Question

The Balance Sheets for Jackson, Inc. for the years ending December 31, 2019 and 2018 are shown below: Dec. 31, 2019 143,290 47,660 (2,300) 4,200 Cash Accounts Receivable Allowance for Doubtful Amounts Prepaid Insurance Prepaid Rent Inventories Land Buildings Equipment Delivery equipment Less: Accumulated Depreciation Buildings Equipment Delivery Equipment Patents Dec. 31, 2018 88,300 40,500 (2,200) 3,200 5,600 58,200 80,000 175,000 74,000 29,000 70,960 100,000 175,000 74,000 48,000 (13,000) (48,500) (9,500) 7,500 597,310 (7,500) (35,500) (26,500) 17,700 499,800 Dec. 31, 2018 29,000 5,900 155,400 Accounts payable Accrued liabilities Mortgage payable Bonds payable Premium on Bonds Common Stock ($2PV) Additional paid-in capital - Common Stock Additional paid-in capital - Treasury Stock Retained earnings Less: Treasury Stock Dec. 31, 2019 24,000 5,500 89,000 100,000 4,200 55,000 82,500 1,500 247,610 (12,000) 597,310 50,000 67,500 212,000 (20,000) 499,800

Answer 1

Answer

Jackson Inc
Cash flow Statement - Indirect method			Calculation
Cash flows from Operating Activities
Net income	151,860
Adjustments to reconcile net income to net cash from operating activities
Net gain (loss)	(700)
Amortization expense	2,200
Depreciation expense-Building	5,500		=13,000-7,500
Depreciation expense-Equipment	13,000		=48,500-35,500
Depreciation expense-Delivery Equipment	4,000		=9,500-26,500+(23,000-2,000)
Changes in Working Capital
Accounts Receivable	(7,160)		=40,500-47,660
Allowance for doubtful amounts	100		=2,300-2,200
Prepaid Insurance	(1,000)		=3,200-4,200
Prepaid Rent	5,600		=5,600-0
Inventories	(12,760)		=58,200-70,960
Accounts Payable	(5,000)		=24,000-29,000
Accrued Liabilities	(400)		=5,500-5,900
Net Cash Provided/(Used) by Operating Activities		155,240
Cash flows from Investing Activities
Proceeds from sale of delivery equipment	4,200
Proceeds from sale of patents	6,500
Purchase of Land	(20,000)		=80,000-100,000
Purchase of Delivery Equipment	(42,000)		=48,000-29,000+23,000
Net Cash Provided/(Used) by Investing Activities		(51,300)
Cash flows from Financing Activities
Repayment of Mortgage payable	(66,400)		=89,000-155,400
Proceeds from issuance of bonds	104,200		=100,000+4,200
Proceeds from issuance of common stock	10,000		=(55,000+82,500)-(50,000+67,500)-10,000
Reissue of treasury stock	9,500
Dividends paid	(106,250)		=247,610-212,000-151,860+10,000
Net Cash Provided/(Used) by Financing Activities		(48,950)
Net Change in Cash		54,990
Cash at Beginning of Period		88,300
Cash at End of Period		143,290

	Workings			Calculation
1	Depreciation expense-Delivery Equipment
	Accumulated Dep - Opening Balance		9,500
	Accumulated Dep - Closing Balance		(26,500)
	Cost of delivery equipment sold	23,000
	Book value of delivery equipment sold	(2,000)
	Accumulated Dep on sales		21,000
	Depreciation expense-Delivery Equipment		4,000
2	Purchase of Delivery Equipment
	Closing balance	48,000
	Opening balance	(29,000)
	Cost of delivery equipment sold	23,000
	Purchase of Delivery Equipment	42,000
3	Stock Dividends
	Common Stock Value	50,000
	Par value per share	2
	Number of Common Stock	25,000		=50,000/2
	5% Stock Dividends	5%
	Number of shares of Stock Dividends	1,250		=25,000*5%
	FMV per share	8
	Stock Dividends Amount	10,000		=1,250 shares @ $8
4	Proceeds from issuance of common stock
	Common stock - closing balance	55,000
	Additional paid in capital - closing balance	82,500
			137,500
	Common stock - opening balance	(50,000)
	Additional paid in capital - opening balance	(67,500)
			(117,500)
	Stock Dividends		(10,000)	From above wkgs
	Proceeds from issuance of common stock		10,000
5	Dividends paid
	Retained earnings - closing balance	247,610
	Retained earnings - opening balance	(212,000)
	Net Income	(151,860)
	Stock Dividends	10,000
	Dividends paid	(106,250)

Requirement (b)

Jackson Inc
Cash flow Statement - Direct method
Cash flows from Operating Activities
Sales	874,060
Opening Accounts Receivable	40,500
Closing Accounts Receivable	(47,660)
Closing Allowance	2,300
Opening Allowance	(2,200)
Cash collections from customers		867,000
Cash payments
Cost of sales	546,400
Opening Accounts Payable	29,000
Closing Accounts Payable	(24,000)
Closing Inventory	70,960
Opening Inventory	(58,200)
Cash paid to Suppliers		564,160
Operating expenses	176,500
Opening Accrued Liabilities	5,900
Closing Accrued Liabilities	(5,500)
Closing Prepaid Insurance	4,200
Opening Prepaid Insurance	(3,200)
Closing Prepaid Rent	-
Opening Prepaid Rent	(5,600)
Amortization expense	(2,200)
Depreciation expense-Building	(5,500)
Depreciation expense-Equipment	(13,000)
Depreciation expense-Delivery Equipment	(4,000)
Cash paid for operating expenses		147,600
Net Cash Provided/(Used) by Operating Activities		155,240