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4 years ago

MONTGOMERY INC.

Business

1 answer:

Katarina [22]4 years ago

7 0

Answer:

Montgomery Inc.

Statement of Cash Flow, using the indirect method:

Net income $ 8,900

adjusting non-cash expense:

Depreciation 6,100

Net Cash from operations $15,000

Add: Working Capital:

Accounts receivable (2,000)

Inventory (16,800)

Accounts Payable (1,700)

Salaries payable (100)

Cash from operating activities ($5,600)

Investing Activities:

Purchase of Equipment (6,900)

Financing Activities:

Issue of additional stock 8,300

Net cash flow $4,200

Explanation:

MONTGOMERY INC. Comparative Balance Sheets

December 31

Current Year Prior Year

Assets

Cash $ 30,800 $ 31,000

Accounts receivable, net 8,900 10,900

Inventory 79,800 63,000

Total current assets 119,500 104,900

Equipment 44,200 37,300

Accum. depreciation: Equipment (19,900) (13,800)

Total assets $ 143,800 $ 128,400

Liabilities and Equity

Accounts payable $ 21,200 $ 22,900

Salaries payable 400 500

Total current liabilities 21,600 23,400

Equity

Common stock, no par value 102,400 94,100

Retained earnings 19,800 10,900

Total liabilities and equity $ 143,800 $ 128,400

MONTGOMERY INC.

Income Statement

For Current Year Ended December 31

Sales $ 38,500

Cost of goods sold (16,000)

Gross profit 22,500

Operating expenses

Depreciation expense $ 6,100

Other expenses 4,700

Total operating expense 10,800

Income before taxes 11,700

Income tax expense 2,800

Net income $ 8,900

b) The indirect method of preparing the statement of cash flows starts with the net income and uses the balances in the balance sheet to determine if they are net cash outflows or inflows.

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2 years ago

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3 years ago

The following situations suggest a strength or a weakness in internal control. Identify each as a strength or weakness, and giv

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Answer: Options A and C are strengths while options B and D are weaknesses. See explanation below.

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a. All employees must take at least five consecutive days off each year.

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c. Cash received over the counter is controlled by the sales clerk, who rings up the sale and places the cash in the register. The daily sales are recorded in the accounting records by the accounting department.

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d. The officer who signs checks need not examine the payment packet because he is confident the amounts are correct.

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4 years ago

Green Caterpillar Garden Supplies Inc.'s income statement reports data for its first year of operation. The firm's CEO would lik

sergeinik [125]

Answer:

Green Caterpillar Garden Supplies Inc.

a) Income Statement for Year Ending December 31

Year 1 Year 2 (Forecasted)

Net sales $30,000,000 $37,500,000

Less: Operating costs 19,500,000 24,375,000

Depreciation &amortization expenses 1,200,000 1,200,000

Operating income (or EBIT) $9,300,000 $11,925,000

Less: Interest expense 930,000 1,788,750

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b) In Year 2, if Green Caterpillar has 5,000 shares of preferred stocks issued and outstanding, then each preferred share should expect to receive _ $20 _ in annual dividends.

-If Green Caterpillars has 400,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change from _ $12.31 _ in Year 1 to _ $14.95 _ in Year 2.

-Green Caterpillar's before interest, taxes, depreciation and amortization (EBITDA) value changed from _ $10,500,000 _ in Year 1 to _ $13,125,000_ in Year 2.

-It is _ wrong _ to say that Green Caterpillar's net inflows and outflows of cash at the end of Years 1 and 2 are equal to the company's annual contribution to retained earnings, $2,913,200 and $3,549,050, respectively. This is because _ not all_ of the items reported in the income statement involve payments and receipts of cash.

Explanation:

a) The preferred dividend per share = Preferred Dividends divided the number of preferred stock shares.

b) The EPS is the Earnings Per Share and is calculated as Net Income to Common Stockholders divided by the number of common stock shares outstanding.

The operating cost figure may not be based on a cash basis. It could be accrued costs. Similarly, the net sales may as well involve sales on credit, which do not involve cash flows.

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4 years ago