Presented Below Are the Comparative Balance Sheets and Income Statement $\quad$

question 115

Essay

Presented below are the comparative balance sheets and income statement for Pierce Manufacturing Corporation (in $ millions) for the year ended December 31, Year 2:

$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Pierce Manufacturing Corporation}$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Balance Sheet}$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text {At December 31, Year 2}$
$\begin{array}{lrr}&\underline{\text { Year } 2}& \underline{\text { Year } 1}\\\text { Assets }\\\text { Cash } & \$ 330 & \$ 220 \\\text { Accounts Receivable } & 825 & 913 \\\text { Inventory } & 704 & 660 \\\text { Prepaid Insurance } & 55 & 22 \\\text { Property Plant and Equipment } & 2,310 & 1,980 \\\text { Less: Accumulated Depreciation } & \underline{(924)} & \underline{(660)} \\\text { Totals } & \underline{\$ 3,300} & \underline{\$ 3,135}\end{array}$



$\begin{array}{lrr}\text { Liabilities and Shareholders' Equity }\\\text { Accounts Payable } & \$ 330 & \$ 396 \\\text { Other Current Liabilities } & 330 & 440 \\\text { Income Taxes Payable } & 220 & 165 \\\text { Notes Payable-long term } & 880 & 660 \\\text { Common Stock } & 990 & 880 \\\text { Retained earnings } & \underline{550} & \underline{594} \\\text { Totals } &\underline{ \$ 3,300} & \underline{\$ 3,135}\end{array}$
$\begin{array}{c}\text {Pierce Manufacturing Corporation }\\\text {Income Statement }\\\text {For Year Ending December 31, Year 2}\\\\\begin{array}{lr}\text { Sales } && \$ 7,700 \\\text { Cost of Goods Sold } && \underline{3,696} \\\text { Gross Profit } && \$ 4,004\\\text { Expenses } & \\\text { Administrative Expenses } & \$ 1,980 \\\text { Insurance Expense } & 110 \\\text { Depreciation } & \underline{264}&\underline{2,354} \\\text { Income before income taxes } && \$ 1,650 \\\text { Income tax expense } && \underline{660} \\\text { Net income } && \underline{\underline{\$ 990}}\end{array}\end{array}$

Prepare the operating section of the statement of cash flows using the direct method and a reconciliation using the indirect method.

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Definitions:

Environmental Regulations

Laws and rules enforced by governments to regulate activities that impact the environment, aimed at reducing pollution and preserving natural resources.

Workplace Safety Regulations

Laws and guidelines designed to ensure the physical safety and health of employees within the workplace.

Education

The systematic process of facilitating learning, or the acquisition of knowledge, skills, values, and habits through various methods such as teaching, training, research, and discussion.

Production Techniques

Methods and processes used in the transformation of inputs into outputs or goods and services.