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Identify the Statement of Cash Flow Section For each of the transactions below, determine whether it involves an operating activity, investing activity or financing activity. For each item, place an “X” in the appropriate column. Transaction Operating Activity Investing Activity Financing Activity Office supplies were purchased for cash. Dividends were declared and paid. Bonds payable with a face value of $100,000 were sold for cash at 96. A building was purchased and paid for. Treasury stock was sold. Accounts Payable were paid off. Common stock of another firm was purchased for cash. A machine with an original cost of $30,000 was sold for $7,000. Accumulated Depreciation to date was $23,000. Short-term marketable securities (not cash equivalents) were sold. Interest expense on the bonds above was paid in cash. Land was purchased for cash. Dividends were received on the common stock acquired above. Use the following data for ABC Music Co. to prepare a statement of cash flows using the indirect method for the year ended June 30, 2016. ABC Music Co. Income Statement For the Year Ended June 30, 2016 Net Sales $350,000 Less Expenses Cost of Goods Sold $200,000 Depreciation Expense 20,000 Administrative Expenses 52,000 Selling Expenses 45,000 Loss on Sale of Investment 500 Total Expenses 317,500 Net Income $ 32,500 ABC Music Co. Comparative Balance Sheets June 30 2016 and 2015 Assets 2016 2015 Cash $ 4,500 $ 15,000 Accounts Receivable (net) 35,000 27,500 Inventory 40,000 50,000 Prepaid Expenses 3,000 2,500 Long Term Investments 20,000 25,000 Plant and Equipment 80,000 40,000 Accumulated Depreciation (20,000) (12,000) Total Assets $162,500 $148,000 Liabilities Accounts Payable $ 2,000 $ 6,000 Wages Payable 220 260 Taxes Payable 780 740 Notes Payable 20,000 12,000 Total Liabilities $23,000 $ 19,000 Stockholders’ Equity Common Stock $ 65,000 $ 65,000 Retained Earnings 81,500 64,000 Total Paid in Capital and Retained Earnings 146,500 129,000 Less: Treasury Stock ( 7,000) 0 Total Stockholders’ Equity $139,500 $129,000 Total Liabilities and Stockholders’ Equity $162,500 $148,000 Additional Information: · A plant asset costing $20,000 was sold for its book value of $8,000. And additional plant asset was purchased for $60,000. · A long term investment was sold for $4,500. · The outstanding notes are long term. An $8,000 note was issued during 2016. · Common stock was repurchased.

Identify the Statement of Cash Flow Section

For each of the transactions below, determine whether it involves an operating activity, investing activity or financing activity.  For each item, place an “X” in the appropriate column.

Transaction Operating Activity Investing Activity Financing Activity
Office supplies were purchased for cash.      
Dividends were declared and paid.      
Bonds payable with a face value of $100,000 were sold for cash at 96.      
A building was purchased and paid for.      
Treasury stock was sold.      
Accounts Payable were paid off.      
Common stock of another firm was purchased for cash.      
A machine with an original cost of $30,000 was sold for $7,000. Accumulated Depreciation to date was $23,000.      
Short-term marketable securities (not cash equivalents) were sold.      
Interest expense on the bonds above was paid in cash.      
Land was purchased for cash.      
Dividends were received on the common stock acquired above.      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Use the following data for ABC Music Co. to prepare a statement of cash flows using the indirect method for the year ended June 30, 2016.

ABC Music Co.

Income Statement

For the Year Ended June 30, 2016

     
Net Sales   $350,000
Less Expenses    
  Cost of Goods Sold $200,000  
  Depreciation Expense     20,000  
  Administrative Expenses     52,000

  Selling Expenses     45,000

  Loss on Sale of Investment          500

Total Expenses     317,500
Net Income   $  32,500

 

ABC Music Co.

Comparative Balance Sheets

June 30 2016 and 2015

Assets 2016 2015
Cash $  4,500 $ 15,000
Accounts Receivable (net)   35,000    27,500
Inventory   40,000    50,000
Prepaid Expenses      3,000      2,500
Long Term Investments    20,000    25,000
Plant and Equipment    80,000    40,000
Accumulated Depreciation  (20,000)   (12,000)
Total Assets $162,500 $148,000
     
Liabilities    
Accounts Payable $   2,000 $   6,000
Wages Payable         220         260
Taxes Payable         780         740
Notes Payable   20,000    12,000
Total Liabilities $23,000 $ 19,000
     
Stockholders’ Equity    
Common Stock $ 65,000 $  65,000
Retained Earnings    81,500     64,000
Total Paid in Capital and Retained Earnings 146,500  129,000
               Less: Treasury Stock  (  7,000)              0
Total Stockholders’ Equity $139,500 $129,000
Total Liabilities and Stockholders’ Equity $162,500 $148,000

Additional Information:

  • A plant asset costing $20,000 was sold for its book value of $8,000. And additional plant asset was purchased for $60,000.
  • A long term investment was sold for $4,500.
  • The outstanding notes are long term. An $8,000 note was issued during 2016.
  • Common stock was repurchased.

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