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    Kite Corporation completed its 2011 calendar year operations with net income of $64,950. The statement of cash flows shows $150,150 generated from operations and $10,200 and $75,000 used in investing and financing activities respectively. A major cash outflow was $63,000 in dividends paid. The company also purchased $75,000 of equipment through a long-term note payable.

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    648235

    Uploaded by

    mohitgaba19
    69 views5 pages
    Kite Corporation completed its 2011 calendar year operations with net income of $64,950. The statement of cash flows shows $150,150 generated from operations and $10,200 and $75,000 used in investing and financing activities respectively. A major cash outflow was $63,000 in dividends paid. The company also purchased $75,000 of equipment through a long-term note payable.

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    Kite Corporation completed its 2011 calendar year operations with net income of $64,950. The statement of cash flows shows $150,150 generated from operations and $10,200 and $75,000 used in investing and financing activities respectively. A major cash outflow was $63,000 in dividends paid. The company also purchased $75,000 of equipment through a long-term note payable.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    69 views5 pages

    648235

    Uploaded by

    mohitgaba19
    Kite Corporation completed its 2011 calendar year operations with net income of $64,950. The statement of cash flows shows $150,150 generated from operations and $10,200 and $75,000 used in investing and financing activities respectively. A major cash outflow was $63,000 in dividends paid. The company also purchased $75,000 of equipment through a long-term note payable.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 5

    Kite Corporation, a merchandiser, recently completed its calendar-year 2011 operations.

    For the
    year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from
    customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect
    cash payments for inventory, and (5) Other Expenses are paid in advance and are initially
    debited to Prepaid Expenses. The company’s balance sheets and income statement follow.
    KITE CORPORATION
    Comparative Balance Sheets
    December 31,2011 and 2010
    2011
    Assets
    Cash 136500
    Accounts receivable 74,100
    Merchandise inventory 454,500
    Prepaid expenses 17,100
    Equipment 278,250
    Accumdepreciation—Equipment -108,750
    Total assets 851700
    Liabilities and Equity
    Accounts payable 117450
    Short-term notes payable 17,250
    Long-term notes payable 112,500
    Common stock, $5 par 465,000
    Paid-in capital in excess
    of par, common stock 18,000
    Retained earnings 121,500
    Total liabilities and equity 851700

    KITE CORPORATION
    Income Statement
    For Year Ended December 31, 2011
    Sales $1,083,000
    Cost of goods sold
    Gross profit
    Operating expenses
    Depreciation expense $36,600

    Other expenses 392,850

    Total operating expenses

    Other gains (losses)


    Loss on sale of equipment
    Income before taxes
    Income taxes expense
    Net income
    Additional Information on Year 2011 Transactions
    a. The loss on the cash sale of equipment was $2,100 (details in b).
    b. Sold equipment costing $51,000, with accumulated depreciation of $20,850, for $28,050 cash.
    c. Purchased equipment costing $113,250 by paying $38,250 cash and signing a long-term note payable for the balance.
    d. Borrowed $6,000 cash by signing a short-term note payable.
    e. Paid $45,000 cash to reduce the long-term notes payable.
    f. Issued 3,000 shares of common stock for $11 cash per share.
    g. Declared and paid cash dividends of $63,000.
    Required
    1. Prepare a complete statement of cash flows; report its operating activities using the indirect method.
    Disclose any noncash investing and financing activities in a note.
    2. Analyze and discuss the statement of cash flows prepared in part 1, giving special attention to the wisdom of the cash d
    Answer 1
    Cash flow Statement
    Cash flow from Operating Activities
    2010 Net Income
    add: loss on sale of equipment
    71550 64950 add: Depreciation
    90,750 -16650 add: Decrease in Accounts Receivable
    490,200 -35700 add: Decrease in Merchandise Inventory
    19,200 -2100 add: Decrease in Prepaid Expenses
    216,000 62250 less: Decrease in Accounts Payable
    -93,000 -15750 add: Increase in Short term notes payable
    794700 57000

    123450 -6000 Cash flow from Investing Activities


    11,250 6000 Sale of Equipment
    82,500 30000 Purchase of Equipment
    450,000 15000
    Cash flow from Financing Activities
    0 18000 Payment of Long term notes
    127,500 -6000 Issue of Common Stock
    794700 57000 Dividends paid

    Net Change in Cash


    add:Beginning Cash
    Ending Cash
    $1,083,000 Non Cash investing activity
    585,000 Purchase of equipment by signing a long-term note payable for $ 75,000
    498,000
    Answer 2

    The Corporation has earned $ 150,150 from the operations and $ 10,200 has
    been used in Investing Activities and $ 75,000 has been used in Financing
    Activities.
    $ 63,000 paid by way of Dividends is the major amount used in terms of
    financing activities.
    429,450
    68,550

    2,100
    66,450
    9,450
    $57,000

    payable for the balance.

    the wisdom of the cash dividend payment.


    $ 57,000
    $ 2,100
    $ 36,600
    $ 16,650
    $ 35,700
    $ 2,100
    $ 6,000
    $ 6,000 $ 150,150

    $ 28,050
    $ -38,250 $ -10,200

    $ -45,000
    $ 33,000
    $ -63,000 $ -75,000

    $ 64,950
    $ 71,550
    $ 136,500

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