Preparation of Income Statement Using Balance Sheet and Cash Flow Data
The following financial statements are for Troi Company. Consider the following additional information:
(a) All accounts payable relate to inventory purchases.
(b) Property, plant, and equipment sold had an original cost of $75,000 and a book value of $22,000.
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Troi Company Comparative Balance Sheet December 31, 2008 and 2007 |
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2008 |
2007 |
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Assets |
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Cash |
$ 4,000 |
$ 3,400 |
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Accounts receivable |
25,000 |
18,000 |
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Inventory |
30,000 |
34,000 |
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Prepaid general expenses |
5,700 |
5,000 |
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Property, plant, and equipment |
305,000 |
320,000 |
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Accumulated depreciation |
(103,500) |
(128,900) |
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Patent |
36,000 |
40,000 |
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Total assets |
$302,200 |
$291,500 |
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2008 |
2007 |
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Liabilities and Stockholders’ Equity |
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Accounts payable |
$ 25,000 |
$ 22,000 |
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Wages payable |
12,000 |
10,300 |
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Interest payable |
2,800 |
4,000 |
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Dividends payable |
14,000 |
— |
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Income taxes payable |
1,600 |
1,200 |
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Bonds payable |
100,000 |
120,000 |
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Common stock |
50,000 |
50,000 |
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Retained earnings |
96,800 |
84,000 |
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Total liabilities and stockholders’ equity |
$302,200 |
$291,500 |
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Troi Company |
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Statement of Cash Flows |
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For the Year Ended December 31, 2008 |
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Cash flows from operating activities: |
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Cash collected from customers |
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$685,300 |
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Cash payments for: |
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Inventory purchases |
$300,000 |
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General expenses |
102,000 |
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Wages expense |
150,000 |
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Interest expense |
11,000 |
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Income tax expense |
23,900 |
586,900 |
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Net cash provided by operating activities |
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$ 98,400 |
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Cash flows from investing activities: |
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Sale of property, plant, and equipment |
$ 27,200 |
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Purchase of property, plant, and equipment |
(60,000) |
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Net cash used in investing activities |
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(32,800) |
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Cash flows from financing activities: |
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Retirement of bonds payable |
$ (23,000) |
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Payment of dividends |
(42,000) |
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Net cash used in financing activities |
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(65,000) |
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Net increase in cash |
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$ 600 |
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Cash at beginning of year |
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3,400 |
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Cash at end of year |
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$ 4,000 |
Instructions: Prepare the income statement for Troi Company for the year ended December 31, 2008.