FA-required in excel
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Question 3: Sheffer
The Sheffer Company’s statement of cash flows for 2012 showed the following calculation of
the cash flow from operating activities:
Collections from customers $ 2,245
Payments to suppliers (1,375)
Payments to employees ( 688)
Payments to the IRS (for income tax) ( 72)
Cash flow from operating activities $ 110
The company’s balance sheet at the beginning and end of 2012 showed the following:
Beginning End
of year of year
Accounts payable $ 92 $ 103
Accounts receivable 218 262
Accumulated depreciation 93 122
Income tax payable 142 180
Merchandise inventory 141 189
Plant and equipment (at cost) 338 371
Wages payable 36 37
A note to the financial statements showed that the company bought plant and equipment during
the year for $33.
Required:
a. Prepare an income statement for the Sheffer Company for 2012.
b. Did the Sheffer Company use the direct or the indirect method in preparing its statement of
cash flows?
c. Recently, the FASB has decided to eliminate goodwill amortization. Suppose certain
goodwill was recognized in 2012, and consider the financial statements for a subsequent
year, say 2017, under the assumption there is no impairment. Will the proposed change
result in an increase or a decrease to the Retained Earnings account? Explain.
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