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Salus Mea Inc., is developing its annual financial statements at December 31, current year. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized as follows: Balance sheet at December 31 Cash Accounts receivable Merchandise inventory Property and equipment Less: Accumulated depreciation Accounts payable Wages payable Note payable, long-term Common stock and additional paid-in capital Retained earnings Income statement for current year Sales Cost of goods sold Depreciation expense Other expenses Net income Current Year $ 73,250 15,250 23,450 209,250 (57450) $263,750 $ 16,500 2,000 56,300 103,950 $5,000 $263,750 $205,000 (123,500) (11,700) (43,000) $26.800 Additional Data: 1. Bought equipment for cash, $48,900. 2. Paid $14,700 on the long-term note payable. 3. Issued new shares of stock for $38,050 cash. 4. Dividends of S650 were declared and paid. 5. Other expenses all relate to wages. 6. Accounts payable include only inventory purchases made on credit. Prior Year $ 63,500 21,350 18,000 160,350 (45.750) $217,450 $ 19,000 2,700 71,000 65,900 58.850 $217,450 Required: Use the information above to calculate the various individual accruals and reconcile the net income ($26,800) with the cash flow for the current year. For each operational accrual indicate the extent to which it may be considered discretionary (or not) and explain why.

Salus Mea Inc., is developing its annual financial statements at December 31, current year. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized as follows: Balance sheet at December 31 Cash Accounts receivable Merchandise inventory Property and equipment Less: Accumulated depreciation Accounts payable Wages payable Note payable, long-term Common stock and additional paid-in capital Retained earnings Income statement for current year Sales Cost of goods sold Depreciation expense Other expenses Net income Current Year $ 73,250 15,250 23,450 209,250 (57450) $263,750 $ 16,500 2,000 56,300 103,950 $5,000 $263,750 $205,000 (123,500) (11,700) (43,000) $26.800 Additional Data: 1. Bought equipment for cash, $48,900. 2. Paid $14,700 on the long-term note payable. 3. Issued new shares of stock for $38,050 cash. 4. Dividends of S650 were declared and paid. 5. Other expenses all relate to wages. 6. Accounts payable include only inventory purchases made on credit. Prior Year $ 63,500 21,350 18,000 160,350 (45.750) $217,450 $ 19,000 2,700 71,000 65,900 58.850 $217,450 Required: Use the information above to calculate the various individual accruals and reconcile the net income ($26,800) with the cash flow for the current year. For each operational accrual indicate the extent to which it may be considered discretionary (or not) and explain why.

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter16: Financial Statement Analysis
Section: Chapter Questions
Problem 4PB
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Salus Mea Inc., is developing its annual financial statements at December 31, current year. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized as follows: Balance sheet at December 31 Cash Accounts receivable Merchandise inventory Property and equipment Less: Accumulated depreciation Accounts payable Wages payable Note payable, long-term Common stock and additional paid-in capital Retained earnings Income statement for current year Sales Cost of goods sold Depreciation expense Other expenses Net income Additional Data: 1. Bought equipment for cash, $48,900. 2. Paid $14,700 on the long-term note payable. Current Year $ 73,250 15,250 23,450 209,250 (57.450) $263,750 $ 16,500 2,000 56,300 103,950 $5,000 $263.750 $205,000 (123,500) (11,700) (4),000) $26.800 3. Issued new shares of stock for $38,050 cash. 4. Dividends of S650 were declared and paid. 5. Other expenses all relate to wages. 6. Accounts payable include only inventory purchases made on credit. Prior Year $ 63,500 21,350 18,000 160,350 (45.750) $217,450 $ 19,000 2,700 71,000 65,900 58.850 $217,450 Required: Use the information above to calculate the various individual accruals and reconcile the net. income ($26,800) with the cash flow for the current year. For each operational accrual indicate the extent to which it may be considered discretionary (or not) and explain why.
Transcribed Image Text:Salus Mea Inc., is developing its annual financial statements at December 31, current year. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized as follows: Balance sheet at December 31 Cash Accounts receivable Merchandise inventory Property and equipment Less: Accumulated depreciation Accounts payable Wages payable Note payable, long-term Common stock and additional paid-in capital Retained earnings Income statement for current year Sales Cost of goods sold Depreciation expense Other expenses Net income Additional Data: 1. Bought equipment for cash, $48,900. 2. Paid $14,700 on the long-term note payable. Current Year $ 73,250 15,250 23,450 209,250 (57.450) $263,750 $ 16,500 2,000 56,300 103,950 $5,000 $263.750 $205,000 (123,500) (11,700) (4),000) $26.800 3. Issued new shares of stock for $38,050 cash. 4. Dividends of S650 were declared and paid. 5. Other expenses all relate to wages. 6. Accounts payable include only inventory purchases made on credit. Prior Year $ 63,500 21,350 18,000 160,350 (45.750) $217,450 $ 19,000 2,700 71,000 65,900 58.850 $217,450 Required: Use the information above to calculate the various individual accruals and reconcile the net. income ($26,800) with the cash flow for the current year. For each operational accrual indicate the extent to which it may be considered discretionary (or not) and explain why.
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