,594

3,674

Total operating expenses

3,290

3,026

Operating income (loss)

304

648

Interest expense

(130)

(142)

Interest and other income

19

18

Earnings before income taxes

193

524

Income tax expense

(59)

(130)

Net earnings (loss)

252

394

Tax rate

30.6%

32.3%

Interest cost net of taxes (in millions)

90.22

96.13

Statement of Cash Flows

 

 

Net cash provided/(used) by operating activities

746

801

Net cash provided/(used) by investing activities

(477)

(834)

Net cash provided/(used) by financing activities

(476)

482

Capital expenditures, net

(269)

(262)

Income tax payments

(27)

(33)

Interest payments

(143)

(117)

           

            Calculate the following ratios for 2011:

           

Ratio

2011

 

Debt to equity

 

Return on assets

 

Financial leverage percentage

 

Quality of income

 

Profit margin

 

Fixed asset turnover

 

Total asset turnover

 

Current ratio

 

Quick ratio

 

Receivables turnover

 

Inventory turnover

 

Times interest earned

 

Capital Acquisitions

 

 

SHOW ALL THE WORKING

 

 

 

 

  • 10 years ago
cash flows for Reynolds Inc. for 2011 using the indirect method. Be sure to prepare a schedule for any non-cash items for disclosure, if appropriate.
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