QuestionQuestion

Middleham Co. started operation in 2014. The following balances are from the PARTIAL unadjusted trial balance on December 31, 2014. Ignore income tax in this problem.

Cash ? Loan payable 100,000
Revenues 120,000 Prepaid rent 24,000
A/P 20,000 Wage expense 30,000
Purchases 70,000 Common Shares 100,000
FV-OCI at cost 8,000 Equipment 50,000
Gains on sales of land 15,000

1 Middleham borrowed on July 1, 2014, $50,000, 5% loan. Interest and principal to be paid in full on June 30,2016

2 Middleham acquired equipment by signing a loan $50,000, 5%, interest and principal to be paid in 2015. Land was purchased for 70,000 in cash and sold after 2 months.

3 Depreciation on equipment is 10% of ending balance.

4 The fair value of the FV-OCI investment on December 31, 2014 is $5,000. No investment was traded after the acquisition on November 30, 2014.

5 The physical count reports ending inventory to be $10,000.

6 Middleham rented a store on January 1, 2014, signing a two-year agreement.

Answer the following questions:

• How much is the net income for the year ended December 31, 2014?

• What is the ending balance of cash as of December 31, 2014?


As of December 31, 2014, on the statement of Cash flow:

• How much is cash from operating activities?

• How much is cash from investing activities?

• How much is cash from financing activities?

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1        Middleham borrowed on July 1, 2014, $50,000, 5% loan. Interest and principal to be paid in full on June 30,2016
For net income calculation we need to accrue interest on the loan for 2014. Accrued interest is as follows:
Loan value 50.000
Interest rate (Annual) 5%
Annual interest 2.500
Divided by months in year 12
Times months loan held in 2014 6
Accrued interest/interest expense 1.250...
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