Miracle Tool, Inc., sells a single product (a combination screwdriver, pliers, hammer, and crescent wrench) exclusively through television advertising. The comparative income statements and balance sheets are for the past two years.
The following information regarding the company’s operations in 2011 is available from the company’s accounting records:
1. Early in the year the company declared and paid a $4,000 cash dividend.
2. During the year marketable securities costing $15,000 were sold for $14,000 cash, resulting in a $1,000 nonoperating loss.
3. The company purchased plant assets for $20,000, paying $2,000 in cash and issuing a note payable for the $18,000 balance.
4. During the year the company repaid a $10,000 note payable, but incurred an additional $18,000 in long-term debt as described in 3.
5. The owners invested $15,000 cash in the business as a condition of the new loans described in paragraph 4
a. Prepare a worksheet for a statement of cash flows, following the general format illustrated in Exhibit 13–7 . ( Note: If this problem is completed as a group assignment, each member of the group should be prepared to explain in class all entries in the worksheet, as well as the group’s conclusions in parts c, d, and e. )
b. Prepare a formal statement of cash flows for 2011, including a supplementary schedule of noncash investing and financing activities. (Use the format illustrated in Exhibit 13–8 . Cash provided by operating activities is to be presented by the indirect method. )
c. Explain how Miracle Tool, Inc., achieved positive cash flows from operating activities, despite incurring a net loss for the year.
d. Does the company’s financial position appear to be improving or deteriorating? Explain.
e. Does Miracle Tool, Inc., appear to be a company whose operations are growing or contracting? Explain.
f. Assume that management agrees with your conclusions in parts c, d, and e. What decisions should be made and what actions (if any) should be taken? Explain.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more