The following income statement and balance sheet information are available for two firms, Firm A and Firm B.
(a) Calculate the amount of dividends Firm A and Firm B paid using the information given.
(b) Prepare a statement of cash flows for each firm using the indirect method.
(c) Analyze the difference in the two firms.
Income Statement for Year Ended December 31, 2012
|
|
Firm A
|
Firm B
|
|
Sales
|
$1,000,000
|
$1,000,000
|
|
Cost of goods sold
|
700,000
|
700,000
|
|
Gross profit Other expenses
|
300,000
|
300,000
|
| Selling and administrative |
120,000 |
115,000 |
|
Depreciation
|
10,000
|
30,000
|
|
Interest expense
|
20,000
|
5,000
|
|
Earnings before taxes
|
150,000
|
150,000
|
|
Income tax expense
|
75,000
|
75,000
|
|
Net Income
|
$ 75,000
|
$ 75,000
|
Changes in Balance Sheet Accounts December 31, 2011, to December 31, 2012
|
|
Firm A
|
Firm B
|
|
Cash and cash equivalents Accounts receivable Inventory
Property, plant, and equipment Less accumulated depreciation
Total Assets Accounts payable
Notes payable (current) Long-term debt
Deferred taxes (noncurrent) Capital, stock
|
$ 0
+40,000
+40,000
+20,000
(+10,000)
$ +90,000
$ -20,000
+17,000
+20,000
+3,000
-
|
$ +10,000
+5,000
-10,000
+70,000
(+30,000)
$ +45,000
$ -5,000
+2,000
-10,000
+18,000
-
|
|
Retained earnings
Total Liabilities and Equity
|
+70,000
$ +90,000
|
+40,000
$ +45,000
|