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ACC1002_Wescott Company_statement of cash flows




Question;ACC1002;QUESTION 3;The following shows the comparative balance sheets and income statement;of Wescott;Company.;Wescott;Company;Balance;Sheets;At;December 31;2011;2010;Assets;Cash????????????????? $;85,600 $;65,200;Accounts receivable, net?????????. 72,850 56,750;Merchandise inventory?????????? 157,750 144,850;Prepaid expenses????????????. 6,080 12,680;Equipment??????????????? 280,600 245,600;Accumulated depreciation-Equipment???? (80,600);(97,600);Total assets???????????????. $522,280 $427,480;Liabilities;Accounts payable???????????... $;52,850 $;45,450;Income taxes payable??????????. 15,240 12,240;Notes payable (long term)????????.. 59,200 79,200;Total liabilities?????????????? $127,290 $136,890;Equity;Share Capital?????????????. 200,000;150,000;Share Premium????????????.. 53,000 40,000;Retained earnings???????????.. 141,990;100,590;Total equity??????????????... $394,990;$290,590;Total liabilities and equity????????? $522,280;$427,480;Wescott Company;Income Statement;For Year Ended December 31, 2011;Sales????????????????? $;488,000;Cost of goods sold?????????. $212,540;Depreciation expense?????????? 43,000;Other operating expenses??????? 106,260;Interest expense???????..???? 6,400 (368,200);Gain on sale of;equipment??????????. 4,700;Income before taxes???????????... 124,500;Income taxes expense??????????. (41,100);Net income??????????????.. $;83,400;Additional information;1. A $20,000 note payable is retired at its carrying amount in exchange;for cash.;2. The only changes affecting retained earnings are net income and cash;dividends paid.;Cash dividends paid is to be classified under financing activities.;3. New equipment is acquired for $120,000 cash.;4. Received cash for the sale of equipment that had cost $85,000;yielding a gain of $4,700.;5. Prepaid expenses relate to Other operating expenses on the income;statement.;6. Interest paid is to be classified under operating activities.;Required;a) Prepare a statement of cash flows for the year ended December 31;2011 using the indirect method based on IFRS.;b) Explain the effect, if any, of each of the following transactions;and events on Wescott;Company?s profit and on its cash flows;i. Payment of a supplier?s invoice.;ii. An accrued expense at the end of an accounting period.;iii. Payment of a dividend.;iv. Purchase of inventory for cash.;v. Investing spare or unused cash in a high-interest bank account;repayable at 7 days? notice.


Paper#37349 | Written in 18-Jul-2015

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