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Lansbury Inc. had the following balance sheet at December 31, 2019.

LANSBURY INC.
BALANCE SHEET
DECEMBER 31, 2019

Cash $20,000 Accounts payable $30,000
Accounts receivable 21,200 Notes payable (long-term) 41,000
Investments 32,000 Common stock 100,000
Plant assets (net) 81,000 Retained earnings 23,200
Land 40,000 $194,200
$194,200

During 2020, the following occurred.

1. Lansbury Inc. sold part of its debt investment portfolio for $15,000. This transaction resulted in a gain of $3,400 for the firm. The company classifies these investments as available-for-sale.
2. A tract of land was purchased for $13,000 cash.
3. Long-term notes payable in the amount of $16,000 were retired before maturity by paying $16,000 cash.
4. An additional $20,000 in common stock was issued at par.
5. Dividends of $8,200 were declared and paid to stockholders.
6. Net income for 2020 was $32,000 after allowing for depreciation of $11,000.
7. Land was purchased through the issuance of $35,000 in bonds.
8. At December 31, 2020, Cash was $37,000, Accounts Receivable was $41,600, and Accounts Payable remained at $30,000.

Requried:

a. Prepare a statement of cash flows for 2017.
b. Prepare an unclassified balance sheet as it would appear on December 31, 2017.
c. Compute two cash flow ratios.

Respuesta :

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Answer:

See explanation

Explanation:

Requirement A

See the image Below:

Requirement B

                     LANSBURY INC.

                    BALANCE SHEET

             As at December 31, 2020

             Assets

Cash                                                                   $37,000

Accounts receivable                                          $41,600

Investment                                                         $20,400 (Note - 1)

Plant asset                                      $81,000

Less: Accumulated depreciation ($11,000)    

Book value of Plant asset                                 $70,000

Land                                                                   $53,000

Total assets                                                     $222,000

Liabilities and Stockholders' Equity

           Liabilities

Accounts payable        $30,000

Notes payable              $25,000

Total liabilities              $55,000

    Stockholders' Equity

Common Stock           $120,000

Retained earnings      $  47,000   (Note - 2)

Total stockholders' equity = $167,000

Total liabilities & Stockholders' Equity = $222,000

Note - 1:

Sold investment's cost value calculation -

Selling price =           $15,000

Less: Gain on sale = ($3,400)

Cost price = $11,600

Investment during 2019 =             $32,000

Sale of Investment (book value)    $11,600

Remaining value of Investment = $20,400

Note - 2:

Beginning                              $23,200

Add: Net Income                   $32,000

Less: Dividend                       ($8,200)

Ending retained earnings  = $47,000

Requirement C

1. Cash flow to net income ratio:

It shows how much cash flows from operating activities during the year over a specific net income.

We know, Cash flow to net income ratio = [tex]\frac{Cash flow from operating activities}{Net Income}[/tex]

Cash flow to net income ratio = [tex]\frac{19,200}{32,000}[/tex]

Cash flow to net income ratio = 60%

2. Operating cash flow ratio:

It shows how much cash flows from operating activities during the year from the use of current liabilities.

We know, Operating Cash flow ratio = [tex]\frac{Cash flow from operating activities}{Current liabilities}[/tex]

Operating Cash flow ratio = [tex]\frac{19,200}{30,000}[/tex]

Operating Cash flow ratio = 64%

Note: Here, accounts payable is the only current liabilities as notes payable has a long-term value.

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