GL1201 - Based on Exercise 12-11 LO P1, P2, P3, A1

Use the following financial statements and additional information.
 

LAUDERDALE INC. Comparative Balance Sheets June 30, 2017 and 2016
	2017				2016
Assets
Cash	$	83,900			$	15,300
Accounts receivable, net		76,000				59,000
Inventory		66,000				92,000
Prepaid expenses		6,500				8,100
Total current assets		232,400				174,400
Equipment		212,000				196,000
Accum. depreciation—Equipment		(54,000	)			(18,000	)
Total assets	$	390,400			$	352,400
Liabilities and Equity
Accounts payable	$	30,000			$	36,000
Wages payable		7,000				17,000
Income taxes payable		4,000				4,400
Total current liabilities		41,000				57,400
Notes payable (long term)		38,000				75,000
Total liabilities		79,000				132,400
Equity
Common stock, $5 par value		270,000				190,000
Retained earnings		41,400				30,000
Total liabilities and equity	$	390,400			$	352,400

 

LAUDERDALE INC. Income Statement For Year Ended June 30, 2017
Sales				$	1,146,000
Cost of goods sold					701,000
Gross profit					445,000
Operating expenses
Depreciation expense	$	97,000
Other expenses		113,000
Total operating expenses					210,000
					235,000
Other gains (losses)
Gain on sale of equipment					9,200
Income before taxes					244,200
Income taxes expense					74,750
Net income				$	169,450

Additional Information

1. A $38,000 note payable is retired at its $38,000 carrying (book) value in exchange for cash.
2. The only changes affecting retained earnings are net income and cash dividends paid.
3. New equipment is acquired for $95,000 cash.
4. Received cash for the sale of equipment that had cost $79,000, yielding a $9,200 gain.
5. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.
6. All purchases and sales of inventory are on credit.

Requirement

General Journal tab - Reconstruct the entries to summarize the activity between June 30, 2016 and June 30, 2017.
Direct Method tab - Prepare the Statement of Cash flows for the year ended June 30, 2017 using the direct method.
Indirect Method tab - Prepare the reconciliation to the indirect method.

General Journal

Using the income statement, the comparative balance sheet, and the additional information given above, reconstruct the entries for the summarized activity of the current fiscal year.  Upon completion, the trial balance tab should agree with the June 30, 2017 balances.

No	Date	Account Title	Debit	Credit
1	Jun 30	Cash	1,129,000
		Accounts receivable, net	17,000
		Sales		1,146,000
2	Jun 30	Cost of goods sold	701,000
		Accounts payable	6,000
		Inventory		26,000
		Cash		681,000
3	Jun 30	Depreciation expense	97,000
		Accumulated depreciation - Equipment		97,000
4	Jun 30	Other expenses	113,000
		Wages payable	10,000
		Prepaid expenses		1,600
		Cash		121,400
5	Jun 30	Cash	27,200
		Accumulated depreciation - Equipment	61,000
		Equipment		79,000
		Gain on sale of equipment		9,200
6	Jun 30	Income taxes expense	74,750
		Income taxes payable	400
		Cash		75,150
7	Jun 30	Notes payable (long-term)	38,000
		Cash		38,000
8	Jun 30	Equipment	95,000
		Cash		95,000
9	Jun 30	Cash	80,000
		Common stock, $5 par value		80,000
10	Jun 30	Sales	1,146,000
		Gain on sale of equipment	9,200
		Income summary		1,155,200
11	Jun 30	Income summary	985,750
		Cost of goods sold		701,000
		Depreciation expense		97,000
		Other expenses		113,000
		Income taxes expense		74,750
12	Jun 30	Income summary	169,450
		Retained earnings		169,450
13	Jun 30	Retained earnings	158,050
		Cash		158,050

General Ledger

As your reconstructed entries are recorded, you will explain the changes in the beginning and ending balances for each account.

Post-closing

General Ledger Account
Cash No. Date Debit Credit Balance Jun 30 15,300 1 Jun 30 1,129,000 1,144,300 2 Jun 30 681,000 463,300 4 Jun 30 121,400 341,900 5 Jun 30 27,200 369,100 6 Jun 30 75,150 293,950 7 Jun 30 38,000 255,950 8 Jun 30 95,000 160,950 9 Jun 30 80,000 240,950 13 Jun 30 158,050 82,900		Accounts receivable, net No. Date Debit Credit Balance 59,000 1 Jun 30 17,000 76,000
Inventory No. Date Debit Credit Balance Jun 29 92,000 2 Jun 30 26,000 66,000		Prepaid expenses No. Date Debit Credit Balance Jun 29 8,100 4 Jun 30 1,600 6,500
Equipment No. Date Debit Credit Balance Jun 29 196,000 5 Jun 30 79,000 117,000 8 Jun 30 95,000 212,000		Accumulated depreciation - Equipment No. Date Debit Credit Balance Jun 29 18,000 3 Jun 30 97,000 115,000 5 Jun 30 61,000 54,000
Accounts payable No. Date Debit Credit Balance Jun 29 36,000 2 Jun 30 6,000 30,000		Wages payable No. Date Debit Credit Balance Jun 29 17,000 4 Jun 30 10,000 7,000
Income taxes payable No. Date Debit Credit Balance Jun 29 4,400 6 Jun 30 400 4,000		Notes payable (long-term) No. Date Debit Credit Balance Jun 29 75,000 7 Jun 30 38,000 37,000
Common stock, $5 par value No. Date Debit Credit Balance Jun 29 190,000 9 Jun 30 80,000 270,000		Retained earnings No. Date Debit Credit Balance Jun 29 30,000 12 Jun 30 169,450 199,450 13 Jun 30 158,050 41,400
Sales No. Date Debit Credit Balance 0 1 Jun 30 1,146,000 1,146,000 10 Jun 30 1,146,000 0		Cost of goods sold No. Date Debit Credit Balance 0 2 Jun 30 701,000 701,000 11 Jun 30 701,000 0
Depreciation expense No. Date Debit Credit Balance 0 3 Jun 30 97,000 97,000 11 Jun 30 97,000 0		Other expenses No. Date Debit Credit Balance 0 4 Jun 30 113,000 113,000 11 Jun 30 113,000 0
Gain on sale of equipment No. Date Debit Credit Balance 0 5 Jun 30 9,200 9,200 10 Jun 30 9,200 0		Income taxes expense No. Date Debit Credit Balance 0 6 Jun 30 74,750 74,750 11 Jun 30 74,750 0
Income summary No. Date Debit Credit Balance 0 10 Jun 30 1,155,200 (1,155,200) 11 Jun 30 985,750 (169,450) 12 Jun 30 169,450 0

Trial Balance

Begin by selecting "Post-closing" from the drop-down menu.  Verify that each balance agrees with the June 30, 2017 balance sheet above.

Post-closing

LAUDERDALE INC.
Trial Balance
June 30, 2017
Account Title	Debit	Credit
Cash	82,900
Accounts receivable, net	76,000
Inventory	66,000
Prepaid expenses	6,500
Equipment	212,000
Accumulated depreciation - Equipment		54,000
Accounts payable		30,000
Wages payable		7,000
Income taxes payable		4,000
Notes payable (long-term)		37,000
Common stock, $5 par value		270,000
Retained earnings		41,400
Total	443,400	443,400

Direct Method

Prepare the Statement of Cash flows for the year ended June 30, 2017 using the Direct Method.  Hint  Use the Cash T-account on the General Ledger tab to identify the sources and uses of cash.  List cash outflows as negative values.

Post-closing

	LAUDERDALE INC. Statement of Cash Flows (Direct Method) For Year Ended June 30, 2017 Cash flows from operating activities: Cash received from customers $1,129,000 Cash paid for merchandise (681,000) Cash paid for operating expenses (121,400) Cash paid for income taxes (75,150) Net cash provided by operating activities $251,450 Cash flows from investing activities: Cash received from sale of equipment 27,200 Cash paid for equipment (95,000) Net cash used by investing activities (67,800) Cash flows from financing activities: Cash received from stock issuance 80,000 Cash paid to retire notes (37,000) Cash paid for dividends (158,050) Net cash used by financing activities (115,050) Net increase in cash $68,600 Cash balance at prior year-end 15,300 Cash balance at current year-end $83,900

Indirect Method

Prepare the operating activities section of the statement of cash flows using the indirect method.  Enter reductions to net cash provided by operating activities as negative values.

Post-closing

	LAUDERDALE INC. Statement of Cash Flows (Indirect Method) For Year Ended June 30, 2017 Cash flows from operating activities: Net income $169,450 Adjustments to reconcile net income to net cash provided by operating activities: Increase in accounts receivable $(17,000) Decrease in inventory 26,000 Decrease in prepaid expenses 1,600 Decrease in accounts payable (6,000) Decrease in wages payable (10,000) Decrease in income taxes payable (400) Depreciation expense 97,000 Gain on sale of equipment (9,200) 82,000 Net cash provided by operating activities $251,450 Net cash provided by operating activities, using the direct method: $251,450 Congratulations! You have successfully reconciled the two methods.