AC 313 Statement of Cash Flows Assessment (50 Points) Presented


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Additional Info: There is a prior period adjustment to retained earnings of $20. See additional information #6 on the assignment. You should adjust the beginning balance to $388 and add $20 to the Cash paid for income taxes. Prepare an indirect and direct statement of cash flows SCF exercise(1) (1).docx AC 313 Statement of Cash Flows Assessment (50 Points) Presented below are the balance sheets of Trout Corporation as of December 31, Year 1 and Year 2, and the income statement for the year ended December 31, Year 2. The statement of retained earnings for the year ended December 31, Year 2 is on the next page. All dollars are in thousands. Trout Corporation Balance Sheets December 31, Year 1 and Year 2 Year 1 Year 2 Cash Treasury Bills & Commercial Paper Accounts Receivable, net Inventories Land Plant and Equipment Accumulated Depreciation Total Assets $204 143 495 780 250 900 (170) $2,602 $403 106 695 895 350 1,398 (295) $3,552 Liabilities & Stockholders’ Equity Accounts Payable Dividends Payable Accrued Liabilities Notes Payable, Long-Term Bonds Payable Bond Discount Common Stock, Par Value $20 Additional Paid-In Capital Retained Earnings Total Liabilities & Stockholders’ Equity $700 -168 -500 (18) 600 244 408 $2,602 $650 10 413 450 500 (16) 640 304 601 $3,552 Assets Trout Corporation Income Statement For the Year Ended December 31, Year 2 Net Sales Revenue Operating Expenses: Cost of Goods Selling & Administrative Expenses Operating Income Other Income (Expense): Interest Expense Gain on Sale of Equipment Pre-Tax Income from Continuing Operations Less: Income Tax Expense: $2,000 $1,126 456 1,582 $418 $(80) 5 (75) $343 90 Net Income $253 Trout Corporation Statement of Retained Earnings For the Year Ended December 31, Year 2 Retained Earnings as of January 1, Year 2 Prior Period Adjustment Adjusted prior period Add: Net Income Deduct: Dividend Declared, October 10, Year 2 Retained Earnings, December 31, Year 2 $408 (20) 388 $ 253 (40) 213 $601 Additional Information: 1. On April 15, Year 2, Trout issued 2 shares of its common stock for land having a fair value of $100. 2. On May 25, Year 2, Trout borrowed money from an insurance company. The underlying promissory note bears interest at 15% and is payable in three equal annual installments of $150. The first payment is due on May 25, Year 3. 3. On July 1, Year 2, Trout sold equipment costing $52 for $33 cash. 4. On October 10, Year 2, Trout declared a cash dividend of $40 on its common stock. 5. The Selling and Administrative Expense account includes Depreciation Expense. 6. On September 1, Year 2, Trout paid a $20 additional tax assessment for Year 1 due to an error in tax calculation discovered by the Internal Revenue Service. This payment was appropriately recorded by Trout as a prior period adjustment. Required: Create an EXCEL worksheet with one tab for the Direct Method and one tab for the Indirect Method. (You can earn up to an additional 5 points for formatting.) A. Using EXCEL, prepare a statement of cash flows for Trout Corporation using the direct method of reporting cash flows from operating activities for the year ended December 31, Year 2. B. Using the same EXCEL workbook and a second tab, prepare the operating activities section only for the statement of cash flows for Trout Corporation using the indirect method for the year ended December 31, Year 2. C. Using Microsoft Word answer the following 1. Using the Accounts Receivable account, explain how a company may report net income on its income statement using the accrual basis but report negative cash flow from operating activities on its statement of cash flows using the cash basis. [Hint: Assume that you calculate an excess of revenues over expenses (i.e., net income on the accrual basis) but your calculation of cash flow from operating activities (i.e., the cash basis) produces a negative number. That is, cash is used rather than provided. See chapters 1,

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