Question Details

(Solution) - Peoria Corp just completed another successful year as indicated by

Brief item decscription

Solution download


Item details:

Peoria Corp. just completed another successful year, as indicated by the following income statement:
For the Year Ended
December 31, 2012
Sales revenue......................................................................$1,250,000
Cost of goods sold....................................................................700,000
Gross profit.................................................................$ 550,000
Operating expenses...................................................................150,000
Income before interest and taxes........................................$ 400,000
Interest expense.........................................................................25,000
Income before taxes.......................................................$ 375,000
Income tax expense..................................................................150,000
Net income................................................................$ 225,000
Presented here are comparative balance sheets:

Other information is as follows:
a. Dividends of $60,000 were declared and paid during the year.
b. Operating expenses include $50,000 of depreciation.
c. Land and plant and equipment were acquired for cash, and additional stock was issued for cash. Cash also was received from additional bank loans.
The president has asked you some questions about the year's results. She is very impressed with the profit margin of 18% (net income divided by sales revenue). She is bothered, however, by the decline in the company's cash balance during the year. One of the conditions of the existing bank loan is that the company maintain a minimum cash balance of $50,000.
Required
1. Prepare a statement of cash flows for 2012 using the direct method in the Operating Activities section.
2. On the basis of your statement in part (1), draft a brief memo to the president to explain why cash decreased during such a profitable year. Include in your explanation any recommendations for improving the company's cash flow in future years.

 







About this question:
STATUS
Answered
QUALITY
Approved
ANSWER RATING

This question was answered on: Jul 11, 2017

PRICE: $15

Solution~000392923174.zip (18.37 KB)

Buy this answer for only: $15

Pay using PayPal (No PayPal account Required) or your credit card. All your purchases are securely protected by PayPal.
SiteLock

Need a similar solution fast, written anew from scratch? Place your own custom order

We have top-notch tutors who can help you with your essay at a reasonable cost and then you can simply use that essay as a template to build your own arguments. This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student. New solution orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.

Order Now