Question: The 2011 income statement and the 2011
The 2011 income statement and the 2011 comparative balance sheet of T-Bar-M Camp, Inc., have just been distributed at a meeting of the camps board of directors. The directors raise a fundamental question: Why is the cash balance so low? This question is especially troublesome since 2011 showed record profits. As the controller of the company , you must answer the question.
Requirements
1. Prepare a statement of cash flows for 2011 in the format that best shows the relationship between net income and operating cash flow. The company sold no plant assets or longterm investments and issued no notes payable during 2011. There were no noncash investing and financing transactions during the year. Show all amounts in thousands.
2. Answer the board members question: Why is the cash balance so low? Point out the two largest cash payments during 2011. (Challenge) 3. Considering net income and the companys cash flows during 2011, was it a good year or a bad year? Give your reasons.
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T-Bar-M Camp, Inc. Income Statement Year Ended December 31, 2011 (In thousands) Revenues: Sales revenue $436 ............ Expenses: Cost of goods sold. Salary expense. Depreciation expense.. $221 48 ....... 46 .............. Interest expense . Amortization expense. Total expenses... 13 11 339 Net income .. $ 97 T-Bar-M Camp, Inc. Comparative Balance Sheets December 31, 2011 and 2010 (In thousands) 2011 2010 Assets Cash. $ 17 $ 63 Accounts receivable, net. 72 61 Inventories. 194 181 Long-term investments 31 Property, plant, and equipment... Accumulated depreciation. 369 259 (244) (198) Patents. 177 188 Totals.. $ 616 $ 554 Liabilities and Owners' Equity Accounts payable.. $ 63 $ 56 Accrued liabilities 12 17 Notes payable, long-term.. Common stock, no par.. 179 264 149 61 Retained earnings .. 213 156 Totals. . $ 616 $ 554
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