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Category > Accounting Posted 29 May 2017 My Price 12.00

Piura Manufacturing Comparative Balance Sheets

Case 15-50       Direct and Indirect Methods

The comparative balance sheets and income statement of Piura Manufacturing  follow.

Piura Manufacturing Comparative Balance Sheets

For the Years Ended June 30, 2013 and 2014

2013                              2014

 

 

Assets

Cash

 

$  72,000

 

 

$146,400

 

Accounts receivable

44,000

 

48,000

 

Inventory

64,000

 

44,000

 

Plant and equipment

104,000

 

112,000

 

Accumulated depreciation

(52,000)

 

(48,000)

 

Land

20,000

 

20,000

 

Total assets

$252,000

 

$322,400

 

Liabilities and equity

Accounts payable

 

$  32,000

 

 

$  48,000

 

Wages payable

4,000

 

2,400

 

Bonds payable

24,000

 

16,000

 

Preferred stock (no par)

4,000

 

12,000

 

Common stock

30,000

 

36,000

 

Paid-in capital in excess of par

50,000

 

76,000

 

Retained earnings

108,000

 

132,000

 

Total liabilities and equity

$252,000

 

$322,400

 

Piura Manufacturing Income Statement

For the Year Ended June 30, 2014

 

Sales

$ 320,000

Less: Cost of goods sold

(200,000)

Gross margin

$ 120,000

Less: Operating expenses

(88,000)

Net income

$   32,000

Additional transactions for 2014 were as follows:

a.       Cash dividends of $8,000 were paid.

b.       Equipment was acquired by issuing common stock with a par value of $6,000. The fair mar- ket value of the equipment is $32,000.

c.        Equipment with a book value of $12,000 was sold for $6,000. The original cost of the equip- ment was $24,000. The loss is included in operating expenses.

d.       Two thousand shares of preferred stock were sold for $4 per share.

 

Required:

1.       Prepare a schedule of operating cash flows using (a) the indirect method and (b) the direct method.

2.       Prepare a statement of cash flows using the indirect method.

3.       Prepare a statement of cash flows using a worksheet similar to the one shown in Corner- stone 15.8 (p. 688).

4.       Form a group with two to four other students, and discuss the merits of the direct and indi- rect methods. Which do you think investors might prefer? Should the FASB require all com- panies to use the direct method?

 

Answers

Alpha Geek
(8)
Status NEW Posted 29 May 2017 08:05 AM My Price 12.00

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