ASSIGNMENT 08 A06 Intermediate Accounting II Directions: Be sure to make an electronic copy of your answer before submitting it to Ashworth College…

Need help with B & C as soon as possible!

Part B (30 points)

The following Income Statement and Operating Cash Flow information pertain to Receivership Inc.’s operations for the year ended December 31, 2014. Prepare the net cash flow from operating activities section of the cash flow statement using the direct method.

Income statement for the year ended December 31, 2014

Revenues                                                                                      1,328

COGS                                                                              587

Rent expenses                                                                  152

Wages expenses                                                               136

Insurance expenses                                                            53

Other SG&A (includes depreciation expenses)              198

Interest expenses                                                                30

Gain on sale of asset                                                          (5)

                                                                                                      1,151

Income before tax                                                                            177

Tax                                                                                                     62

Net income                                                                                      115

Cash flow provided by operating activities (indirect method), for the year ended December 31, 2014

Net income                                                                                     115

Depreciation                                                                                     32

Gain on sale of asset                                                                         (5)

                                                                                                        142

Increases/decreases in A/R                                                26

Inventories                                                                       (35)

Prepaid rent                                                                        13

A/P                                                                                     28

Wages payable                                                                 (20)

Tax payable                                                                         5

Interest payable                                                                  (2)

Advances from customers                                                 (3)

Other accrued SG&A                                                          5

                                                                                                           17

Net cash provided by operating activities                                       159

Part C (40 points)

The following information and financial statements excerpts pertain to Liquidity Inc.

a.   All short term investments (securities available for sale) were purchased on 12/31/14 and sold during 2015.

b.   The company entered a lease agreement on 12/31/15.

c.   Fixed assets with a net book value of $15 were sold during the year.

d.   The company repaid the current portion of long-term debt during the year.

e.   Dividend was declared and partially paid.

                                                                               2014             2015

Assets

Cash                                                                           54                 45

Short term investments                                              95                   0

Accounts receivable                                                  45                 85

Inventory                                                                   52                 75

Prepaid general expenses                                          11                 15

Fixed assets under capital lease, net                            0                 50

Fixed assets, net                                                       165               228

                                                                                 422               498

Liabilities and stockowners’ equity

Accounts payable                                                      38                 48

Wages payable                                                           12                   6

Tax payable                                                                 3                   5

Dividend payable                                                         0                   4

Current portion of long term debt                             10                 12

Obligations under capital leases                                  0                 50

Long term debt                                                        183               180

Common stock                                                         150               163

Retained earnings                                                      26                 30

                                                                                 422               498

                                                                               2014            2015

Revenues, net                                                                              426

Cost of goods sold                                                                       310

Gross margin                                                                               116

General expenses                                                       30

Wages expenses                                                         42

Depreciation expense                                                24

Interest expense                                                         11

Loss on sale of fixed assets                                         3

Gain on sale of securities available for sale            –12

Tax expenses                                                               8

                                                                                                     106

Net income                                                                                    10

1.   Prepare the statement of cash flows for the year 2015 using the direct method.

2.   Reconcile net income and net cash flows from operating activities for the year 2015.







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