The Following Balance Sheets Are Provided for Socrates Foods:
A

question 128

Essay

The following balance sheets are provided for Socrates Foods:
a. Compute the following:
(1) Cash received from customers during the year $__________
(2) Cash payments for merchandise during the year $__________
(3) Wages paid to employees during the year $__________
(4) In Socrates Foods' statement of cash flows, what amount would be reported as the net change in cash and cash equivalents? $__________ (increase/decrease)
b. Socrates Foods recorded the sale of equipment as follows:
How would this transaction be reported in Socrates Foods' statement of cash flows? (Assume the direct method is being used.)
$\begin{array}{lcc}&\text { End of } & \text { Beginning } \\&\text { Year }&\text {of Year }\\ \text { Cash and cash equivalents } & \$ 170,000 & \$ 120,000 \\ \text { Accounts receivable.}& 80,000 & 65,000 \\ \text {Inventory} & 140,000 & 130,000 \\\text {Plant and equipment (net)} & 130,000 & 80,000 \\ \text { Total assets } & \$ 520,000 & \$ 39 \\\text {Accounts payable (for merchandise).}&\$ 65,000 & \$ 35,000 \\\text {Wages payable}&120,000 & 110,000 \\\text {Long-term liabilities}&95,000 & 70,000 \\\text {Common stock}&100,000 & 100,000 \\\text {Retained earnings.}&140,000 & 80,000 \\ \$ 520,000 & \$ 395,000 \\\text {Total liabilities and owners' equity}&\end{array}$

$\text { Selected information from Socrates Foods' current year income statement: }$

$\begin{array}{lrr} \text { Sales } &&\$1,650,000\\ \text {Cost of goods sold. } &&840,000\\ \text {Wages expense. }& &260,000\end{array}$
$\begin{array}{lcc}\text { Cash } & 25,000 \\\text { Accumulated Depreciation: Equipment } & 20,000 \\\text { Loss on Disposal of Equipment } & 15,000\\\text { Equipment. }&&60,000\end{array}$

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Definitions:

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.

Natural Monopoly

A monopoly that exists when increasing returns to scale provide a large cost advantage to having all output produced by a single firm.

Network Externalities

The effect that an additional user of a good or service has on the value of that product to others, often positive, as in the case of telecommunications networks.

Monopolist

A monopolist is a single supplier in a market who has significant control over prices and the availability of a product or service.