Carlson Company Comparative Balance Sheets December 31, 20x5 and 20x4 Assets 20x
ID: 2423324 • Letter: C
Question
Carlson Company
Comparative Balance Sheets
December 31, 20x5 and 20x4
Assets
20x5
20x4
Cash
$ 140
$ 140
Accounts receivable (net)
210
280
Inventory
350
420
Prepaid expenses
105
70
Equipment (net)
3,010
2,800
Investments and other assets
4,900
4,200
Total assets
$8,715
$7,910
Liabilities and Stockholders' Equity
Accounts payable
$ 350
$ 280
Income taxes payable
70
140
Long-term note payable
2,100
1,400
Common stock
1,400
1,400
Retained earnings
4,795
4,690
Total liabilities and stockholders' equity
$8,715
$7,910
Additional information:
Depreciation expense $560
Cash dividends declared and paid 50
a. Compute net income, assuming net income and the cash dividends were the only items affecting retained earnings. Show your work.
b. Compute net cash flows from operating activities using the indirect method.
Comparative Balance Sheets
December 31, 20x5 and 20x4
Assets
20x5
20x4
Cash
$ 140
$ 140
Accounts receivable (net)
210
280
Inventory
350
420
Prepaid expenses
105
70
Equipment (net)
3,010
2,800
Investments and other assets
4,900
4,200
Total assets
$8,715
$7,910
Liabilities and Stockholders' Equity
Accounts payable
$ 350
$ 280
Income taxes payable
70
140
Long-term note payable
2,100
1,400
Common stock
1,400
1,400
Retained earnings
4,795
4,690
Total liabilities and stockholders' equity
$8,715
$7,910
Explanation / Answer
Solution-a
Net income:
Increase in retained earnings
$105
Dividends
$50
Net income
$155
Solution-b
Cash flows from operating activities:
Net Income
$155
Adjustments to reconcile net income to net cash flows from operating activities
Depreciation
$560
Decrease in Accounts Receivable
$70
Decrease in Inventory
$70
Increase Prepaid expense
$35
Increase in accounts payable
$70
Decrease in Income tax
($70)
Cash flows from operating activities
$890
Net income:
Increase in retained earnings
$105
Dividends
$50
Net income
$155