Income Statement For the year ended 12/31/12 Sale $85,000 Cost of goods sold $45
ID: 2378877 • Letter: I
Question
Income StatementFor the year ended 12/31/12
Sale
$85,000
Cost of goods sold
$45,000
Gross margin
$40,000
Operating expenses
Depreciation 6000
Selling and Admin 8000
Total
$14,000
Operating Income
$26,000
Gain on sales of Investments
$4,000
Interest Expense
$2,000
Income before taxes
$28,000
Income tax expense
$5,600
Net Income
$22,400
Partial Balance Sheet
2012 2011 Difference Cash
$20,000
Accounts Receivable (net) $80,000 $67,000 $13,000 Inventory $12,000 $11,500 $500 Prepaid Insurance $5,000 $6,000 ($1,000) Patents $11,000 $10,000 $1,000
$0 Accounts Payable $55,000 $70,000 ($15,000) Accured Expenses $30,000 $40,000 ($10,000) Income tax payable $7,000 $4,000 $3,000 Deferred Taxes $45,000 $44,900 $100
Using the direct method and following the above instructions answer each of the requirements showing all calculations.
Requirement 2
Determine cash paid for operating expenses
Income Statement
For the year ended 12/31/12
Sale
$85,000
Cost of goods sold
$45,000
Gross margin
$40,000
Operating expenses
Depreciation 6000
Selling and Admin 8000
Total
$14,000
Operating Income
$26,000
Gain on sales of Investments
$4,000
Interest Expense
$2,000
Income before taxes
$28,000
Income tax expense
$5,600
Net Income
$22,400
Partial Balance Sheet
2012 2011 Difference Cash
$20,000
Accounts Receivable (net) $80,000 $67,000 $13,000 Inventory $12,000 $11,500 $500 Prepaid Insurance $5,000 $6,000 ($1,000) Patents $11,000 $10,000 $1,000
$0 Accounts Payable $55,000 $70,000 ($15,000) Accured Expenses $30,000 $40,000 ($10,000) Income tax payable $7,000 $4,000 $3,000 Deferred Taxes $45,000 $44,900 $100
Using the direct method and following the above instructions answer each of the requirements showing all calculations.
Requirement 2
Determine cash paid for operating expenses
Explanation / Answer
Hi,
Please find the answer as follows:
Notes:
a) Depreciation is not included in Cash Paid for Operating Expenses as it is a non-cash expense.
Thanks.
Selling and Administrative Expenses 8000 Less Decrease in Prepaid Expenses -1000 Add Decrease in Accrued Expenses 10000 Cash Paid for Operating Expenses 17000