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    CH 21 in Class Exercises Day 2

    Uploaded by

    Abdullah alhamaad
    The document contains two sections with financial information about Clear Transmissions Company and Red, Inc. For Clear Transmissions Company, it provides the income statement for 2018 showing sales of $1,320,000 with net income of $182,000. It also shows selected accounts from the comparative balance sheets for 2018 and 2017. For Red, Inc. it provides the comparative balance sheets for 2018 and 2017 showing total assets of $775 million in 2018 and $530 million in 2017. It also provides additional information about equipment purchases and sales during 2018 and borrowing of $50 million to pay dividends.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    CH 21 in Class Exercises Day 2

    Uploaded by

    Abdullah alhamaad
    23 views2 pages
    The document contains two sections with financial information about Clear Transmissions Company and Red, Inc. For Clear Transmissions Company, it provides the income statement for 2018 showing sales of $1,320,000 with net income of $182,000. It also shows selected accounts from the comparative balance sheets for 2018 and 2017. For Red, Inc. it provides the comparative balance sheets for 2018 and 2017 showing total assets of $775 million in 2018 and $530 million in 2017. It also provides additional information about equipment purchases and sales during 2018 and borrowing of $50 million to pay dividends.

    Original Description:

    Financial Accounting

    Original Title

    Ch 21 in Class Exercises Day 2(1)

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    The document contains two sections with financial information about Clear Transmissions Company and Red, Inc. For Clear Transmissions Company, it provides the income statement for 2018 showing sales of $1,320,000 with net income of $182,000. It also shows selected accounts from the comparative balance sheets for 2018 and 2017. For Red, Inc. it provides the comparative balance sheets for 2018 and 2017 showing total assets of $775 million in 2018 and $530 million in 2017. It also provides additional information about equipment purchases and sales during 2018 and borrowing of $50 million to pay dividends.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    23 views2 pages

    CH 21 in Class Exercises Day 2

    Uploaded by

    Abdullah alhamaad
    The document contains two sections with financial information about Clear Transmissions Company and Red, Inc. For Clear Transmissions Company, it provides the income statement for 2018 showing sales of $1,320,000 with net income of $182,000. It also shows selected accounts from the comparative balance sheets for 2018 and 2017. For Red, Inc. it provides the comparative balance sheets for 2018 and 2017 showing total assets of $775 million in 2018 and $530 million in 2017. It also provides additional information about equipment purchases and sales during 2018 and borrowing of $50 million to pay dividends.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Ch 21 In-class Exercises Day 2

    A.
     
    CLEAR TRANSMISSIONS COMPANY
    Income Statement
    For the Year Ended December 31, 2018 ($ in 000s)
    Sales        $1,320  CLEAR TRANSMISSIONS COMPANY
    Cost of goods sold          500  Selected Accounts from Comparative Balance Sheets
    Gross margin          820  December 31, 2018 and 2017 ($ in 000s)
    Salaries expense $220           Year  
    Depreciation expense  180           2018 2017 Change
    Patent amortization expense   10         Cash $102   $100   $ 2 
    Interest expense   40         Accounts receivable  220    232    (12)
    Loss on sale of cash equivalents   6      456  Inventory  440    450    (10)
    Income before taxes          364  Accounts payable  140    134     6 
    Income tax expense          182  Salaries payable   80     86     (6)
    Interest payable   25     20     5 
    Net Income        $ 182 
    Income taxes payable   15     10     5 

     
    Create the Cash Flows from Operating Activities section of the SCF using the Direct/Indirect Method
    B.
    RED, INC.
    Comparative Balance Sheets
    December 31, 2018 and 2017 ($ in millions)
      2018   2017 RED, INC.
    Assets             Statement of Income
    Cash $ 24    $ 110  For Year Ended December 31, 2018
    Accounts receivable   178      132 
    ($ in millions)
    Prepaid insurance   7      3 
    Inventory   285      175  Revenues          
    Buildings and equipment   400      350  Sales revenue      $2,000 
    Less: Accumulated depreciation   (119)     (240)
    Expenses          
      $ 775    $ 530 
    Cost of goods sold $1,400      
    Liabilities            
    Depreciation expense   50      
    Accounts payable $ 87    $ 100 
    Accrued expenses payable   6      11  Operating expenses   447    1,897 
    Notes payable   50      0  Net income      $ 103 
    Bonds payable   160      0 
    Shareholders’ Equity            
    Common stock   400      400 
    Retained earnings   72      19 
      $ 775    $ 530 

     
    Additional information from the accounting records:
    1. During 2018, $230 million of equipment was purchased to replace $180 million of equipment (95% depreciated)
    sold at book value.
    2. In order to maintain the usual policy of paying cash dividends of $50 million, it was necessary for Red to borrow
    $50 million from its bank.

    Prepare the entire SCF using the direct/Indirect method to report operating activities.

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