ACCT221 Homework
Background:
At the end of 2019, Manar Corporation’s computerized information systems experienced a serious malfunction. The information technology specialists along with the company’s accounting team were able to recover the following information:
The following account balances as of January 1, 2019:
|
(in Thousands of Dollars) |
Debits |
Credits |
|
Cash |
38500 | |
|
Supplies |
1,200 | |
|
Inventory |
38,000 | |
|
Prepaid rent |
22,000 | |
|
Machine |
7,000 | |
|
Accumulated depreciation |
200 | |
|
Salaries payable |
5,500 | |
|
Unearned rent revenue |
10,750 | |
|
Notes payable |
0 | |
|
Retained earnings |
1,750 |
The income statement for the year ending of December 31 2019 (amounts in thousands):
|
Manar Corporation | |||
|
Income Statement | |||
|
For the Year Ended December 31 2019 | |||
|
Sales revenue |
$54,250 | ||
|
Cost of goods sold |
31,000 | ||
|
Gross profit |
23,250 | ||
|
Operating expenses: | |||
|
Salaries |
14,000 | ||
|
Supplies |
2,000 | ||
|
Rent |
3,000 | ||
|
Depreciation |
1,200 | ||
|
Bad debt |
1,950 | ||
|
Total operating expenses |
$22,150 | ||
|
Operating income |
1,100 | ||
|
Other income: | |||
|
Rent revenue |
17,250 | ||
|
Net income |
$18,350 | ||
The portion of the statement of cash flows for the year ending December 31, 2019 (amounts in thousands):
|
Manar Corporation | |||||
|
Statement of Cash Flows | |||||
|
For the Year Ended December 31 2019 | |||||
|
Cash Flows from Operating Activities | |||||
|
Net income |
$18,350 | ||||
|
Deprecation |
1200 | ||||
|
Increase in accounts receivable |
(8,900) | ||||
|
Decrease in supplies |
250 | ||||
|
Decrease in inventory |
9,000 | ||||
|
Decrease in prepaid rent |
3,000 | ||||
|
Decrease in Accounts payable |
(15,000) | ||||
|
Increase in salaries payable |
7,500 | ||||
|
Decrease in unearned rent revenue |
(10,350) | ||||
|
Net cash flows from operating activities |
$5,050 | ||||
The team found the following statement of financial position. However, due to the malfunction, the statement has missing information and classification inaccuracies (amounts in thousands). The only additional piece of information that was recovered was a receipt showing that the machines were purchased with cash.
|
Manar Corporation | ||||
|
Statement of Financial Position | ||||
|
At December 31, 2019 | ||||
|
Assets | ||||
|
Current assets: | ||||
|
Inventory |
? | |||
|
Supplies |
? | |||
|
Cash |
$42,650 | |||
|
Accounts receivable |
$12,850 | |||
|
Less: Reserve for accounts receivable |
2,450 |
10,400 | ||
|
Goodwill |
2,000 | |||
|
Prepaid rent |
? | |||
|
Total current assets |
104,000 | |||
|
Property and equipment: | ||||
|
Land held for sale |
3,000 | |||
|
Machines |
12,900 | |||
|
Less: Depreciation reserve |
? |
? | ||
|
Total assets |
$118,500 | |||
|
Shareholders Equity and Liabilities | ||||
|
Shareholders’ equity: | ||||
|
Share capital |
50,000 | |||
|
Unearned rent revenue |
? | |||
|
Retained earnings |
18,100 | |||
|
Total shareholders’ equity |
$68,100 | |||
|
Current liabilities: | ||||
|
Accounts payable |
20,000 | |||
|
Salaries payable |
? | |||
|
Foreign currency translation reserve |
10,000 | |||
|
Note payable (Due in 2022) |
7,000 | |||
|
Total current liabilities |
50,400 | |||
|
Total shareholders’ equity and liabilities |
$118,500 | |||
Required:
- Identify the mistakes and classification inaccuracies in the above statement of financial position. Provide your opinion as to why you believe they are inaccurate. (2 Marks)
- Do you agree or disagree with the following statement: “the matching principle means that revenues equal expenses.” How could violating the matching principle impact analysis of performance for the company? (1 Mark)
- Find the missing data in the above statement of financial position. (1.5 Mark)
- Prepare the correct statement of financial position (free of errors and missing information) as of December 31, 2019. (2.5 Mark)
- Prepare the full statement of cash flows for the period ending December 31, 2019. (2 Mark)
- Discuss the benefits of the classification of the statement financial position. (1 Mark)
General guidelines:
This project is designed to be conducted individually. Therefore, it is not permitted for any student to seek help from others in any stage of this project.
Students should observe the following:
- Please useTimesNew Roman as the font, size 12, and lines are to be 1.5 spaced NOT SINGLE SPACED, also ADJUST THE LINES IN ALL THE PARAGRAPHES.
- To satisfy question 6, you are expected to refer to several internet websites, books, or articles and state these sources in the list of references at the end of your report.
