Accounting 352 – Fall 2009 Final Exam

Required: Prepare a Cash flow statement for 2009 using the DIRECT METHOD. Bring the completed statement and supporting calculations to the final exam.

Notes to the Financial Statements:

  1. Uncollectible Accounts: During 2009 accounts amounting to $14,000 were written off as uncollectible. A previously written off account in the amount of $2,000 was deemed collectible ($1,000 payment received) and was reestablished.
  2. Inventories: The Company uses the FIFO cost flow assumption. Inventories are reported at market value which on 12/31/2009 was $10,000 lower than cost. In 2009, it was discovered that inventory with a cost of $20,000 had been counted twice in the determination of 2008 cost of goods sold. The error was corrected.
  3. Property, Plant and Equipment: Land is reported at cost. New land was acquired in exchange for 10,000 shares of common stock. Buildings are depreciated using the straight-line method, while the unit of output method is used for equipment. Equipment with a book value of $200,000 was sold.
  4. Asset Retirement Obligation (ARO): Tigriswill be required to restore wetlands once its operations at Ormond Beach are completed. The company has estimated the amount of the ARO and is accounting for it in compliance with GAAP.
  5. Asset Impairment: During 2009 it was determined that certain assets had lost operating capacity. The company properly recognized a $ 15,000 impairment charge.

Notes continue after the financial statements

Tigris, Inc.
Income Statement
for the year ended 12/31/2009
Revenue / $2,180,000
Cost of sales / -$850,000
Gross margin / $1,330,000
Operating expenses:
General and administrative / -$490,000
warranties / -$25,000
depreciation / -$300,000 / -$815,000
Other income(expenses)
Investment income / $60,000
interest expense / -$121,455
loss on asset impairment / -$15,000
loss on sale of equipment / -$20,000 / -$96,455
Income from continuing operations / $418,545
Income taxes / 30% / -$125,564
Net Income / $292,982
Tigris, Inc.
Comparative Balance Sheets
Assets / 12/31/2008 / 12/31/2009
Cash / $880,000 / $990,000
Accounts receivable / $650,000 / $580,000
Allowance for doubtful accounts / -$13,000 / -$18,000
Inventory / $450,000 / $650,000
prepaid expenses / $29,000 / $15,200
Land / $950,000 / $1,200,000
Building & Equipment / $1,470,000 / $2,035,000
Asset under Capital lease / $500,000 / $500,000
Accumulated Depreciation / -$340,000 / -$420,000
Investment in Mira Co. / $655,000 / $720,000
Total assets / $5,231,000 / $6,252,200
Liabilities and Stockholders' Equity
Accounts payable / $140,000 / $270,000
warranties / $40,000 / $60,000
taxes payable / $110,000 / $210,000
short term note payable / $150,000 / $415,000
Asset Retirement Obligation / $68,000 / $82,000
Bonds / $500,000 / $400,000
discount / -$10,747 / -$8,186
Long term lease obligation / $349,498 / $303,043
Deferred income tax liability / $120,000 / $98,000
$1,466,751 / $1,829,857
Common Stock / $600,000 / $820,000
Additional paid in capital / $2,190,000 / $2,527,100
Treasury Stock / -$132,000
Retained earnings / $974,249 / $1,207,243
$3,764,249 / $4,422,343
Total equities / $5,231,000 / $6,252,200
  1. Long Term Leases: The Company has acquired certain types of equipment under long-term capital lease contracts. Aggregate minimum annual payments under non-cancelable leases are $77,910 for each of the next five years. The total minimum lease payments as of 12/31/2009 amount to $389,550, less imputed interest at 9% of $86,508, resulting in a present value of net minimum lease payments of $ 303,043.
  2. Investment in Mira Co.: The Company uses the equity method to account for its investment in Mira Co. In 2009 the company purchased an additional 5,000 shares of Mira stock at $4 per share.
  3. Long Term Liabilities: the Company's long-term liabilities consist of 20 year, 5.8% convertible bonds. The bonds had been issued to yield 6%. Each $1,000 bond is convertible into 50 shares of common stock. On 1/1/2009, 100 Bonds were converted; at the time the market value of the stock was $25 per share.