Classic Reserve Rare Coins (CRRC) was formed on January 1, 2010. Additional data
ID: 2561116 • Letter: C
Question
Classic Reserve Rare Coins (CRRC) was formed on January 1, 2010. Additional data for the year follows:
a.
On January 1, 2010,
CRRC issued common stock for $500,000.
b.
Early in January, CRRC
made the following cash payments:
1.
For store fixtures, $55,000
2.
For inventory, $330,000
3.
For rent expense on a store building, $13,000
c.
Later in the year, CRRC
purchased inventory on account for
$241,000.
Before year-end,
CRRC paid $151,000
of this account payable.
d.
During 2010, CRRC
sold 3,000 units of inventory for
$ 200 each. Before year end, the company collected
85% of this amount. Cost of goods sold for the year was
$250,000, and ending inventory totaled $321,000.
e.
The store employs three people. The combined annual payroll is
$94,000, of which CRRC
still owes $6,000 at year-end.
f.
At the end of the year, CRRC
paid income tax of $16,000.
g.
Late in 2010, CRRC
paid cash dividends of $42,000.
h.
For equipment, CRRC
uses the straight-line depreciation method, over five years, with zero residual value.
Requirements
1.
What is the purpose of the cash flow statement?
2.
3.
4.
a.
On January 1, 2010,
CRRC issued common stock for $500,000.
b.
Early in January, CRRC
made the following cash payments:
1.
For store fixtures, $55,000
2.
For inventory, $330,000
3.
For rent expense on a store building, $13,000
c.
Later in the year, CRRC
purchased inventory on account for
$241,000.
Before year-end,
CRRC paid $151,000
of this account payable.
d.
During 2010, CRRC
sold 3,000 units of inventory for
$ 200 each. Before year end, the company collected
85% of this amount. Cost of goods sold for the year was
$250,000, and ending inventory totaled $321,000.
e.
The store employs three people. The combined annual payroll is
$94,000, of which CRRC
still owes $6,000 at year-end.
f.
At the end of the year, CRRC
paid income tax of $16,000.
g.
Late in 2010, CRRC
paid cash dividends of $42,000.
h.
For equipment, CRRC
uses the straight-line depreciation method, over five years, with zero residual value.
Explanation / Answer
1
THE MAIN PURPOSE OF CASH FLOW STATEMENT IS TO SHOW MOVEMENT OF CASH IN A PARTICULAR PERIOD
THE MOVEMENT OF CASH WILL BE REPORTED IN THE CASH FLOW STATEMENT AS ONE OF THE FOLLOWING ACTIVITIES,NAMED AS:(a)OPERATING ACTIVITIES
(b) INVESTING ACTIVITIES
(c) FINANCING ACTIVITIES.
THE NET CHANGE FROM THESE ACTIVITIES SHOULD EQUAL THE CHANGE IN COMPANY CASH AND CASH EQIVALENTS DURING THE REPORTING PERIOD.FOR EXAMPLE-CASH FLOW STATEMENT FOR THE YEAR 2016 WILL REPORT THE CAUSE OF CHANGE IN CASH AND CASH EQIVALENT BETWEEN ITS BALANCE SHEET OF 31 DEC 2015 AND 31 DEC 2016.
IN ADDEITION TO CASH MOVEMENTS,IT DISCLOSES OTHER INFO SUCH AS DEPERICIATION,AMOUNT OF INT PAID,THE AMOUNT OF INCOME TAX PAID AND ANY SIGNIFICANT INVESTING AND FINANCING ACTIVITIES WHICH DO NOT REQUIRE CASH.
THIS IS TO BE DISTRIBUTED WITH COMPANY INCOME STATEMENT AND BALANCE SHEET.
(2)
INCOME STATEMENT
OF CRRC'S
FOR THE YEAR ENDING 31 DEC 2010
REVENUES:
EXPENSES:
PAYROLL EXPENSES
INCOME TAX EXPENSE
DEPERICIATION ON STORE FIXTURE*
TOTAL EXPENSES
NET INCOME($600,000-384,000)
94,000
16,000
11,000
384,000
216,000
(3)
BALANCE SHEET OF
CRRC'S
FOR THE YEAR ENDED DEC 2010
LIABILITIES
LONG TERM LIABILITIES:
ISSUE OF COMMON STOCK
RESERVE AND SURPLUS:
NET INCOME $216000
LESS:DIVIDEND PAID $42000
BILLS PAYABLE
OUTSTANDING EXPENSES
AMOUNT
$500,000
$174,000
$151,000
$6000
$831000
ASSETS
LONG TERM ASSETS:
STORES AND FIXTURES$55,000
LESS:DEPRICIATION $11,000
CURRENT ASSETS:
INVENTORY
CASH
AMOUNT
$44,000
$321000
$466,000
$831000
MEMORANDUM (OPENING BALANCE SHEET)
LIABILITIES
COMMON STOCK
AMOUNT
$500,000
$500,000
ASSETS
STCK AND FIXTURES
INVENTORY
CASH(BAL.FIGURE)
AMOUNT
$55,000
$330000
$115000
$500,000
(4)
CASH FLOW STATEMENT FOR THE YEAR ENDED DEC 2010
PARICULARS
NET INCOME
ADJUSTMENT FOR DEPERICIATION
NET PROFIT BEFORE EXTRA ORDINARY ITEMS AND AFTER ADJ.
CHANGE IN ACCOUNT PAYABLE
CHANGES IN STOCK($330000-$321000) $9000
CHANGES IN OUTSTANDING EXPENSES
NET INCOME FROM OPERATING ACTIVITIES
PURCHASE OF STOCK
PURCHASE OF STORE&FIXTURES
NETB INCOME FROM INVESTING ACTIVITIES
ISSUE OF COMMON STOCK
CASH DIVIDEND PAID
NET INCOME FROM FINANCING ACTIVITIES
NET INCREASE /(DECREASE)
AMOUNT($)
$216,000
$11,000
$227,000
$151,000
$9,000
$6000
$393,000
($330000)($55,000)
($385,000)
$500,000
($42,000)
$458,000
$466,000
PARTICULARS AMOUNT ($)REVENUES:
SALES (300*$200) 6,00,000 TOTAL REVENUE 6,00,000EXPENSES:
COST OF GOODS SOLD 250,000 RENT EXPENSE ON A STORE BUILDING13,000
PAYROLL EXPENSES
INCOME TAX EXPENSE
DEPERICIATION ON STORE FIXTURE*
TOTAL EXPENSES
NET INCOME($600,000-384,000)
94,000
16,000
11,000
384,000
216,000