PROBLEM 1:
The 2018 and 2019 comparative balance sheets and 2019 income
statement for Edmond & Edmond Company appear below:
EDMOND & EDMOND COMPANY
Comparative Balance Sheet
December 31
2019 2018
Assets
Cash $ 26,000 $ 23,000
Accounts receivable 25,000 34,000
Merchandise inventory 32,000 15,000
Property, plant, and equipment 60,000 78,000
Accumulated depreciation (21,000) (24,000)
Total $122,000 $126,000
Liabilities and Stockholders' Equity
Accounts payable $ 18,000 $ 23,000
Income taxes payable 9,000 8,000
Notes payable (long-term) 8,000 33,000
Common stock 28,000 24,000
Retained earnings 59,000 38,000
Total $122,000 $126,000
EDMOND & EDMOND COMPANY
Income Statement
For the Year Ended December 31, 2019
Sales $400,000
Cost of goods sold 270,000
Gross profit 130,000
Operating expenses 45,000
Income from operations 85,000
Interest expense 5,000
Income before income taxes 80,000
Income tax expense 24,000
Net income $ 56,000
The following additional data were provided:
1. Dividends declared and paid were $35,000.
2. During the year, equipment was sold for $17,000 cash. This equipment cost $28,000 originally and had a book value of $17,000 at the time of sale.
3. Purchased a used delivery truck for $10,000
4. All depreciation expense is included the operating expenses.
5. All sales and purchases are on account.
6. Accounts payable pertain to merchandise suppliers.
REQUIREMENTS: Prepare 1 WORD document (WD1) and 1 EXCEL document (ED1):
1. (WD1)>>Write a brief, yet clear, paragraph about the purpose of a statement of cash flow .
Be specific.
2. (ED1)>>Prepare a statement of cash flows for Edmond & Edmond Company using the indirect
method. Be sure your
statement is complete in form, includes all needed line-items, and
is
accurate.
3. (WD1)>>Write a brief, yet thorough,
email to Cisslee Williams (the Controller for Edmond and
Edmond) stating the overall
conclusion you have drawn from the completed statement of
cash
flows.
PROBLEM 2:
Find the official website for ONE of the following companies:
Coca-cola
Walmart
Tyson Foods
Once you find an official website for the company you select, perform the following tasks:
Find the “Investor Relations” link and click. Once in “investor relations,”
Find the 2017 annual report OR 10-K Report to the SEC
After locating one of the documents, locate the financial statements included in the document.
Copy and paste the (1) comparative balance sheet, (2) income statement, and (3) statement of cash flows and include ALL three (3) in a separate file. Do not be concerned with the formatting once you have pasted. Just be sure the name of the company, name of the statement, and the years are clearly shown as proof that you have provided the required statements.
Now that you have access to the financial statements, compute the following ratios FOR TWO YEARS. Be sure to show ALL computations, equations, formulas, etc.:
Any two liquidity ratios
One solvency ratio
Any two profitability ratios
REQUIRED1: Write and submit a 1st document that:
>>>Identifies the name of the company on which you performed research
>>> Presents the ratios (e.g., a table) you have computed. Keep computations separate from final ratio answers. Be sure to clearly classify and identify all ratios. Show the computations. Neatness, order, and clarity are a MUST. Be sure your presentation is neat, orderly, and can be clearly followed.
>>>States YOUR conclusion about each of the three groups of ratios. Hint: A cover page is expected.
REQUIRED2: Write and submit a 2nd document that includes the financial statements you copied and pasted (as required in “d” above. IF you can easily include your financial statements as pages in the 1st document, that will absolutely acceptable, and preferred.
Problem- 1
Answer-a:
The main purpose of the cash flow statement is to provide information about the cash receipts and cash payments along with net change in cash and cash equivalents resulting from the operating, investing and financing activities of a firm during the specified period. It helps to answer the following questions:
It helps the investors to assess the firm’s ability to generate cash and cash equivalents and the needs of the entity to utilise those cash flows.
Answer-b:
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EDMOND & EDMOND COMPANY |
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Cash Flow Statement for the year ended December 31, 2019 |
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Cash Flow from Operating Activities |
||
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Profit before taxation (Net Income) |
80000 |
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Adjustment for: |
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Provision for Depreciation *** |
8000 |
|
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Interest Expense |
5000 |
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Changes in current assets and liabilities |
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decrease in accounts receivables |
9000 |
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increase in merchandise inventory |
-17000 |
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decrease in accounts payable |
-5000 |
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Cash generated from operations |
80000 |
|
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Less; Income tax paid *** |
-23000 |
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Net Cash Flow from Operating Activities |
57000 |
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Cash Flow from Investing Activities |
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Purchased of used delivery truck |
-10000 |
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Proceed from sale of Equipment |
17000 |
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Net cash used in investing activities |
7000 |
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Cash Flow from Financing Activities |
||
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Repayment of Notes Payable |
-25000 |
|
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Proceed from Issue of Share Capital |
4000 |
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Dividend Paid |
-35000 |
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Interest Expense |
-5000 |
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Net Cash used in Financing Activities |
-61000 |
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Net increase in cash and cash equivalent |
3000 |
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Cash and cash equivalent at the beginning of the year |
23000 |
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Cash and cash equivalent at the end of the year |
26000 |
|
Calculation of Depreciation Expense for the year 2019:
Accumulated depreciation on sold equipment = 11,000
Add: Accumulated depreciation at the end of year = 21,000
Less: Accumulated depreciation at the beginning of year = 24,000
Depreciation for the current year = 8,000.
Calculation of Income Tax Paid during the year:
Income tax expense for the year = 24,000
Add: liability for income tax at the beginning = 8,000
Less: liability for income tax at the end of year = 9,000
Income tax paid during the year = 23,000
Answer-c:
Cash flow statement shows that the firm is performing well as it’s earning sufficient resources from the operations to fund its financing and investing activities. It is able to meet the regular liability of interest payment and dividends for its shareholders
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