Question

A. On January 1, 2018, ARC issued no par common stock for $450,000.

b. Early in January, ARC made the following cash payments:_________.
1. For store fixtures, $53,000
2. For merchandise inventory, $340,000
3. For rent expense on a store building, $20,000
c. Later in the year, ARC purchased merchandise inventory on account for $239,000. Before year-end, ARC paid $139,000 of this accounts payable.
d. During 2018, ARC sold 2,400 units of merchandise inventory for $275 each. Before year-end, the company collected 85% of this amount. Cost of goods sold for the year was $250,000, and ending merchandise inventory totaled $329,000.
e. The store employs three people. The combined annual payroll is $96,000, of which ARC still owes $3,000 at year-end.
f. At the end of the year, ARC paid income tax of $17,000. There are no income taxes payable.
g. Late in 2018, ARC paid cash dividends of $44,000. h. For store fixtures, ARC uses the straight-line depreciation method, over five years, with zero residual value. Print Print Done Done American Rare Coins (ARC) 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 ARC'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 Rare Coins Income Statement Year Ended December 31, 2018
Requirements
1. What is the purpose of the statement of cash flows?
2. Prepare ARC'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.
3. Prepare ARC's balance sheet at December 31, 2018.
4. Prepare ARC's statement of cash flows using the indirect method for the year ended December 31, 2018.
American Rare Coins
Income Statement
Year Ended December 31, 2018
Revenue:
Expenses:
Total Expenses
Net Income

Answer 1

1.The statement of cash flows purpose is to enable us know how Cash are been spent as well as how cash flows which is why statement of Cash flows is an important part of financial accounting.

2.$266,400

3.Total Assets $775,400

Total Liabilities & Stockholder's Equity $775,400

4.Closing Balance of Cash $305,000

Step-by-step explanation:

1. The statement of cash flows purpose is to enable us know how Cash are been spent as well as how cash flows which is why statement of Cash flows is an important part of financial accounting.

2. Preparation of the income statement

ARC INCOME STATEMENT

Revenue

Sales Revenue 660,000 (2,400×275)

Less :Expenses

Cost of Goods Sold 250,000

Salaries Expense 96,000

Depreciation 10,600

(53,000/5)

Rent Expense 20,000

Income tax expenses 17,000

Total Expens ( 393,600)

Net Income 266,400

(660,000-393,600)

3.Preparations of ARC balance sheet at December 31, 2018.

ARC BALANCE SHEET

Assets

Current Assets

Cash 305,000

Accounts Receivable 99,000 (660,000×15%)

Merchandise Inventory 329,000

Property, Plant and Equipment

Store Fixtures 53,000

Less : Accumulated Depreciation (10,600)

TOTAL ASSETS 775,400

Liabilities

Current Liabilities

Accounts Payable 100,000

(239,000-139,000)

Salaries Payable 3,000

Stockholder's Equity

Common Stock 450,000

Retained Earnings 222,400

(266,400-44,000)

Total Stockholder's Equity 672,400

TOTAL LIABILITIES & STOCKHOLDER'S EQUITY 775,400

4.Preparation of statement of cash flows

ARC CASH FLOW STATEMENT for the year ended December 31, 2018.

INDIRECT METHOD

CASH FLOW FROM OPERATING ACTIVITIES:

Cash Collected from Customers 561,000

(660,000×85%)

Cash paid for inventory (479,000) -(340,000+139,000)

Cash paid for Salaries (93,000) -(96,000-3000)

Cash paid for Rent (20,000)

Cash paid for Income tax (17,000)

CASH FLOW FROM OPERATING ACTIVITIES (48,000)

CASH FLOW FROM INVESTING ACTIVITIES:

Purchase of Store Fixtures (53,000)

NET CASH USED IN INVESTING ACTIVITIES (53,000)

CASH FLOW FROM FINANCING ACTIVITIES

Issue of Common Stock 450,000

Dividend Paid (44,000)

NET CASH USED IN FINANCING ACTIVITIES 406,000

Increase in Cash 305,000

(406,000-53,000-48,000)

Opening Balance of Cash 0

CLOSING BALANCE OF CASH 305,000

Current Assets

Cash Calculation 305,000

(450,000-53,000-340,000-20,000+660,000×85%-139,000-44,000-93,000-17,000)=305,000