Question

PLEASE MAKE SURE TO COMPLETE ALL REQUIREMENTS

% PC-32A (similar to) Question Help North American Reserve Rare Coins (NARRC) was formed on January 1, 2018. Additional data for the year follow (Click the icon to view the data.) Read the requirements. Requirement 1. What is the purpose of the statement of cash flows? The purpose of the statement of cash flows is to show where cash came from and how cash was spent during the period. Requirement 2. Prepare NARRC's income statement for the year ended December 31, 2018. Use the single-step format, with all revenues listed together and all expenses listed together i More Info X North American Reserve Rare Coins Income Statement Year Ended December 31, 2018 Revenue: Sales Revenue Expenses Cost of Goods Sold a. On January 1, 2018, NARRC issued no par common stock for $500,000. b. Early in January, NARRC made the following cash payments: 1. For store fixtures, $49,000 2. For merchandise inventory, $320,000 3. For rent expense on a store building, $13,000 c. Later in the year, NARRC purchased merchandise inventory on account for $240,000. Before year-end, NARRC paid $160,000 of this accounts payable. d. During 2018, NARRC sold 3,000 units of merchandise inventory for $200 each. Before year-end, the company collected 85% of this amount. Cost of goods sold for the year was $270,000, and ending merchandise inventory totaled $290,000 e. The store employs three people. The combined annual payroll is $94.000, of which NARRC still owes $2.000 at year-end. f. At the end of the year, NARRC paid income tax of $22,000. There are no income taxes payable. g. Late in 2018, NARRC paid cash dividends of $39,000. h. For store fixtures, NARRC uses the straight-line depreciation method, over five years, with zero residual value. Total Expenses Net Income * Requirements Print Done 1. What is the purpose of the statement of cash flows? Prepare NARRC's income statement for the year ended December 31, 2018. Use the single-step format, with all revenues listed together and all expenses listed together. Prepare NARRC's balance sheet at December 31, 2018 Prepare NARRC's statement of cash flows using the indirect method for the year ended December 31, 2018. Print Done

Answer 1

North American Reserve Rare Coins (NARRC Income Statement Year Ended December 31, 2018 Sales Revenue 600,000 Expenses Cost of goods sold 270,000 Rent Expense 13,000 Salaries expenses 94,000 Depreciation expense 9,800 Income tax expense 22,000 Total Expenses 408,800 Net Income 191,200 Statement of Retained Earnings Year Ended December 31, 2018 Net Income Less Dividends paid Retained Earnings 191,200 (39,000) 152,200

North American Reserve Rare Coins (NARRC) Balance Sheet Assets Current Assets Cash Accounts Receivable Inventory Total Current Assets Liabilities Current Liabilities 315,000 Accounts Payable 90,000 Salaries payable 290,000 695,000 Total Current Liabilities 80,000 2,000 82,000 Property, Plant & Equipment Equipment Accumulated Depreciation Property, Plant & Equipment, net Stockholders Equity 49,000 Common Stock (9,800) Retained earnings 39,200 Total Stockholders Equity 500,000 152,200 652,200 Total Assets 734,200 Total Liabilities & Stockholders Equity 734,200

North American Reserve Rare Coins (NARRC) Cashflow Statement - Indirect method Cashflows from Operating Activities Net income 191,200 Adjustments to reconcile net income to net cash from operating activities Depreciation expense 9,800 Changes in Working Capital Accounts Receivable (90,000) Increase in current asset decreases cash Inventory (290,000) Accounts Payable 80,000 Increase in current liabilities increases cash Income taxes Payable 2,000 Net cash provided by (used for) Operating Activities (97,000) Cashflows from Investing Activities Purchase of Equipment Net cash provided by (used for) Investing Activities (49,000) (49,000) Cashflows from Financing Activities Proceeds from issue of common shares Dividends paid Net cash provided by (used for) Financing Activities 500,000 (39,000) 461,000 315,000 Net increase (decrease) in cash Beginning cash balance Ending cash balance 315,000

Credit Calculation Journal entries No. Account Cash Common Stock Debit $ 500,000 $ 500,000 bi $ 49,000 Equipment Cash $ 49,000 b2 $ 320,000 Inventory Cash $ 320,000 b3 $ 13,000 Rent Expense Cash $ 13,000 c1 $ 240,000 Inventory Accounts Payable $ 240,000 c2 $ 160,000 Accounts Payable Cash $ 160,000 di $ 600,000 =3,000*200 Accounts Receivable Sales Revenue $ 600,000 d2 $ 510,000 =600,000*85% Cash Accounts Receivable $ 510,000 d3 $ 270,000 Cost of goods sold Inventory $ 270,000 $ 94,000 Salaries expenses Cash Salaries payable =94,000-2,000 $ 92,000 $ 2,000 $ 22,000 Income tax expense Cash $ 22,000 $ 39,000 Dividends Cash $ 39,000 $ 9,800 -49,000/5 Depreciation expense Accumulated Depreciation $ 9,800

North American Reserve Rai Account Cash Accounts Receivable Inventory Equipment Accumulated Depreciation Accounts Payable Salaries payable Common Stock Dividends Sales Revenue Cost of goods sold Rent Expense Salaries expenses Depreciation expense Income tax expense Totals T rial Balance Debit Credit 315,000 90,000 290,000 49,000 9,800 80,000 2,000 500,000 39,000 600,000 270,000 13,000 94,000 9,800 22,000 1,191,800 1,191,800