Diaz Company Had the Following Comparative Balance Sheet Information for 2014

question 24

Essay

Diaz Company had the following comparative balance sheet information for 2014 and 2013at the end of Year 2 and Year 1: $\begin{array}{l}\hline \quad \quad \quad \quad \quad \quad \quad \quad \quad \text {Diaz Company } \\\hline \quad \quad \quad \quad \quad \quad \text {Comparative Balance Sheets } \\\begin{array}{|l}\hline \\\hline \\\hline \text { Cash}\\\hline \text { Accounts receivable}\\\hline \text { Inventory}\\\hline \text { Prepaid insurance}\\\hline \text { Property, plant and equipment}\\\hline \text { Accumulated depreciation}\\\hline \text { Total}\\\hline \\\hline \text { Accounts payable}\\\hline \text { Bonds payable}\\\hline \text { Common stock}\\\hline \text { Retained earnings}\\\hline \text { Total}\\\hline \end{array}\begin{array}{|l|}\hline 2014\\\hline\\\hline \$ 30,000 \\\hline 48,000 \\\hline 158,000 \\\hline 10,000 \\\hline 70,000 \\\hline\underline {(14,000) }\\ \hline \underline {\$ 302,000 }\\ \hline \\\hline \$14,000 \\\hline 90,000 \\\hline 140,000 \\\hline \underline {58,000} \\ \hline \underline {\$ 302,000 }\\\hline\end{array}\begin{array}{l|}\hline 2013 \\\hline \\\hline 28,000 \\\hline 50,000 \\\hline 156,000 \\\hline 8,000 \\\hline 60,000 \\\hline\underline { (10,000)} \\\hline \underline { 292,000} \\\hline \\\hline 18,000 \\\hline 120,000 \\\hline 120,000 \\\hline \underline { 34,000} \\\hline \underline { 292,000} \\\hline\end{array}\end{array}$ Diaz reported net income for 2014 Year 2 of $40,000.No property,plant,& equipment was disposed of during the year.Diaz uses the indirect method to prepare the statement of cash flows.

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Definitions:

Adjustment Costs

Expenses incurred in the process of modifying a business operation or strategy, including restructuring or equipment changes.

Transaction Motive

The need to hold cash for the purpose of conducting day-to-day business operations.

Float Management

The practice of managing the time difference between the writing of a check and its clearing at the bank, aiming to optimize the use of available funds.

Small Firm

A business with a limited number of employees and revenue, often defined within specific legal frameworks based on the industry.