Maurice Tutor
$15/per page/Negotiable
Assume that Berkshire Hathaway is considering buying Granite Shoals Corporation. Granite Shoals reported the following comparative balance sheet and income statement for 2014:
|
GRANITE SHOALS CORPORATION Balance Sheet December 31, 2014 and 2013 |
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|
 |
2014 |
2013 |
Increase (Decrease) |
|
Cash |
$ 19,000 |
$3,000 |
$16,000 |
|
Accounts receivable |
22,000 |
23,000 |
(1,000) |
|
Inventory |
34,000 |
31,000 |
3,000 |
|
Prepaid expenses |
1,000 |
3,000 |
(2,000) |
|
Equipment (net) |
90,000 |
79,000 |
11,000 |
|
Intangible assets |
9,000 |
9,000 |
— |
|
Total assets |
$175,000 |
$148,000 |
$27,000 |
|
Accounts payable |
$ 14,000 |
$ 9,000 |
$ 5,000 |
|
Accrued liabilities |
16,000 |
19,000 |
(3,000) |
|
Income tax payable |
14,000 |
12,000 |
2,000 |
|
Long-term note payable |
45,000 |
50,000 |
(5,000) |
|
Common stock |
31,000 |
20,000 |
11,000 |
|
Retained earnings |
64,000 |
40,000 |
24,000 |
|
Treasury stock |
(9,000) |
(2,000) |
(7,000) |
|
Total liabilities and stockholders’ equity |
$175,000 |
$148,000 |
$27,000 |
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|
Sales revenue |
$190,000 |
|
Gain on sale of equipment |
6,000 |
|
Total revenue and gains |
$196,000 |
|
Cost of goods sold |
$ 85,000 |
|
Depreciation expense |
19,000 |
|
Other operating expenses |
36,000 |
|
Total expenses |
$140,000 |
|
Income before income tax |
$ 56,000 |
|
Income tax expense |
18,000 |
|
Net income |
$ 38,000 |
Requirements
1. Compute the following cash flow amounts for 2014:
a. Collections from customers
b. Payments for inventory
c. Payments for other operating expenses
d. Payment of income tax
e. Acquisition of equipment. Granite Shoals sold equipment that had book value of $15,000.
f. Cash receipt from sale of plant assets
g. Issuance of long-term note payable. Granite Shoals paid off $10,000 of long-term notes payable.
h. Issuance of common stock
i. Payment of dividends
j. Purchase of treasury stock
2. Prepare Granite Shoals Corporation’s statement of cash flows (direct method) for the year ended December 31, 2014. There were no noncash investing and financing activities.