Michaels Company had the following information available at the end of 2014. Ple
ID: 2478695 • Letter: M
Question
Michaels Company had the following information available at the end of 2014.
Please take a look at the question below and create a statement of cash flows AND a reconciliation schedule.
Prepare a statement of cash flows for Michaels Company using the direct method accompanied by a reconciliation schedule. Assume the short-term investments are classified as available-for-sale. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
MICHAELS COMPANY
COMPARATIVE BALANCE SHEETS
AS OF DECEMBER 31, 2014 AND 2013
2014
2013
$10,760
$3,060
20,590
13,800
21,640
31,330
41,100
36,080
2,400
13,480
2,610
970
1,350
830
124,930
172,200
350,040
350,040
(105,220
)
(88,110
)
524,620
400,050
(130,660
)
(113,950
)
45,840
51,350
$910,000
$871,130
$22,380
$31,070
5,390
4,960
6,000
3,840
10,530
10,530
60,590
70,170
400,170
400,170
14,314
23,820
240,840
219,100
25,576
17,790
124,210
89,680
$910,000
$871,130
MICHAEL S COMPANY
INCOME STATEMENT AND DIVIDEND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2014
$1,160,450
748,980
411,470
$79,520
156,790
39,330
275,640
135,830
8,320
4,390
2,500
(52,270
)
(37,060
)
98,770
40,350
58,420
(23,890
)
$34,530
MICHAELS COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2014
(Direct Method)
Cash receipts:
Cash payments:
Reconciliation Schedule
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MICHAELS COMPANY
COMPARATIVE BALANCE SHEETS
AS OF DECEMBER 31, 2014 AND 2013
2014
2013
Cash$10,760
$3,060
Accounts receivable20,590
13,800
Short-term investments21,640
31,330
Inventory41,100
36,080
Prepaid rent2,400
13,480
Prepaid insurance2,610
970
Supplies1,350
830
Land124,930
172,200
Buildings350,040
350,040
Accumulated depreciation—buildings(105,220
)
(88,110
)
Equipment524,620
400,050
Accumulated depreciation—equipment(130,660
)
(113,950
)
Patents45,840
51,350
Total assets$910,000
$871,130
Accounts payable$22,380
$31,070
Income taxes payable5,390
4,960
Salaries and wages payable6,000
3,840
Short-term notes payable10,530
10,530
Long-term notes payable60,590
70,170
Bonds payable400,170
400,170
Premium on bonds payable14,314
23,820
Common stock240,840
219,100
Paid-in capital in excess of par—common stock25,576
17,790
Retained earnings124,210
89,680
Total liabilities and stockholders’ equity$910,000
$871,130
MICHAEL S COMPANY
INCOME STATEMENT AND DIVIDEND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2014
$1,160,450
Cost of goods sold748,980
411,470
Gross margin Operating expenses Selling expenses$79,520
Administrative expenses156,790
Depreciation/Amortization expense39,330
Total operating expenses275,640
Income from operations135,830
Other revenues/expenses Gain on sale of land8,320
Gain on sale of short-term investment4,390
Dividend revenue2,500
Interest expense(52,270
)
(37,060
)
Income before taxes98,770
Income tax expense40,350
Net income58,420
Dividends to common stockholders(23,890
)
To retained earnings$34,530
MICHAELS COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2014
(Direct Method)
Cash receipts:
$ $Cash payments:
$ $Reconciliation Schedule
Reconciliation of Net Income to $ Adjustments to reconcile net income to $ $ Click if you would like to Show Work for this question:Open Show Work
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Explanation / Answer
Answer:
Michaels Company Sttaement of cash flow For the Year Ended December 31, 2014 Cash flows from operating activities Cash receipts: Cash received from customers 1153660 Dividends received 2500 1156160 Cash payments: Cash paid to suppliers 762690 Cash paid for operating expenses 225230 Taxes paid 39920 Interest paid 61776 1089616 Net cash provided by operating activities 66544 Cash flows from investing activities Sale of short-term investments 14080 Sale of land 55590 Purchase of equipment -124570 Net cash used by investing activities -54900 Cash flows from financing activities Proceeds from issuance of common stock 29526 Principal payment on long-term debt -9580 Dividends paid -23890 Net cash used by financing activities -3944 Net increase in cash 7700 Cash, January 1, 2014 3060 Cash, December 31, 2014 10760 Sales Revenue 1160450 – Increase in Accounts Receivable 6790 Cash received from customers 1153660 Cost of Goods Sold 748980 + Increase in Inventory 5020 + Decrease in Accounts Payable 8690 Cash paid to suppliers 762690 Operating Expenses 275,640 – Depreciation/Amortization Expense -39330 – Decrease in Prepaid Rent -11080 + Increase in Prepaid Insurance 1640 + Increase in Office Supplies 520 – Increase in Wages Payable -2160 Cash paid for Operating Expenses 225230 Income tax expense 40350 Less:Increase in income taxes payable -430 Taxes paid 39920 Interest Expense 52270 + Decrease in Bond Premium 9506 Interest paid 61776 Reconciliation of Net Income to Net Cash Provided by Operating Activities: Net income 58420 Adjustments to reconcile net income to net cash provided by operating activities: Dep 39330 Decrease in prepaid rent 11080 Increase in income taxes payable 430 Increase in wages payable 2160 Increase in accounts receivable -6790 Increase in inventory -5020 Increase in prepaid insurance -1640 Increase in office supplies -520 Decrease in accounts payable -8690 Gain on sale of land -8320 Gain on sale of short-term investments -4390 Amortization of bond premium -9506 Total adjustments 8124 Net cash provided by operating activities 66544