Project Assignment: Intermediate Accounting
Dice Corp's consolidated balance sheet accounts as of December 31, Year 6 and Year 5, are presented below:
|
Assets
|
31-Dec
|
|
Year 6
|
Year 5
|
|
Cash
|
$ 195,000
|
$ 100,000
|
|
Current investments
|
300,000
|
-
|
|
Accounts receivable (net)
|
480,000
|
510,000
|
|
Inventory
|
680,000
|
600,000
|
|
Prepaid expenses
|
15,000
|
20,000
|
|
Equity method investment
|
215,000
|
300,000
|
|
Plant assets
|
1,730,000
|
1,000,000
|
|
Accumulated depreciation
|
(480,000)
|
(450,000)
|
|
Goodwill
|
90,000
|
100,000
|
|
Total assets
|
$ 3,225,000
|
$ 2,180,000
|
|
Liabilities and Equity
|
|
|
|
Accounts payable
|
$ 825,000
|
$ 720,000
|
|
Interest payable
|
15,000
|
10,000
|
|
Income tax payable
|
20,000
|
30,000
|
|
Current debt
|
325,000
|
|
|
Deferred taxes
|
250,000
|
300,000
|
|
Common stock, $10 par
|
800,000
|
700,000
|
|
Additional paid-in capital
|
370,000
|
250,000
|
|
Retained earnings
|
620,000
|
170,000
|
|
Total liabilities and equity
|
$ 3,225,000
|
$ 2,180,000
|
Information relating to Year 6 activities is as follows:
• Cash dividends of $240,000 were declared and paid by Dice in Year 6.
• The accounts receivable balances at the beginning and end of Year 6 were net of allowances for bad debts of $50,000 and $60,000, respectively. Dice wrote off $40,000 of bad debts during Year 6.
• Current investments consist of Treasury bills maturing on 6/30/Year 7. They were acquired for cash on December 31, Year 6.
• Equipment costing $400,000 and having a carrying amount of $140,000 was sold on January 1, Year 6, for $150,000 in cash. Additional plant assets were purchased in Year 6 for cash.
• Dice accounts for its interest in Thrice Corp. under the equity method. Its equity in Thrice's Year 6 earnings was $25,000. During Year 6, Dice received a $10,000 cash dividend from Thrice. At the end of Year 6, Dice sold part of its investment in Thrice for $135,000 in cash. Significant influence over Thrice was not lost as a result of the sale.
• The provision for Year 6 income taxes was $210,000.
• 10,000 shares of common stock were issued in Year 6 for $22 a share.
Additional information:
• Cash collected from customers amounts to $7,820,000.
• Cash paid to employees and suppliers amounts to $6,520,000.
• Selling, general, administrative expenses excluding noncash expense amount to $1,100,000.
• Received interest in cash $30,000.
• Paid interest in cash $135,000.
• Paid income tax in cash $270,000.
Instructions:
Part 1- Prepare a Statement of Cash Flows using Indirect Method for Dice Corp. for the year ended December 31, Year 6.
Part 2- Prepare a Statement of Cash Flows using Direct Method for Dice Corp. for the year ended December 31, Year 6.
Part 3- When you work on the Statement of Cash Flows, you may need to pay close attention to the sources of cash flows, which are associated with the following issues: revenue recognition, inventory valuation, and calculation of cost of goods sold. Please write in good form to answer the following two questions:
1. What guidelines are used to match costs with revenues in determining income?
2. What is the general rule for distinguishing between inventory-related costs that should be included in the cost of inventory and those that should be expensed as incurred?
Part 4- When you observe the given comparative balance sheet, you may need to pay attention to the two groups of noncurrent operating assets: plant assets and intangible assets with regard to their acquisition, utilization and disposition. Write in good form to answer the following questions:
1. Name the items that may properly be included as part of the acquisition cost of plant assets. What argument is given for reporting noncurrent operating assets at their historical costs instead of at current values?
2. What factors must be considered in determining the periodic depreciation charges that should be made for a company's depreciable assets? How does the recognition of an asset retirement obligation impact periodic depreciation expense? Interest expense?
Requirements:
1. The Statement of Cash Flows shall be in standard form that is in conformity with FASB standards and related rules.
2. Include in notes to the cash flows statement calculations and additional information where necessary. The calculations also shall be in good form with precise explanation.
3. All responses must be typed. The cash flows statement shall be created in Excel as an embedded object from the Microsoft Word. With respect to writings, you need to pay special attention to spellings and grammatical rules.
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.