Question

Cash Computations

A comparative balance sheet, income statement, and additional information for Shillig Doors Inc. follow.

Shillig Doors Inc.

Condensed Comparative Income Statement

For the Years Ended December 31, 2015 and 2014

	2015	2014
Net Sales	$3,946,000	$3,112,000
Cost of goods sold	2,385,600	2,364,000
Gross profit	$1,561,000	$748,000
Expenses	792,000	506,000
Net income	$769,000	$242,000

Shillig Doors Inc.

Comparative Balance Sheet

December 31, 2015 and 2014

	2015	2014
Assets
Current assets:
Cash	$131,000	$102,000
Available-for-sale securities	400.000	-
Accounts receivable	409,000	372,000
Inventory	289,000	304,000
Prepaid expenses	36,000	24,000
Total current assets	$1,265,000	$802,000
Property, plant, and equipment	$656,000	$541,000
Accumulated depreciation	(81,000)	(42,000)
	$575,000	$499,000
Total assets	$1,840,000	$1,301,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$191,000	$174,000
Accrued expenses	124,000	110,000
Dividends payable	165,000	100,000
Total current liabilities	$480,000	$384,000
Notes payable – due 2017	210,000	106,000
Total liabilities	$690,000	$490,000
Stockholders’ equity:
Common stock	$625,000	$600,000
Retained earnings	525,000	211,000
Total stockholders’ equity	$1,150,000	$811,000
Total liabilities and stockholders’ equity	$1,840,000	$1,301,000

Additional information for Shillig:

(a)    All accounts receivable and accounts payable relate to trade merchandise.

(b)    The proceeds from the notes payable were used to finance plant expansion.

(c)     Capital stock was sold to provide additional working capital.

Compute the following for 2015:

                Cash collected from accounts receivable, assuming all sales are on account.

                Cash payments made on accounts payable to suppliers, assuming that all purchases of inventory are on account.

                Cash payments for dividends.

                Cash receipts that were not provided by operations.

                Cash payments for assets that were not reflected in operations.

Answer 1

1. Cash collected from accounts receivable in 2015:

Sales $3946000

Add: Beginning accounts receivable $372000

Less: Ending accounts receivable ($409000)

Cash received from accounts receivable $3909000

2. Cash payments on accounts payable in 2015:

Cost of the goods sold $2385600

Less: Decrease in inventory in 2015 ($15000)

Less: increase in accounts payable in 2015 ($17000)

Cash paid on accounts payable $2353600

3. Cash payment for dividends:

First we will calculate the dividend for the year as per below:

Ending retained earnings = Beginning retained earnings + Net income - Dividends

$525000 = $211000 + $769000 - Dividends

Dividends = $211000 + $769000 - $525000 = $455000

Now, we will calculate the cash dividends paid :

Cash dividends paid = Beginning dividends payable + Dividend for the year - Ending dividends payable

Cash dividends paid = $100000 + $455000 - $165000

Cash dividends paid = $390000

4. Cash receipts not provided by operations:

Issue of common stock ($625000 - $600000)    $25000

Issue of notes payable- due 2017 ($210000 - $106000) $104000

Total receipts $129000

5. Cash payments for assets that were not reflected in operations:

Purchase of plant ($656000 - $541000)   $115000

Less: Financed by notes payable ($104000)

Cash paid $11000