Problem 4–8
DUKE COMPANY
Statement of Comprehensive Income
For the Year Ended December 31, 2018
Sales revenue ………………………………………………………… $15,000,000
Operating expenses:
General and administrative …………………………………… $1,000,000
Other income (expense):
Interest expense …………………………………………………… (700 ,000)
Note:
The depreciation expense error is a prior period adjustment and is not reported in the income
statement.
Problem 4–9
Requirement 1
DIVERSIFIED PORTFOLIO CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash flows from operating activities:
Collections from customers (1) $880,000
Cash flows from investing activities:
Cash flows from financing activities:
Proceeds from issue of common stock 100,000
Payment of dividends (80 ,000)
(1) $900,000 in service revenue less $20,000 increase in accounts receivable.
Problem 4–9 (concluded)
Requirement 2
DIVERSIFIED PORTFOLIO CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash flows from operating activities:
Adjustments for noncash effects:
Changes in operating assets and liabilities:
Increase in accounts receivable (20,000)
Problem 4–10
Requirement 1
2017 Cash:
2017 Cash + Net increase in cash = 2018 Cash
2018 A/R:
2017 A/R + Cr. Sales – Cash collections = 2018 A/R
2017 Inventory:
2017 A/P + Purchases – Cash paid = 2018 A/P
Therefore, Purchases = $40
2017 Inventory + Purchases – 2018 Inventory = Cost of goods sold
2017 Accumulated depreciation:
2018 accumulated depreciation less 2018 depreciation = 2017 accumulated
depreciation
Problem 4–10 (continued)
2017 Total assets:
2018 Total assets:
2017 Income taxes payable:
2017 Inc. taxes payable + Inc. tax expense – Income taxes paid =
2018 Retained earnings:
2017 R/E + Net income – Dividends = 2018 R/E
2017 Total liabilities and shareholders’ equity:
2018 Total liabilities and shareholders’ equity:
Problem 4–10 (concluded)
Requirement 2
GRANDVIEW CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2018
($ in millions)
Cash flows from operating activities:
Net income $ 28
Adjustments for noncash effects:
Changes in operating assets and liabilities:
Increase in accounts receivable1(9)
1 $93 – 84
Problem 4–11
SANTANA INDUSTRIES
Statement of Cash Flows
For the Year Ended December 31, 2018
($ in thousands)
Cash flows from operating activities:
Net income $ 3,850
Adjustments for noncash effects:
Changes in operating assets and liabilities:
Increase in accounts receivable (300)
Increase in inventory (1,000)
Cash flows from investing activities:
Purchase of equipment (4,000)
Cash flows from financing activities:
Problem 4–12
1. Inventory turnover ratio $6,300 ÷ [($800 + 600) ÷ 2] = 9.0
2. Average days in inventory 365 ÷ 9.0 = 40.56 days
3. Receivables turnover ratio $9,000 ÷ [($600 + 400) ÷ 2] = 18.0
Problem 4–13
Requirement 1
On average,
J&J collects
its receivables
in 14 days less
as Pfizer.
Receivables turnover = Net sales
Accounts receivable