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Prepare a statement of cash flows using the indire...




Prepare a statement of cash flows using the indirect method for the Windsor Corp for the year 2009. (Thirty-three Pts) Increase (Decrease) Cash 229,000 Marketable Securities (121,000) Accounts Receivable 83,200 Allowance for Doubtful Accounts 13,300 Inventory 74,200 Prepaid Expenses (17,800) Investment in SAS, Inc (20,000) Plant and Equipment 210,000 Accumulated Depreciation 130,000 Deferred Tax Assets (80,000) Accounts Payable (80,700) Accrued Liabilities (74,000) 8% Bond Liability 80,000 Common Stock and Additional Paid-In Capital 387,000 Retained Earnings (98,000) Analysis of the Retained Earnings: Retained Earnings, December 31, 2008 1,360,000 Add: Net Income 327,000 Deduct: Cash Dividends 185,000 Stock Dividends 240,000 Retained Earnings-Unappropriated, December 31, 2009 1,262,000 Additional Information: 1. On January 2, 2009, marketable securities (available for-sale) costing $121,000 were sold for $155,000. 2. The company paid a cash dividend on February 1, 2009. CONTINUED NEXT PAGE 3. Accounts receivable of $6,200 and $7,400 were considered uncollectible and written-off in 2009 and 2008, respectively. 4. Major repairs of $33,000 to the equipment were debited to accumulated depreciation during the year. No assets were retired during 2009. 5. Windsor owns 20% of SAS, Inc. and accounts for their investment using the equity method. SAS paid no dividends during the year and had a net loss of $100,000. 6. During the year, employees exercised 1,000 stock options each having an exercise price of $25 a share. The stock-based compensation expense (Black-Scholes fair value) included in net income for the year was $25,000. The DTA decrease reflects tax benefits the Company realized upon the exercise of the options. The excess tax benefits from stock option exercise (i.e. the ultimate tax deduction exceeds the total stock-based compensation expense) was $20,000. 7. At January 1, 2009, the cash balance was $166,000. 8. Interest and tax expense were $30,000 and $75,000, respectively. Income taxes paid net of refunds and Interest expense paid were $10,000 and $55,000, respectively. 9. Held checks of $50,000 for Construction in Progress accrual at year end were included in outstanding accounts payable but no checks were held last year end. 10. During the year, the company received proceeds of $100,000 from a follow-on common stock public offering and paid offering costs (including accounting and legal fees, filing fees and printing costs) of $3,000. 11. Cash flow is often a key measure of a company?s financial health. What is free cash flow? How is it computed? Some argue that free cash flow is a better measure than net income and is harder to manipulate. Do you agree, please present arguments for and against. 12. Discuss the differences between US GAAP and IFRS relative to cash flow statement. Blank 5. Going back to Windsor Corp (question #4), assume that net A/R changed from $530,100 to $600,000; inventory from $700,000 to $774,200; A/P from $300,000 to $219,300; sales and cost of sales were $3,000,000 and $2,100,000, respectively. Had the cash flow statement been prepared using the direct method, what would be the amounts for: Cash Received from Customers (Four Pts) Cash Paid to Suppliers (Five Pts)


Paper#5430 | Written in 18-Jul-2015

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