Q22E - Horngren'S Financial And Managerial Accounting

Question

Computing cash flows for investing and financing activities Consider the following facts for Java Jolt: 

1. Beginning and ending Retained Earnings are \(45,000 and \)70,000, respectively. Net income for the period is \(60,000. 
2. Beginning and ending Plant Assets are \)124,500 and \(134,500, respectively.
3. Beginning and ending Accumulated Depreciation—Plant Assets are \)21,500 and \(26,500, respectively. 
4. Depreciation Expense for the period is \)17,000, and acquisitions of new plant assets total \(29,000. Plant assets were sold at a \)5,000 gain. Requirements                                             1. How much are cash dividends?                                                                                                     2. What was the amount of the cash receipt from the sale of plant assets?

Step-by-Step Solution

Answer

Requirement 1: Cash dividends are $35,000

Requirement 2: Cash receipt from sale of plan assets is $7,000    

Step-by-Step Solution Step 1: Calculation of cash dividends

Dividends = Beginning retained earnings + Net income – Net Loss – Ending retained earnings

                  = $45,000 + $60,000 – $70,000

                  = $35,000

Step 2: Calculation of the amount of the cash receipt from the sale of plant assets

Cash Received = Cost – Accumulated depreciation + Gain 

                           = $29,000 – $27,000 + $5,000

                           = $7,000