Q30E - Horngren'S Financial And Managerial Accounting

Question

A-One Mobile Homes reported the following in its financial statements for the year Ended December 31, 2018:

2018 2017

Income Statement

Net Sales Revenue \( 25,118 \) 21,893

Cost of Goods Sold 18,074 15,501

Depreciation Expense 271 234

Other Operating Expenses 4,632 4,277

Income Tax Expense 530 482

Net Income \( 1,611 \) 1,399

Balance Sheet

Cash \( 21 \) 19

Accounts Receivable 798 615

Merchandise Inventory 3,483 2,832

Property, Plant, and Equipment, net 4,351 3,437

Accounts Payable 1,547 1,364

Accrued Liabilities 938 851

Long-term Liabilities 477 461

Common Stock, no par 670 443

Retained Earnings 5,021 3,784

Requirements

1. Compute the collections from customers.

2. Compute payments for merchandise inventory.

3. Compute payments of other operating expenses.

4. Compute the acquisitions of property, plant, and equipment (no sales of property during 2018).

5. Compute the amount of borrowing, with A-One paying no long-term liabilities.

6. Compute the cash receipt from issuance of common stock.

7. Compute the payment of cash dividends.

Step-by-Step Solution

Answer

1. Cash collection from customers =$25,935
2. Cash payment for merchandise inventory =$18,542
3. Cash paid for other operating expenses =$4,545
4. Acquisition of property, plant, and equipment =$914
5. Amount of borrowing =$16
6. Cash receipt from issuance of common stock =$227
7. Dividends=$374

Step 1: Calculation of cash collections from customer

$\begin{array}{c}\mathrm{Cash} \mathrm{Collection}=\mathrm{Opening} \mathrm{account} \mathrm{receivable}+\mathrm{Credit} \mathrm{sales} \mathrm{for} \mathrm{the} \mathrm{period}–\mathrm{Closing} \mathrm{account} \mathrm{receivables}\\ =\mathrm{\$}615+\mathrm{\$}25,118–\mathrm{\$}798\\ =\mathrm{\$}24,935\end{array}$

Step 2: Computation of cash payments for merchandise inventory

$\begin{array}{c}\mathrm{Cash} \mathrm{Payments} \mathrm{for} \mathrm{inventory}=\mathrm{Cost} \mathrm{of} \mathrm{goods} \mathrm{sold}–\mathrm{Beginning} \mathrm{merchandise} \mathrm{inventory}\\ +\mathrm{Closing} \mathrm{merchandise} \mathrm{inventory}+\mathrm{Beginning} \mathrm{accounts} \mathrm{payable}\\ –\mathrm{Closing} \mathrm{accounts} \mathrm{payable}\\ =\mathrm{\$}18,074–2,832+\mathrm{\$}3,483+1,364–\mathrm{\$}1,547\\ =\mathrm{\$}18,542\end{array}$

Step 3: Computation of payments for other operating expenses

$\begin{array}{c}\mathrm{Cash} \mathrm{paid} \mathrm{for} \mathrm{other} \mathrm{operating} \mathrm{expenses}=\mathrm{Other} \mathrm{Operating} \mathrm{Expense}+\mathrm{Beginning} \mathrm{Accrued} \mathrm{Liabilities}\\ -\mathrm{Ending} \mathrm{Accrued} \mathrm{Liabilities}\\ =\mathrm{\$}4,632+\mathrm{\$}851–\mathrm{\$}938\\ =\mathrm{\$}4,545\end{array}$

Step 4: Computation of acquisition of property, plant, and equipment

$\begin{array}{c}\mathrm{Acquisition} \mathrm{of} \mathrm{property}, \mathrm{plant}, \mathrm{and} \mathrm{equipment}=\mathrm{Closing} \mathrm{Balance}–\mathrm{Opening} \mathrm{balance}\\ =\mathrm{\$}4,351-\mathrm{\$}3,437\\ =\mathrm{\$}914\end{array}$

Step 5: Computation of amount of borrowing, with A-One paying no long-term liabilities

$\begin{array}{c}\mathrm{Amount} \mathrm{of} \mathrm{borrowing}=\mathrm{Closing} \mathrm{Balance}–\mathrm{Opening} \mathrm{balance}\\ =\mathrm{\$}477–\mathrm{\$}461\\ =\mathrm{\$}16\end{array}$

Step 6: Computation of cash receipt from issuance of common stock.

$\begin{array}{c}\mathrm{Cash} \mathrm{receipt} \mathrm{from} \mathrm{issuance} \mathrm{of} \mathrm{common} \mathrm{stock}=\mathrm{Closing} \mathrm{Balance}–\mathrm{Opening} \mathrm{balance}\\ =\mathrm{\$}670–\mathrm{\$}443\\ =\mathrm{\$}227\end{array}$

Step 7: Computation of the payment of cash dividends

$\begin{array}{c}\mathrm{Ending} \mathrm{Retained} \mathrm{Earnings}=\mathrm{Beginning} \mathrm{Retained} \mathrm{Earnings}+\mathrm{Net} \mathrm{income}-\mathrm{Net} \mathrm{loss}–\mathrm{Dividends}\\ \mathrm{\$}5,021=\mathrm{\$}3,784+\mathrm{\$}1,611–\mathrm{Dividends}\\ \mathrm{Dividends}=\mathrm{\$}374\end{array}$