Step by Step Assistance

Saturday, 9 December 2017

The following are the financial statements of Nosker Company.

The following are the financial statements of Nosker Company.

Nosker Company
Comparative Balance Sheets
December 31
Assets

2019

2018
Cash
$38,000


$20,000

Accounts receivable
30,000


14,000

Inventory
27,000


20,000

Equipment
60,000


78,000

Accumulated depreciation—equipment
(29,000
)

(24,000
)
   Total
$126,000
 
$108,000
 







Liabilities and Stockholders’ Equity






Accounts payable
$24,000


$15,000

Income taxes payable
7,000


8,000

Bonds payable
27,000


33,000

Common stock
18,000


14,000

Retained earnings
50,000
 
38,000
 
   Total
$126,000
 
$108,000
 

Nosker Company
Income Statement
For the Year Ended December 31, 2019
Sales revenue
$242,000
Cost of goods sold
175,000
Gross profit
67,000
Operating expenses
24,000
Income from operations
43,000
Interest expense
3,000
Income before income taxes
40,000
Income tax expense
8,000
Net income
$32,000

Additional data:

1.
Dividends declared and paid were $20,000.
2.
During the year, equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had a book value of $8,500 at the time of sale.
3.
All depreciation expense, $14,500, is in the operating expenses.
4.
All sales and purchases are on account.

 save image
save image

[Net cash provided by oper. act. = Net inc. + (Depr. exp. - Incr. in accts. rec. - Incr. in inv. + Incr. in accts. pay. - Decr. In inc. tax. pay.)]
Compute free cash flow.
Free cash flow = $31,500 – $0 – $20,000 = $11,500
Here

Saturday, 28 October 2017

Southwest Milling Co. purchased a front-end loader to move stacks of lumber. The loader had a list price of $115,250. The seller agreed to allow a 6.00 percent discount because Southwest Milling paid cash.

Southwest Milling Co. purchased a front-end loader to move stacks of lumber. The loader had a list price of $115,250. The seller agreed to allow a 6.00 percent discount because Southwest Milling paid cash. Delivery terms were FOB shipping point. Freight cost amounted to $2,300. Southwest Milling had to hire a specialist to calibrate the loader. The specialist’s fee was $1,210. The loader operator is paid an annual salary of $18,700. The cost of the company’s theft insurance policy increased by $1,890 per year as a result of acquiring the loader. The loader had a four-year useful life and an expected salvage value of $6,100.
    
Required
a.
Determine the amount to be capitalized in an asset account for the purchase of the loader.

 save image
 b. Record the purchase in general journal format.
save image

Explanation:
a. 
Discount: $115,250 × 6.00% = $6,915
The operator salary and increase in insurance are operating expenses.