Advanced Financial Accounting - II - Preston University

Net income 818Retained earnings—Jan. 1, 2008 3101,128Stock dividend declared and issued 600Retained earnings—Dec. 31,2008 $ 528MARDI GRAS COMPANYComparative Balance SheetAs of December 31($000 Omitted)Assets 2008 2007Current assetsCash $ 383 $ 100U.S. Treasury notes (Available-for-sale) -0- 50Accounts receivable 740 500Inventory 720 560Total current assets 1,843 1,210Long-term assetsLand 150 70Buildings and equipment 910 600Accumulated depreciation (200) (120)Patents (less amortization) 105 130Total long-term assets 965 680Total assets $2,808 $1,890Liabilities and Stockholders' EquityCurrent liabilitiesAccounts payable $ 420 $ 340Income taxes payable ' 40 20Notes payable 320 320Total current liabilities 780 680Long-term notes payable-—due 2010 200 200Total liabilities 980 880Stockholders' equityCommon stock 1,300 700Retained earnings 528 310Total stockholders equity 1,828 1,010Total liabilities and stockholders' equity $2,808 $1,890INSTRUCTIONS:Prepare a statement of cash flows using the direct method. Changes in accounts receivable and accounts payabl"relate to sales and cost of goods sold. Do note prepare a reconciliation schedule.Sandburg Corporation was formed 5 years ago through a public subscription of common stock. Robert Frost,;who owns 15% of the common stock, was one of the organizers of Sandburg and is its current president. Thecompany has been successful, but it currently is experiencing a shortage of funds. On June 10, Robert Frostapproached the Spokane National Bank, asking for a 24-month extension on two $35000 notes, which are dueJune 30, 2007, and September 30, 2007. Another note of $6,000 is due on March 31, 2008, but he expects nodifficulty in paying this note on its due date. Frost explained that Sandburg's cash flow problems are dueprimarily to the company's desire to finance a $300,000 plant expansion over the next 2 fiscal years throughinternally generated funds.The Commercial Loan Officer of Spokane National Bank requested financial reports for the last 2 fiscal years.These reports are reproduced below:I'ase