Maurice Tutor
$15/per page/Negotiable
4.10.            The following income statement and balance sheet information are available for two firms, Firm A and Firm B.
(a)Â Â Â Â Calculate the amount of dividends Firm A and Firm B paid using the information
given.
(b)Â Â Â Â Prepare a statement of cash flows for each firm using the indirect method.
(c)Â Â Â Â Analyze the difference in the two firms.
Income Statement for Year Ended December 31, 2012
Â
|
 |
Firm A |
 |
Firm B |
 |
|
Sales |
$1,000,000 |
 |
$1,000,000 |
 |
|
Cost of goods sold |
700,000 |
 |
700,000 |
 |
|
Gross profit Other expenses Selling and administrative |
300,000 Â 120,000 |
 |
300,000 Â 115,000 |
 |
|
Depreciation |
10,000 |
 |
30,000 |
 |
|
Interest expense |
20,000 |
 |
5,000 |
 |
|
Earnings before taxes |
150,000 |
 |
150,000 |
 |
|
Income tax expense |
75,000 |
 |
75,000 |
 |
|
Net Income |
$Â Â Â Â 75,000 |
 |
$Â Â Â Â 75,000 |
 |
|
 |
 |
 |
 |
 |
Â
Â
Changes in Balance Sheet Accounts December 31, 2011, to December 31, 2012
Â
|
 |
Firm A |
 |
Firm B |
 |
|
Cash and cash equivalents Accounts receivable Inventory Property, plant, and equipment Less accumulated depreciation Total Assets Accounts payable Notes payable (current) Long-term debt Deferred taxes (noncurrent) Capital, stock |
$           0 +40,000 +40,000 +20,000  (+10,000) $ +90,000 $ -20,000 +17,000 +20,000 +3,000 — |
 |
$ +10,000 +5,000 -10,000 +70,000  (+30,000) $ +45,000 $  -5,000 +2,000 -10,000 +18,000 — |
 |
|
Retained earnings Total Liabilities and Equity |
  +70,000 $ +90,000 |
 |
  +40,000 $ +45,000 |
 |
|
 |
 |
 |
 |