Question

The Cobblepot Aviary Tools and Supplies Company (CATS Co.) begins operations on December 1, 2014. On December 31, 2014 it concludes the fiscal year. CATS uses a pe LIFO inventory system and straight line depreciation. The following transactions occurred in December Dec. 1: Financed the company startup by issuing $100,000 in common stock. Dec. 1: Financed the company by signing a note for S30,000 with a local bank. Principle and 10% interest is to be repaid in six months. Dec. 1: Purchase equipment for $40,000. The equipment has a five year useful life and $4,000 salvage value. Dec. 2: Paid an insurance company $2,400 for a one-year policy. Dec. 3: Paid $5,000 in cash for office supplies. Dec. 5: Purchased 200 Delux Bird Baths (DBB's - the company's signature product) on account from its supplier at a cost of $100 each. Dec. 12: Sold 150 DBB's on account for $200 each. Dec. 18: Paid employees $6,000 in wages for the first half of the month. The second half of the monthly wages will be paid on Jan. 3rd Dec. 20: Purchased with cash 120 DBB's from its supplier at a cost of $125 each. Dec. 22: Paid $12,000 to its supplier for the DBB's purchased on Dec. 54 Dec. 23: Sold 80 DBB's for $220 each. These were all cash sales. Dec. 24: Collected $8,000 on account from customers. Dec. 26: Declared a $2,000 dividend to its shareholders. Dividend will be paid on Jan. 1, 2015 as a New Year's gift. Dec. 28: Collected an advanced payment of $5,500 for 25 DBB's to be delivered to a customer on Jan. 15th Dec. 31: Paid $2,500 to the local utility company for December gas and electricity. Dec. 31: Purchased $15,000 of another firm's bonds. The bonds are classified as available for sale. Dec. 31: Paid $4,000 rent for the office building. Rent was for December and January Dec. 31: Inventory shows $3,500 in office supplies remaining. Bad debt expense is estimated as $400. Instructions: 1. Write the journal entries for the company's fiscal year. 2. Enter the transactions in the necessary general ledger T-accounts. 3. Create a trial and adjusted trial balance. 4. Make the necessary closing entries. 5. Prepare an income statement, balance sheet and statement of retained earnings. 6. Prepare an indirect statement of cash flows. See if you can generate a direct method statement of cash flows as well. Assume that the firm used perpetual FIFO instead of perpetual LIFO. How would this change the firm's net income? How would this change cash flows from operations?

The Cobblepot Aviary Tools and Supplies Company (CATS Co.) begins operations on December 1, 2014. On December 31, 2014 it concludes the fiscal year. CATS uses a pe LIFO inventory system and straight line depreciation. The following transactions occurred in December Dec. 1: Financed the company startup by issuing $100,000 in common stock. Dec. 1: Financed the company by signing a note for S30,000 with a local bank. Principle and 10% interest is to be repaid in six months. Dec. 1: Purchase equipment for $40,000. The equipment has a five year useful life and $4,000 salvage value. Dec. 2: Paid an insurance company $2,400 for a one-year policy. Dec. 3: Paid $5,000 in cash for office supplies. Dec. 5: Purchased 200 Delux Bird Baths (DBB's - the company's signature product) on account from its supplier at a cost of $100 each. Dec. 12: Sold 150 DBB's on account for $200 each. Dec. 18: Paid employees $6,000 in wages for the first half of the month. The second half of the monthly wages will be paid on Jan. 3rd Dec. 20: Purchased with cash 120 DBB's from its supplier at a cost of $125 each. Dec. 22: Paid $12,000 to its supplier for the DBB's purchased on Dec. 54 Dec. 23: Sold 80 DBB's for $220 each. These were all cash sales. Dec. 24: Collected $8,000 on account from customers. Dec. 26: Declared a $2,000 dividend to its shareholders. Dividend will be paid on Jan. 1, 2015 as a New Year's gift. Dec. 28: Collected an advanced payment of $5,500 for 25 DBB's to be delivered to a customer on Jan. 15th Dec. 31: Paid $2,500 to the local utility company for December gas and electricity. Dec. 31: Purchased $15,000 of another firm's bonds. The bonds are classified as available for sale. Dec. 31: Paid $4,000 rent for the office building. Rent was for December and January Dec. 31: Inventory shows $3,500 in office supplies remaining. Bad debt expense is estimated as $400

I need help with #5 and #6.

5. prepare an income statement, balance sheet, and statement of retained earnings.

6. prepare an indirect statement of cash flows. see if you can generate a direct method statement of cash flows as well.

Answer 1

G H K $ 47,600 1 Income Statement 2 Sales Revenue 3 Less: Expenses 4 Cost of Goods Sold $ 23,750 5 Wages Expense $ 6,000 6 Utilities Expense $ 2,500 7 Supplies Expense $ 1,500 8 Bad Debt Expense $ 400 9 Total Expenses 10 Net Income 11 Statement of Retained Earnings 13 Retained Earnings, December 1 || 14 Add: Net Income 15 16 Less: Dividends 17 Retained Earnings, December 31 | 18 $ 34,150 $ 13,450 $116.950 12 J Balance Sheet Assets Current Assets Cash $ 59,200 Accounts Receivable $ 21,600 Supplies $ 3,500 Inventory $ 11,250 Prepaid Insurance $ 2,400 Prepaid Rent $ 4,000 Short term Investments $ 15,000 Total Current Assets Property, Plant and Equipment Equipment Total Assets Liabilities and Stockholder's Equity Current Liabilities Accounts Payable $ 8,000 Dividend Payable $ 2,000 Unearned Revenue $ 5,500 Total Current Liabilities Liabilities Loan Payable Total Liabilities Stockholder's Equity Common Stock $100,000 Retained Earnings $ 11,450 Total Stockholder's Equity Total Liabilities and Stockholder's Equity $ - $ 13,450 $ 13,450 $ 2.000 $ 11,450 $ 40,000 $156,950 $ 15,500 21 $ 30,000 $ 45,500 23 24 25 26 27 $111,450 $156,950 28 20

$ 13,450 M 1 Statement of Cashflow - Indirect Method 2 Cash flow from Operating Activities 3 Net Income 4. Adjustments 5 Increase in Accounts Receivable $ (21,600 6 Increase in Supplies $ (3,500) 7 Increase in Inventory $ (11,250) 8 Increase in prepaid Insurance $ (2,400) 9 Increase in Prepaid Rent $ (4,000) 10 Increase in Accounts Payable $ 8,000 11 Increase in Unearned Revenue $ 5,500 12 Net Cashflow from Operating Activities 13 Cash flow from Investing Activities Activities 14 Purchase of Investment $(15,000) 15 Purchase of Equipment $ (40,000) 16 Loan from Bank $ 30,000 17 Net Cashflow from Investing Activities 18 Cash flow from Financing Activities 19 Issue of Common Stoke $100,000 20 Net Cash flow from Financing Activities 21 Net Increase / (decrease) 22 Add: Beginning Cash Balance 23 Ending Cash Balance 24 $ $ (29,250) (15,800 $ (25,000) $ $ 100,000 59,200 $ 59,200

C Credit ($) A B 1 Trial Balance 2 Account Titles Debit ($) 3 Cash $ 59,200 4. Accounts Receivable $ 21,600 5 Supplies $ 3,500 6 Inventory $ 11,250 7 Prepaid Insurance $ 2,400 8 Prepaid Rent $ 4,000 9 Short term Investments $ 15,000 10 Equipment $ 40,000 11 Accounts Payable 12 Dividend Payable 13 Unearned Revenue 14 Loan Payable 15 Common Stock 16 Dividends $ 2,000 17 Sales Revenue 18 Cost of Goods Sold $ 23,750 19 Wages Expense $ 6,000 20 Utilities Expense $ 2,500 21 Supplies Expense $ 1,500 22 Bad Debt Expense $ 400 $ 8,000 $ 2,000 $ 5,500 $ 30,000 $ 100.000 $ 47,600 23 24 Totals $ 193,100 $ 193,100 25

1. Credit ($) Trial Balance 2 Account Titles Debit ($) 3 Cash =100000+30000-40000-2400-5000-6000-(120*125)-12000+(80*220)+8000+5500-2500-15000-4000 4 Accounts Receivable =(150*200)-8000-400 5 Supplies =5000-(5000-3500 6 Inventory =(200*100)-(150*100)+(120*125)-(50*100-(30*125) 7 Prepaid Insurance =2400 8 Prepaid Rent =4000 9 Short term Investments 15000 10 Equipment =40000 11 Accounts Payable 12 Dividend Payable 13 Unearned Revenue 14 Loan Payable 15 Common Stock 16 Dividends 2000 17 Sales Revenue 18 Cost of Goods Sold =(150*100)+(50*100)+(30*125) 19 Wages Expense =6000 20 Utilities Expense 2500 21 Supplies Expense =5000-3500 22 Bad Debt Expense 400 =(200*100)-12000 2000 =5500 =30000 =100000 =(150*200)+(80*220) 23 =SUM(B3:B22) =SUM(C3:C22) 24 Totals 25

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