The company bought kitchen equipment (a commercial oven) for $29,000 on November 1, 2021 and signed a $12,000 note payable to help pay for it. The terms provide for semiannual fixed principal payments of $2,000 on May 1 and November 1 of each year, plus interest of 5%. All other furniture, fixture, and equipment were purchased during the year for cash. Recall that the company originally issued 25,930 common shares for $25,930, of which 750 shares were repurchased from the lawyer for $500. Sunrise Bakery Inc. Income Statement Year Ended October 31, 2022 Sales revenue $462,500 Cost of goods sold 231,250 Gross profit 231,250 Operating expenses Salaries and wages expense $92,500 Depreciation expense 3,900 Other operating expenses 35,987 132,387 Income from operations 98,863 Other expenses Interest expense 413 Income before income tax 98,450 Income tax expense 19,690 Net income $ 78,760 Sunrise Bakery Inc. Balance Sheet October 31, 2022 Assets Current assets Cash $86,219 Accounts receivable 3,250 Inventory 17,897 Prepaid expenses 6,300 $113,666 Property, plant, and equipment Furniture and fixtures $12,500 Accumulated depreciation— furniture and fixtures (1,250) 11,250 Computer equipment 4,200 Accumulated depreciation— computer equipment (600) 3,600 Kitchen equipment 29,000 Accumulated depreciation— kitchen equipment (2,050) 26,950 41,800 Total assets $155,466 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 5,848 Income tax payable 19,690 Dividends payable 700 Salaries and wages payable 2,250 Interest payable 188 Note payable—current portion 4,000 $ 32,676 Long-term liabilities Note payable—long-term portion 6,000 Total liabilities 38,676 Stockholders’ equity Paid-in capital Preferred stock, 2,800 shares issued and outstanding $ 14,000 Common stock, 25,930 shares issued, 25,180 outstanding 25,930 39,930 Retained earnings 77,360 Total paid-in capital and retained earnings 117,290 Less: Treasury stock (750 common shares) 500 Total stockholders’ equity 116,790 Total liabilities and stockholders’ equity $155,466 Recall that the company declared a semiannual dividend to the preferred stockholders on April 30, and the dividend was paid on June 1. The second semiannual dividend was declared to the preferred stockholders on October 31, to be paid on December 1. Prepaid expenses relate only to operating expenses. Required for Part A Prepare a statement of cash flows for Sunrise Bakery Inc. using the direct method.
- The company bought kitchen equipment (a commercial oven) for $29,000 on November 1, 2021 and signed a $12,000 note payable to help pay for it. The terms provide for semiannual fixed principal payments of $2,000 on May 1 and November 1 of each year, plus interest of 5%. All other furniture, fixture, and equipment were purchased during the year for cash.
- Recall that the company originally issued 25,930 common shares for $25,930, of which 750 shares were repurchased from the lawyer for $500.
Sunrise Bakery Inc.
Income Statement
Year Ended October 31, 2022
Sales revenue $462,500
Cost of goods sold 231,250
Gross profit 231,250
Operating expenses
Salaries and wages expense $92,500
Depreciation expense 3,900
Other operating expenses 35,987 132,387
Income from operations 98,863
Other expenses
Interest expense 413
Income before income tax 98,450
Income tax expense 19,690
Net income $ 78,760
Sunrise Bakery Inc.
Balance Sheet
October 31, 2022
Assets
Current assets
Cash $86,219
Accounts receivable 3,250
Inventory 17,897
Prepaid expenses 6,300 $113,666
Property, plant, and equipment
Furniture and fixtures $12,500
furniture and fixtures (1,250) 11,250
Computer equipment 4,200
Accumulated depreciation—
computer equipment (600) 3,600
Kitchen equipment 29,000
Accumulated depreciation—
kitchen equipment (2,050) 26,950 41,800
Total assets $155,466
Liabilities and
Current liabilities
Accounts payable $ 5,848
Income tax payable 19,690
Dividends payable 700
Salaries and wages payable 2,250
Interest payable 188
Note payable—current portion 4,000 $ 32,676
Long-term liabilities
Note payable—long-term portion 6,000
Total liabilities 38,676
Stockholders’ equity
Paid-in capital
Common stock, 25,930 shares issued, 25,180 outstanding 25,930 39,930
Retained earnings 77,360
Total paid-in capital and retained earnings 117,290
Less:
Total stockholders’ equity 116,790
Total liabilities and stockholders’ equity $155,466
- Recall that the company declared a semiannual dividend to the preferred stockholders on April 30, and the dividend was paid on June 1. The second semiannual dividend was declared to the preferred stockholders on October 31, to be paid on December 1.
- Prepaid expenses relate only to operating expenses.
Required for Part A
- Prepare a statement of cash flows for Sunrise Bakery Inc. using the direct method.
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