Acc 291 Wk 5 P-13-9a & P13-9a

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Direct Method
0A
ARMA INC.|
Statement of Cash Flows|
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For the Year Ended December 31, 2011|
Cash flows from operating activities| | |
Cash receipts from customers| | (1) $332,980 |
Less cash payments:| | |
To suppliers| (2) $100,410 | |
For income taxes| 27,280 | |
For operating expenses| (3) 15,310 | |
For interest| ------------------------------------------------- 4,730 | -------------------------------------------------
147,730 |
Net cash provided by operating activities| | 185,250 |
| | |
Cash flows from investing activities| | |
Sale of plant assets| 1,500 | |
Purchase of plant assets| (85,000)| |
Purchase of investments| ------------------------------------------------- (24,000)| |
Net cash used by investing activities| | (107,500)|
| | |
Cash flows from financing activities| | |
Sale of common stock| 45,000 | |
Payment of cash dividends| (40,350)| |
Redemption of bonds| ------------------------------------------------- (40,000)| |
Net cash used by financing activities| | ------------------------------------------------- (35,350)|
| | |
Net increase in cash| | 42,400 |
Cash at beginning of period| | ------------------------------------------------- 48,400 |
Cash at end of period| | ------------------------------------------------- $90,800 |

(1) Cash receipts from customers| |
Sales| $392,780 |
Deduct: Increase in accounts receivable| ------------------------------------------------- (59,800)|
Cash receipts from customers| ------------------------------------------------- $332,980 |

(2) Cash payments to suppliers| |
Cost of goods sold| $135,460|
Add: Increase in inventory| ------------------------------------------------- 9,650|
Cost of purchases| 145,110|
Deduct: Increase in accounts payable| ------------------------------------------------- (44,700)|
Cash payments to suppliers| ------------------------------------------------- $100,410|

(3) Cash payments for operating expenses| | |
Operating expenses exclusive of depreciation| | $12,410| Add: Increase in prepaid expenses| $2,400| |
Decrease in accrued expenses payable| ------------------------------------------------- 500| -------------------------------------------------
2,900|
Cash payments for operating expenses| | ------------------------------------------------- $15,310|

Indirect Method
P13-9A
Condensed financial data of Arma Inc. follow.
|
ARMA INC.|
Comparative Balance Sheets|
-------------------------------------------------
December 31|
Assets | ------------------------------------------------- 2011| | -------------------------------------------------
2010|
Cash| $90,800 | | $48,400 |
Accounts receivable| 92,800 | | 33,000 |
Inventories| 112,500 | | 102,850 |
Prepaid expenses| 28,400 | | 26,000 |
Investments| 138,000 | | 114,000 |
Plant assets| 270,000 | | 242,500 |
Accumulated depreciation| ------------------------------------------------- (50,000)| | ------------------------------------------------- (52,000)|
Total| -------------------------------------------------
$682,500 | | ------------------------------------------------- $514,750 |
| | | |
Liabilities and Stockholders' Equity| | |
Accounts payable| $112,000| | $67,300|
Accrued expenses payable| 16,500| | 17,000|
Bonds payable| 110,000| | 150,000|
Common stock | 220,000| | 175,000|
Retained earnings| ------------------------------------------------- 224,000| | ------------------------------------------------- 105,450|
Total| -------------------------------------------------
$682,500| | ------------------------------------------------- $514,750|
|
ARMA INC.|
Income Statement|...
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