Direct Cash flow and journal entry

Recall that Bill sold the old equipment at his other location to a friend for $7,000 .He now has to replace the equipment, but is undecided about whether he should buy or lease the equipment. Bill could get the same bundle purchase price as he did for the new location if he buys it, but he can lease the equipment under a 3-year lease agreement. The annual rental payments are a lump sum payment of $12,000 for the first year and $10,000 for the next 2 years at the end of which he would have the option to purchase the equipment for $6000. Required1. Prepare a Statement of Cash Flow (using the Direct methods) for 2018 2.Advise Bill on the advantages and disadvantages of replacing his old equipment by leasing it versus buying it and its effect on cash flows. Assume a market interest rate of 4%. You can access the present/future value tables on line for your calculations.3.Show the journal entries that would have to be recorded for the lease for years 1, 2,and 3 and eventual purchase at the end of year 3 under the assumption it is a) an operating lease and b) a capital lease.I have already do the indirect methods for cash flow. you need base on the File1 (that I gave u ,balance sheet and Income statement )to Complete the Cash Flow Using the Direct method in file2. And do the journal entries. This is Grading sheet. Area % Statement of Cash Flows, Indirect-correctly formatted with correct descriptions and amounts 30 Statement of Cash Flows-correctly formatted with correct account descriptions and amounts 30 Lease vs Buy Analysis-Recommendation with data to support it 20 Entries to record lease as operating and capital lease 20 Overall Grade 100
bill_s_bagel_shop_case_7_worksheets.xlsx

statement_of_cash_flows_calcs_for_case_7__1___1_.xls

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Bill’s Bagel Shop, Inc
Balance Sheet
Assets
Current Assets
Cash
Accounts Receivable
Less: Allowance for Uncollectible Accounts
Prepaid Insurance
Prepaid Advertising
Inventory-Food Supplies
Total Current Assets
Long Term Assets
Land
Land Improvements
Building
Furniture and Equipment
Accumulated Depreciation
Equipment-old
Accumulated Depreciation-old equip
Total Long Term Assets
Total Assets
Liabilities
Current Liabilities
Accounts Payable
Payroll Liabilities
Sales Tax Payable
Corporate Income Taxes Payable
Interest Payable
Unearned Revenue
Total Current Liabilties
Long Term Liabilities
Notes Payable
Mortgage Payable
Total Liabilties
Stockholders’ Equity
Common Stock
Retained Earnings
Total Stockholders’ Equity
Total Liabilities & Stockholders’ Equity
At 12/31/17
$
$
$
$
$
$
$
$
75,000
74,000
(2,000)
1,500
78,000
226,500
40,000
(14,000)
26,000
252,500
20,000
21,926
23,715
20,000
85,641
$
60,000
145,641
$
$
20,000
86,859
106,859
252,500
At 12/31/18
$
$
$
$
$
$
$
$
168,899
42,000
(2,000)
1,500
1,200
67,400
278,999
120,000
10,000
145,737
38,000
(3,300)
310,437
589,436
85,000
10,500
15,400
14,886
1,544
5,000
132,330
$
46,864
244,836
424,030
$
$
20,000
145,405
165,405
589,435

Bill’s Bagel Shop, Inc
Income Statement
For the year ended December 31, 2018
Food Sales
Cost of Goods Sold
Gross Profit
Operating expenses
Depreciation expense
Donations
Payroll Expenses
Repairs and Maintenance
Utilities
Total operating expenses
Net Operating Income
Other expenses and losses
Interest Expense
Loss on sale of equipment
Total other expenses and losses
Net income before taxes
Income taxes (20%)
Net Income
$
946,800
(130,000)
816,800
$
(720,800)
96,000
650,000
10,300
4,000
53,500
2,000
1,000
9,568
12,000
$
$
(21,568)
74,432
(14,886)
59,546
Bill’s Bagel Shop
Statement of Cash Flows
FYE 12/31/2018
(Indirect)
Cash Flows from Operating Activities
Net Income (Loss)
Adjusted by:
$
59,564
Depreciation Expense
Loss on Sale of Long Term Asset
Decrease in Accounts Receivable
$
$
$
10,300
12,000
32,000
Increase in Prepaid Advertising
$
(1,200)
Decrease in Inventory
$
10,600
Increase in Accounts Payable
$
65,000
Increase in Payroll Liabilities
$
10,500
Decrease in Sales Tax Payable
$
(6,526)
Decrease in Corp Income Taxes Payable
$
(8,829)
Increase in Interest Payable
$
1,544
Decrease in Unearned Revenue
$
(15,000)
Net Cash Flow by Operating Activities
$
169,953
$
(306,737)
$
231,700
Net Change in Cash
$
94,916
Beginning Cash
$
75,000
Ending Cash
$
169,916
Cash Flows from Investing Activities
Purchase of Long Term Asset
$
Sale of Long Term Asset
$
(313,737)
7,000
Net Cash Flows From Investing Activities
Cash Flows from Financing Activities
Issue of Long Term Debt
$
250,000
Payment of Long Term Debt
$
(18,300)
Issue of Stock
$

Payment of Dividends
$

Purchase of Treasury Stock
$

Net Cash Flows From Financing Activities
Name of Company
Statement of Cash Flows
FYE
Cash Flows from Operating Activities
Net Income (Loss)
Adjusted by:
Depreciation Expense
Loss on Sale of Long Term Asset
Gain on Sale of Long Term Asset
Increase in Current Asset
Decrease in Current Asset
Increase in Current Liability
Decrease in Current Liability
+/+
+
+
+

Net Cash Flow by Operating Activities
$

$

$

Net Change in Cash
$

Beginning Cash
$

Ending Cash
$

Cash Flows from Investing Activities
Purchase of Long Term Asset
Sale of Long Term Asset
+
Net Cash Flows From Investing Activities
Cash Flows from Financing Activities
Issue of Long Term Debt
Payment of Long Term Debt
Issue of Stock
Payment of Dividends
Purchase of Treasury Stock
Net Cash Flows From Financing Activities
+
+

Found on:
Income Statement
Income Statement
Income Statement
Income Statement
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet or In additional information
Balance Sheet or In additional information
Balance Sheet or In additional information
Balance Sheet or In additional information
Balance Sheet or In additional information
Additional Information
Balance Sheet or In additional information

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