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d) Now we can calculate total sales revenue as the sum of cash sales, credit
sales, and this portion earned from the unearned revenue.
Therefore sales revenue = 350,000 + 396,000 + 24,000 = 770,000
The second step in calculating net income is to calculate individual
expenses/losses as follows:
Cost of goods sold = 150,000
Interest expense = Interest paid + accrued interest = 34,000 + 1,000 = 35,000
Administrative expenses = 65,000
Depreciation expense = 150,000
Loss on sold equipment = 50,000
Therefore NI = 770,000-150,000-35,000-65,000-150,000-50,000 = 320,000.
Therefore Dividends = NI- change in RE = 320,000 294,000 = 26,000
3. Prepare the cash flow statement for the year using the indirect method.
Statement of Cash Flows
For Fiscal Year Ended 12/31/2015
Cash provided by operations:
Net income
Depreciation
Decrease (increase) in account receivable
Decrease (increase) in inventory
Increase (decrease) in account payable
Increase (decrease) in accrued interest
Increase (decrease) in unearned
revenue
Loss in sale of equipment
Cash provided (used) by
operation
$320,000.00
$150,000.00
-$180,000.00
-$20,000.00
$180,000.00
$1,000.00
$26,000.00
$50,000.00
$527,000.00
-$400,000.00
$120,000.00
$427,000.00
$167,000.00
-$26,000.00
$815,000.00
-$280,000.00
$568,000.00
$900,000.00
$1,715,000.00