The Comparative Balance Sheet of ConnieJo Company,for December 31,Years 1

question 61

Essay

The comparative balance sheet of ConnieJo Company,for December 31,Years 1 and 2 ended December 31 appears below in condensed form:
$\begin{array}{lrr}&\underline {\text { Year 2 }}&\underline {\text { Year 1 }}\\\\\text { Cash } & \$ 45,000 & \$ 53,500 \\\text { Accounts receivable net } & 51,300 & 58,000 \\\text { Inventories } & 147,200 & 135,000 \\\text { Investments } & 0 & 60,000 \\\text { Equipment } & 493,000 & 375,000 \\\text { Accumulated depreciation -equipment } & \underline {113,700} & \underline {128,000}\\& \underline {\$ 622.800 } & \underline {\$ 553.500 }\\\\ \text { Accounts payable }& \$ 61,500 & \$ 42,600 \\ \text { Bonds payable, due Year 4 }& 0 & 100,000\end{array}$ $\begin{array}{lrrr}\text { Common stack, \$10 par } & 250,000 & 200,000 \\\text { Paid-in capital in excess of par-common stock } & 75,000 & 50,000 \\\text { Retained earnings } & 236,300 & 160,900 \\& \underline {\$ 622,800}&\underline {\$ 553,500} \\\\\text { The income statement for the current year is as follows: }\\\\\text { Sales }&&\$ 623,000 \\\text { Cost of merchandise sold }&&348,500\\\text { Gross profit }&&\underline { \$ 274,500}\\\text { Operating expenses: }\\\text { Depreciation expense }&\$ 24,700\\ \text { Other operating expenses }&\underline{75,300} & \underline{100,000}\\\text { Income from operations}&&{\$ 174,500}\\\text { Other income }\\\text { Gain on sale of investment }& \$5000\\\text { Other expense: }\\\text { Interest expense } & \underline{12,000} & \underline{7,000}\\ \text { Income before income tax } & & {\$ 167,500} \\\text { Income tax } & & \underline{64,100} \\\text {Net Income } & &\$ 103,400\end{array}$ Additional data for the current year are as follows:
a. Fully depreciated equipment costing $39,000 was scrapped,no salvage,and equipment was purchased for $157,000.
b. Bonds payable for $100,000 were retired by payment at their face amount.
c. 5,000 shares of common stock were issued at $15 for cash.
d. Cash dividends declared were paid $28,000.
e. All sales are on account.
Prepare a statement of cash flows,using the direct method of reporting cash flows from operating activities.

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Definitions:

Machine-Hours

A measure used to allocate manufacturing overhead costs to products based on the number of hours machines are used in the production process.

Spending Variance

A measure of the difference between the budgeted amount of expenses and the actual amount spent.

Flexible Budget

A flexible budget tailored to adjust as activity levels or volumes change.

Plane Operating Costs

Expenses related to the operation of an aircraft, including fuel, maintenance, crew, and insurance.