Question

JJIGOTT core: 0.02 of 1 pt 1 of 1 (1 complete) HW Score: 1.59%, 0.02 of Question Help PC-32A (similar to) Official R 6 More Info i (Click Read the The purpo to show Requirem format, w a. On January 1, 2018, ORRC issued no par common stock for $425,000. b. Early in January, ORRC made the following cash payments: 1. For store fixtures, $55,000 2. For merchandise inventory, $300,000 3. For rent expense on a store building, $16,000 c. Later in the year, ORRC purchased merchandise inventory on account for $237,000. Before year-end, ORRC paid $147,000 of this accounts payable. d. During 2018, ORRC sold 2,900 units of merchandise inventory for $200 each. Before year-end, the company collected 80% of this amount. Cost of goods sold for the year was $300,000, and ending merchandise inventory totaled $237,000. e. The store employs three people. The combined annual payroll is $97,000, of which ORRC still owes $4,000 at year-end. f. At the end of the year, ORRC paid income tax of $18.000. There are no income taxes payable. Q. Late in 2018, ORRC paid cash dividends of $42.000. h. For store fixtures, ORRC uses the straight-line depreciation method, over five years. with zero residual value. Revenue Expense Choose fri Print Done 5 parts 5 remaining ? WP esc

Answer 1

Requirement 1:

Purpose of the statement of cash flows: It provides information about cash receipts, cash payments, and the net change in cash resulting from the operating, investing, and financing activities of a company during the period

Requirement 2:

ORRC
Income Statement
Year Ended December 31,2018
Revenues:
Sales revenue		$580,000
Expenses:
Rent expense	$16,000
Cost of goods sold	$300,000
Payroll expense	$97,000
Income tax expense	$18,000
Depreciation expense	$11,000
Total expenses		$442,000
Net income		$138,000

Calculations:

Revenues:
d	Sales (2,900 units x $200)	$580,000
Expenses:
b.3	Rent expense	$16,000
d	Cost of goods sold	$300,000
e	Payroll expense	$97,000
f	Income tax expense	$18,000
h	Depreciation expense ($55,000-0)/5 years	$11,000

Requirement c:

ORRC
Balance Sheet
Year Ended December 31,2018
Assets		Liabilities and stockholder's equity
Cash	$218,000	Accounts payable	$90,000
Accounts receivable	$116,000	Payroll payable	$4,000
Merchandise inventory	$237,000	Total liabilities	$94,000
Store fixtures	$55,000	Stockholder's equity:
(Less): Accumulated depreciation	($11,000)	Common stock	$425,000
		Retained earnings	$96,000
		Total stockholder's equity	$521,000
Total Assets	$615,000	Total liabilities and stockholder's equity	$615,000

Calculations:

i.Cash

Cash A/C
$425,000	$55,000
$464,000	$300,000
	$16,000
	$147,000
	$93,000
	$18,000
	$42,000
$218,000

Accounts receivable = Total sales - Collections = 580,000 - (580,000 x 80%) = $116,000

Accounts payable = Purchases on account - payments for accounts payable = $237,000-$147,000 = $90,000

Retained earnings = Net income - dividends = $138,000-$42,00 = $96,000

Requirement 4:

ORRC
Statement of cash flows (Indirect method)
Year Ended December 31,2018
Cash flows from Operating activities:
Net income	$138,000
Adjustments:
Depreciation Expense	$11,000
Increase in accounts receivable	($116,000)
Increase in merchandise inventory	($237,000)
Increase in accounts payable	$90,000
Increase in payroll payable	$4,000
Net cash flows from operating activities (i)		($110,000)
Cash flows from investing activities:
Purchase of store fixtures	($55,000)
Net cash flows from investing activities (ii)		($55,000)
Cash flows from financing activities activities:
Issuance of common stock	$425,000
Paid for cash dividends	($42,000)
Net cash flows from financing activities (iii)		$383,000
Net increase(decrease) in cash (i+ii+iii)		$218,000
Cash balance, Jan 1,2018		$0
Cash balance, Dec 31,2018		$218,000