Cocoon\'s Luggage Company provided the following balance sheet and income statem
ID: 2585232 • Letter: C
Question
Cocoon's Luggage Company provided the following balance sheet and income statement for the current year.
Cocoon's Luggage Company
Balance Sheets
At December 31
Assets
Ending
Beginning
Current Assets
Cash
$20,510
$4,700
Accounts Receivable, net
5,100
2,600
Merchandise Inventory
4,100
1,400
Total Current Assets
$29,710
$8,700
Noncurrent Assets
Investments in Bonds
$33,000
$14,000
Property, Plant, and Equipment - net
49,000
61,000
Total Noncurrent Assets
$82,000
$75,000
Total Assets
$111,710
$83,700
Liabilities
Current Liabilities
Accounts Payable
$3,600
$4,700
Accrued Expenses
6,500
6,250
Income Taxes Payable
2,100
2,250
Total Current Liabilities
$12,200
$13,200
Noncurrent Liabilities
Notes Payable
$33,000
$31,000
Total Noncurrent Liabilities
$33,000
$31,000
Total Liabilities
$45,200
$44,200
Shareholders’ Equity
Common Stock, $1 par value
$15,000
$7,500
Additional Paid-in Capital
18,000
13,000
Retained Earnings
33,510
19,000
Total Shareholders’ Equity
$66,510
$39,500
Total Liabilities and Shareholders’ Equity
$111,710
$83,700
Prepare the operating activities section of the cash flow statement using the indirect method, assuming that Cocoon's Luggage Company reports under IFRS and it begins the reconciliation to operating cash flows with income before interest and taxes. Cocoon's Luggage classifies interest paid as a financing activity and interest received as an investing activity.
Cocoon's Luggage Company
Income Statement
For the Year Ended December 31
Sales
$75,000
Cost of Goods Sold
36,600
Gross Profit
$38,400
Selling, General, and Administrative Expenses
$13,600
Depreciation Expense
5,800
Total Operating Expenses
$19,400
Income Before Interest and Taxes
$19,000
Interest Expense
$(2,400)
Investment Income
434
Income Before Tax
$17,034
Income Tax Expense
(1,224)
Net Income
$15,810
Cocoon's Luggage Company
Balance Sheets
At December 31
Assets
Ending
Beginning
Current Assets
Cash
$20,510
$4,700
Accounts Receivable, net
5,100
2,600
Merchandise Inventory
4,100
1,400
Total Current Assets
$29,710
$8,700
Noncurrent Assets
Investments in Bonds
$33,000
$14,000
Property, Plant, and Equipment - net
49,000
61,000
Total Noncurrent Assets
$82,000
$75,000
Total Assets
$111,710
$83,700
Liabilities
Current Liabilities
Accounts Payable
$3,600
$4,700
Accrued Expenses
6,500
6,250
Income Taxes Payable
2,100
2,250
Total Current Liabilities
$12,200
$13,200
Noncurrent Liabilities
Notes Payable
$33,000
$31,000
Total Noncurrent Liabilities
$33,000
$31,000
Total Liabilities
$45,200
$44,200
Shareholders’ Equity
Common Stock, $1 par value
$15,000
$7,500
Additional Paid-in Capital
18,000
13,000
Retained Earnings
33,510
19,000
Total Shareholders’ Equity
$66,510
$39,500
Total Liabilities and Shareholders’ Equity
$111,710
$83,700
Explanation / Answer
Solution:-
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Cocoon's Luggage Company Statement of cash flows For the year ended December 31 Income before interest and taxes 19,000 Add Depreciation expense 5,800 Less income tax paid (2,250 + 1,224 - 2,100) (1,374) Less increase in Accounts Receivable (5,100 - 2,600) (2,500) Less increase in Merchandise Inventory (4,100 - 1,400) (2,700) Less Decrease in Accounts Payable (4,700 - 3,600) (1,100) Add Increase in Accrued Expenses (6,500 - 6,250) 250 Add increase in notes payable (33,000 - 31,000) 2,000 Net cash flow from operation activities 19,376