In its 2018 Annual Report to Shareholders, Kinney Inc. reported the following Co
ID: 2527347 • Letter: I
Question
In its 2018 Annual Report to Shareholders, Kinney Inc. reported the following Consolidated Statement of Cash Flows:
For the years ended December 31,
Required:
A. Assuming the decrease in accrued expenses during fiscal year 2018 included a $15,000 reduction due to taxes, compute the income tax expense for Kinney in that year.
B. Kinney reported cost of goods sold of $169,114,150 in its fiscal 2018 income statement. Compute Kinney’s net inventory purchases during the year.
C. Assuming the decrease in accrued expenses during fiscal year 2018 included a $15,000 reduction due to interest on debt, compute the interest expense (net) for Kinney in that year.
D. Assuming that Kinney uses accounts payable strictly for inventory purchases and that all such purchases are on credit, how much cash did Kinney pay during the year for inventories:
(a)Cash paid to inventory suppliers
(b)Cash paid to employees
Explanation / Answer
Ans 1 Beg tax payable+income tax expense-Income tax deferred-Income tax paid= Ending Tax payable So income tax expense=Ending Tax payable-Beg tax payable+Income tax deferred+Income tax paid -15000+215000+1063990 1263990 Income Tax expense $1,263,990 ans 2 Cost of good sold=Beg Inventory+Purchases-end Inventory Purchases=Cost of good sold+(Ending Inventory- Beg Inventory) 169114150+365508 169479658 Purcahses $169,479,658 ans 3 Interest expense=Interest paid+(ending Interest payable-beg interest payable) 1063990-15000 1048990 Interest expenses $1,048,990 ans d a) Cash paid to inventory suppliers Net Inventory Purchases+beg Accounts payable-cash paid to suppliers=Ending Accounts payable Net Inventory Purchases-(Ending Accounts payable+beg Accounts payable)=cash paid to suppliers 169479658-1868676 167610982 b) Cash paid to employees Cash paid to suppliers and employees-cash paid to suppliers 190276791-167610982 22665809