Financial Reporting And Analysis - Financial Reporting And Analysis Section 2
6. An analyst collects the following information for Baking Butter Corporation:
| Net revenue | $200,000 |
| Gross profit | $50,000 |
| Increase in inventory | $8,000 |
| Increase in accounts payable | $12,000 |
The cash paid to its suppliers is closest to:
- Option : A
- Explanation : Cash paid to suppliers = Cost of goods sold + increase in inventory - increase in payables. Cash paid to suppliers = 200,000 - 50,000 + 8,000 - 12,000 = $146,000.
- Option : A
- Explanation : Salary payable = Beginning salary payable + Salary expense - Cash paid Salary payable = 16,000 + 40,000 - 49,000 = 7,000.
- Option : A
- Explanation : Cash paid = Operating expenses - decrease in prepaid expense - increase in accrued expense Cash paid = 20 - 6 - 8 = 6.
| 2011 | 2012 | |
| Machinery | $80 million | $91 million |
| Accumulated depreciation | $25 million | $31 million |
Further information provided is as follows:
| Gain on sale of machinery | $1.5 million |
| Depreciation expense for 2012 | $7 million |
| Capital expenditure on machinery | $14 million |
How much did the company receive in cash from the sale of machinery?
- Option : C
- Explanation : Gain = Selling Price - Book Value
Historical cost:
Beginning value of machinery + machinery bought – machinery sold = Ending value of machinery 80 million + 14 million – 91 million = 3 million Machinery sold = 3 million Accumulated depreciation: Beginning value of depreciation + depreciation expense – machinery depreciation = Ending value of depreciation 25 million + 7 million – 31 million = 1 million Machinery depreciation = 1 million Book value: Book value = Historical cost – accumulated depreciation Book value = 3 - 1 = 2 million Selling price: Selling price = Gain + Book Value Selling price = 1.5 million + 2 million = 3.5 million.
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