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:

Nonfeasance

Failure to act; such failure is actionable in tort only where there is a specific duty to act, as with a guardian, parent, or lifeguard.

Legal Causation

The process of determining whether a defendant's actions are legally sufficient to be considered as causing the plaintiff's injuries or damages.

Automobile Collisions

Accidents involving motor vehicles that result in damage to properties, injuries, or fatalities.

Provinces

Administrative divisions within a country, which have their own local governments but are subordinate to the national government.