5-1
PROBLEM 5-30 b. (cont.)
Iupe Supply Company
Balance Sheet
As of the End of the Year 2014
Assets
Cash
$51,350
Accounts Receivable
$3,700
Less, Allowance for Doubtful Accounts
(185)
3,515
Merchandise Inventory
25,000
Total Assets
$79,865
Liabilities
$ -0-
Stockholders’ Equity
Common Stock
$50,000
Retained Earnings
29,865
Total Stockholders’ Equity
79,865
Total Liabilities and Stockholders’ Equity
$79,865
5-2
PROBLEM 5-30 b. (cont.)
Iupe Supply Company
Statement of Cash Flows
For the Year Ended 2014
Cash Flows From Operating Activities:
Inflow from Customers1
$172,850
Outflow for Inventory
(120,000)
Outflow for Expenses
(51,500)
Net Cash Flow from Operating Activities
$ 1,350
Cash Flows From Investing Activities
-0-
Cash Flows From Financing Activities:
Cash Inflow from Stock Issued
$ 50,000
Net Cash Flow from Financing Activities
50,000
Net Change in Cash
51,350
Plus: Beginning Cash Balance
-0-
Ending Cash Balance
$51,350
1Cash Sales $50,000
Collection of Accounts Receivable 11,300
PROBLEM 5-31
Event
Type of
Event
Assets
Liabilities
Common
Stock
Retained
Earnings
Net
Income
Cash
Flow
a1.*
AS
+
NA
NA
+
+
NA
a2.*
AU
−
NA
NA
−
−
NA
b.
AE
+−
NA
NA
NA
NA
+
c.
AU
−
−
NA
NA
NA
−
d.
AE
+−
NA
NA
NA
NA
+
e.
AE
+/−
NA
NA
NA
NA
−
f.
AU
−
−
NA
NA
NA
−
g.
AS
+
NA
NA
+
+
NA
h.
AS
+
NA
NA
+
+
+
i.
AU
−
NA
NA
−
−
−
j.
AS
+
NA
NA
+
+
NA
k.
AU
−
NA
NA
−
−
NA
l.
AE
+−
NA
NA
NA
NA
+
m.
AS
+
NA
NA
+
+
+
n.
AE
+−
NA
NA
NA
NA
−
o.
AU
−
NA
NA
−
−
−
5-3
PROBLEM 5-32
a.
Village Cycle Sales and Service – 2014
Assets
=
Liabilities
+
Equity
Acct. Title/RE
Even
t
Cash
+
A. Rec.
−
Allow.
+
Mdse Inv.
+
Notes
Rec.
+
Int.
Rec
=
Accts.
Pay.
+
Com. Stock
=
Ret. Earn.
Bal.
46,200
21,300
1,350
85,600
NA
NA
28,000
80,000
43,750
1.
NA
NA
NA
260,000
NA
NA
260,000
NA
NA
2a.
NA
340,000
NA
NA
NA
NA
NA
NA
340,000
Sales Rev.
2b.
NA
NA
NA
(243,000)
NA
NA
NA
NA
(243,000)
Cost of Sales
3a.
80,000
NA
NA
NA
NA
NA
NA
NA
80,000
Service Rev.
4a.1
NA
57,000
NA
NA
NA
NA
NA
NA
57,000
Sales $60,000
CC Exp. (3,000)
4b.
NA
NA
NA
(41,250)
NA
NA
NA
NA
(41,250)
Cost of Sales
5.
348,000
(348,000)
NA
NA
NA
NA
NA
NA
NA
6.
(265,000)
NA
NA
NA
NA
NA
(265,000)
NA
NA
7.
(115,000)
NA
NA
NA
NA
NA
NA
NA
(115,000)
Selling & Adm.
Exp.
8.
57,000
(57,000)
NA
NA
NA
NA
NA
NA
NA
9.
(50,000)
NA
NA
NA
50,000
NA
NA
NA
NA
10.
NA
(830)
(830)
NA
NA
NA
NA
NA
NA
11a.2
NA
NA
NA
NA
NA
1,125
NA
NA
1,125
Int Rev.
11b.3
NA
NA
1,700
NA
NA
NA
NA
NA
(1,700)
Uncoll. Accts.
Exp.
Bal.
101,200
+
12,470
−
2,220
+
61,350
+
50,000
+
1,125
=
23,000
+
80,000
+
120,925
1$60,000 x 5% = $3,000; $60,000 − $3,000 = $57,000
2$50,000 x 9% = $4,500; $4,500 x 3/12 = $1,125
3$340,000 x .5% = $1,700
5-4
PROBLEM 5-32 (cont.)
Village Cycle Sales and Service
Financial Statements
For the Year Ended December 31, 2014
Income Statement
Revenue
Sales Revenue
$400,000
Service Revenue
80,000
Total Revenue
$480,000
Cost of Goods Sold
(284,250)
Gross Margin
195,750
Expenses
Credit Card Expense
$ 3,000
Selling & Adm. Expenses
115,000
Uncollectible Accts. Exp.
1,700
Total Operating Expenses
(119,700)
Operating Income
76,050
Non-Operating Items
Interest Revenue
1,125
Net Income
$ 77,175
Statement of Changes in Stockholders’ Equity
Beginning Common Stock
$80,000
Plus: Stock Issued
-0-
Ending Common Stock
$ 80,000
Beginning Retained Earnings
$43,750
Plus: Net Income
77,175
Ending Retained Earnings
120,925
Total Stockholders’ Equity
$200,925
PROBLEM 5-32 (cont.)
Village Cycle Sales and Service
Balance Sheet
5-5
As of December 31, 2014
Assets
Cash
$101,200
Accounts Receivable
$12,470
Less: Allow. for Doubtful Accts.
(2,220)
10,250
Merchandise Inventory
61,350
Interest Receivable
1,125
Notes Receivable
50,000
Total Assets
$223,925
Liabilities
Accounts Payable
$ 23,000
Total Liabilities
$ 23,000
Stockholders’ Equity
Common Stock
$ 80,000
Retained Earnings
120,925
Total Stockholders’ Equity
200,925
Total Liab. and Stockholders’ Equity
$223,925
PROBLEM 5-32 (cont.)
Village Cycle Sales and Service
Statement of Cash Flows
For the Year Ended December 31, 2014
Cash Flows From Operating Activities:
Cash Receipts from Revenue*
$485,000
Cash Payment for Accounts Pay. (Inv.)
(265,000)
Cash Payments for Expenses
(115,000)
Net Cash Flow from Operating Activities
$105,000
Cash Flows From Investing Activities:
Cash Outflow for Notes Receivable
$ (50,000)
Net Cash Flow from Investing Activities
(50,000)
Cash Flows From Financing Activities
-0–
-0–
Net Change in Cash
55,000
Plus: Beginning Cash Balance
46,200
Ending Cash Balance
$101,200
5-6
*Cash Receipts from Revenue:
Cash Sales $ 80,000
Carrol’s Lamp Shop
Inventory Purchases
Beginning Inventory
200
@
$140
=
$28,000
First Purchase
120
@
150
=
18,000
Second Purchase
140
@
160
=
22,400
Total
460
$68,400
a. (1) Cost of Goods Sold:
FIFO
Units
Unit Cost
Cost of Goods Sold
From Beginning Inventory
200
@
$140
=
$ 28,000
From First Purchase
120
@
150
=
18,000
From Second Purchase
80
@
160
=
12,800
Total
400
$58,800
Ending Inventory:
FIFO
Units
Unit Cost
Ending Inventory
From Second Purchase
60
@
$160
=
$9,600
a. (2) Cost of Goods Sold:
LIFO
Units
Unit Cost
Cost of Goods Sold
From Second Purchase
140
@
$160
=
$22,400
From First Purchase
120
@
150
=
18,000
From Beginning Inventory
140
@
140
=
19,600
Total
400
$60,000
Ending Inventory:
LIFO
Units
Unit Cost
Ending Inventory
From Beginning Inventory
60
@
$140
=
$8,400
5-7
PROBLEM 5-33 a. (cont.)
a. (3)
Weighted Average
Total Cost
Total Units
=
Cost per Unit
$68,400
460
=
$148.696
Cost of Goods Sold:
400 units
@
$148.696
=
$59,478*
Ending Inventory:
60 units
@
$148.696
=
$ 8,922*
*rounded
Carrol’s Lamp Shop
Computation of Income Tax Expense and Net Income
FIFO
LIFO
Weighted
Average
Sales (400 units @ $320)
$128,000
$128,000
$128,000
Cost of Goods Sold
(58,800)
(60,000)
(59,478)
Gross Margin
69,200
68,000
68,522
Salaries Expenses
(40,000)
(40,000)
(40,000)
Income Before Tax
29,200
28,000
28,522
Income Tax (25%)
(7,300)
(7,000)
(7,131)*
Net Income
$21,900
$21,000
$21,391
*RoundedPROBLEM 5-33 (cont.)
b. The Accounting Equation is provided for the use of the instructor.
Assets
=
Stockholders’ Equity
Event
Cash
Inventory
=
Com Stock
Ret. Earn.
FIFO Cost Flow
Beginning Balance
$90,500
$28,000
$40,000
$78,500
1. First Purchase
(18,000)
18,000
2. Second Purchase
(22,400)
22,400
3a. Sale of Inventory
128,000
128,000
3b. Cost of Goods Sold
(58,800)
(58,800)
4. Paid Oper. Expenses
(40,000)
(40,000)
5. Paid Income Tax
(7,300)
(7,300)
Totals
$130,800
$ 9,600
=
$40,000
$100,400
LIFO Cost Flow
5-8
Beginning Balance
$90,500
$28,000
$40,000
$78,500
1. First Purchase
(18,000)
18,000
2. Second Purchase
(22,400)
22,400
3a. Sale of Inventory
128,000
128,000
3b. Cost of Goods Sold
(60,000)
(60,000)
4. Paid Oper. Expenses
(40,000)
(40,000)
5. Paid Income Tax
(7,000)
(7,000)
Totals
$131,100
$ 8,440
=
$40,000
$99,500
Weighted Average
Beginning Balance
$90,500
$28,000
$40,000
$78,500
1. First Purchase
(18,000)
18,000
2. Second Purchase
(22,400)
22,400
3a. Sale of Inventory
128,000
128,000
3b. Cost of Goods Sold
(59,478)
(59,478)
4. Paid Oper. Expenses
(40,000)
(40,000)
5. Paid Income Tax
(7,131)
(7,131)
Totals
$130,969
$ 8,922
=
$40,000
$99,891
5-9
PROBLEM 5-33 (cont.)
b.
Carrol’s Lamp Shop
Financial Statements
FIFO
LIFO
Weight. Av.
Income Statements
For Year Ended December 31, 2014
Sales
$128,000
$128,000
$128,000
Cost of Goods Sold
(58,800)
(60,000)
(59,478)
Gross Margin
69,200
68,000
68,522
Salaries Expense
(40,000)
(40,000)
(40,000)
Income Before Tax
29,200
28,000
28,522
Income Tax Expense
(7,300)
(7,000)
(7,131)
Net Income
$21,900
$21,000
$21,391
Balance Sheets
As of December 31, 2013
Assets
Cash
$130,800
$131,100
$130,969
Inventory
9,600
8,400
8,922
Total Assets
$140,400
$139,500
$139,891
Stockholders’ Equity
Common Stock
$40,000
$40,000
$40,000
Retained Earnings
100,400
99,500
99,891
Total Stockholders’ Equity
$140,400
$139,500
$139,891
PROBLEM 5-33 b. (cont.)
Carrol’s Lamp Shop
Statements of Cash Flows
For the Year Ended December 31, 2014
FIFO
LIFO
Weight. Av.
Cash Flows From Oper. Act.:
Cash Inflow from Customers
$128,000
$128,000
$128,000
Cash Outflow for Inventory
(40,400)
(40,400)
(40,400)
Cash Outflow for Sal. Exp.
(40,000)
(40,000)
(40,000)
Cash Outflow for Income Tax
(7,300)
(7,000)
(7,131)
Net Cash Flow from Oper. Act.
40,300
40,600
40,469
5-10
Cash Flows From Investing Act.
-0-
-0-
-0-
Cash Flows From Financing Act.
-0-
-0-
-0-
Net Change in Cash
40,300
40,600
40,469
Plus: Beginning Cash Balance
90,500
90,500
90,500
Ending Cash Balance
$130,800
$131,100
$130,969
5-11
ATC 5-1
Dollar amounts are in millions.
a. Receivables ÷ Total assets = %
b. Allow. for doubtful accts. ÷ Acct. Rec. = Uncollectible %
c. According to Note 11, “Historically, we recognized an allowance for doubtful
d. Inventory ÷ Total assets = %
e. According to Note 12, the company uses the LIFO method.
f. No, according to Note 12, “We routinely enter into arrangements with vendors