Question

American Reserve Rare Coins (ARRC) was formed on January 1, 2018. Additional data for the year follow: (Click the icon to view the data.) Read the requirements. The purpose of the statement of cash tIOWS IS to snow where casn came from and now casn was spent during the period. Requirement 2. Prepare ARRC'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. American Reserve Rare Coins 1 Requirements Income Statement Year Ended December 31, 2018 Revenue: 1. Expenses: What is the purpose of the statement of cash flows? Prepare ARRC'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 ARRC's balance sheet at December 31, 2018. Prepare ARRC's statement of cash flows using the indirect method for the year ended December 31, 2018. 4. Print Done Total Expenses Net Income

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:

American Reserve Rare Coins
Income Statement
Year Ended December 31,2018
Revenues:
Sales revenue		$540,000
Expenses:
Rent expense	$19,000
Cost of goods sold	$330,000
Payroll expense	$82,000
Income tax expense	$16,000
Depreciation expense	$11,200
Total expenses		$458,200
Net income		$81,800

Explanations:

Revenues:
d	Sales (2,700 units x $200)	$540,000
Expenses:
b.3	Rent expense	$19,000
d	Cost of goods sold	$330,000
e	Payroll expense	$82,000
f	Income tax expense	$16,000
h	Depreciation expense ($56,000-0)/5 years	$11,200

Requirement 3:

American Reserve Rare Coins
Balance Sheet
Year Ended December 31,2018
Assets		Liabilities and stockholder's equity
Cash	$212,000	Accounts payable	$80,000
Accounts receivable	$108,000	Payroll payable	$7,000
Merchandise inventory	$162,000	Total liabilities	$87,000
Store fixtures	$56,000	Stockholder's equity:
(Less): Accumulated depreciation	($11,200)	Common stock	$400,000
		Retained earnings	$39,800
		Total stockholder's equity	$439,800
Total Assets	$526,800	Total liabilities and stockholder's equity	$526,800

Explanations:

Cash:

Cash A/C
$400,000	$56,000
$432,000	$250,000
	$19,000
	$162,000
	$75,000
	$16,000
	$42,000
$212,000

Accounts receivable = Total credit sales - Collection from customers = 540,000 - (540,000 x 80%) = $108,000

Accounts payable = Total credit purchases - Payments to creditors = $242,000-$162,000 = $80,000

Retained Earnings = Net income - Dividends = $$81,800 - $42,000 = $39,800

Requirement 4:

American Reserve Rare Coins
Statement of cash flows (Indirect method)
Year Ended December 31,2018
Cash flows from Operating activities:
Net income	$81,800
Adjustments:
Depreciation Expense	$11,200
Increase in accounts receivable	($108,000)
Increase in merchandise inventory	($162,000)
Increase in accounts payable	$80,000
Increase in payroll payable	$7,000
Net cash flows from operating activities (i)		($90,000)
Cash flows from investing activities:
Purchase of store fixtures	($56,000)
Net cash flows from investing activities (ii)		($56,000)
Cash flows from financing activities activities:
Issuance of common stock	$400,000
Paid for cash dividends	($42,000)
Net cash flows from financing activities (iii)		$358,000
Net increase(decrease) in cash (i+ii+iii)		$212,000
Cash balance, Jan 1,2018		$0
Cash balance, Dec 31,2018		$218,000