balance sheet and cash flows

2.docx

PART I

Presented below is the trial balance of Arbeid Corporation at December 31, 2014.

	Debits	Credits
Cash	$ 197,000
Sales		$ 7,900,000
Trading Securities (at cost, $145,000)	153,000
Cost of Goods Sold	4,800,000
Long-term Investments in Bonds	299,000
Long-term Investments in Stocks	277,000
Short-term Notes Payable		90,000
Accounts Payable		455,000
Selling Expenses	2,000,000
Investment Revenue		63,000
Land	260,000
Buildings	1,040,000
Dividends Payable		136,000
Accrued Liabilities		96,000
Accounts Receivable	435,000
Accumulated Depreciation—Buildings		352,000
Allowance for Doubtful Accounts		25,000
Administrative Expenses	900,000
Interest Expense	211,000
Inventories	597,000
Extraordinary Gain		80,000
Long-term Notes Payable		900,000
Equipment	600,000
Bonds Payable		1,000,000
Accumulated Depreciation—Equipment		60,000
Franchise	160,000
Common Stock ($5 par)		1,000,000
Treasury Stock	191,000
Patent	195,000
Retained Earnings		78,000
Paid-in Capital in Excess of Par		80,000
Totals	$12,315,000	$12,315,000

Instructions: Prepare a balance sheet at December 31, 2014, for Arbeid Corporation. Ignore income taxes.

PART II

Comparative balance sheet accounts of Luke Inc. are presented below.

Luke Inc. Comparative Balance Sheet Accounts As of December 31, 2014 and 2013
	December 31
Debit Accounts	2014	2013
Cash	$ 42,000	$ 33,750
Accounts Receivable	70,500	60,000
Merchandise Inventory	30,000	24,000
Investments (available-for-sale)	22,250	38,500
Machinery	30,000	18,750
Buildings	67,500	56,250
Land	7,500	7,500
	$269,750	$238,750
Credit Accounts
Allowance for Doubtful Accounts	$ 2,250	$ 1,500
Accumulated Depreciation—Machinery	5,625	2,250
Accumulated Depreciation—Buildings	13,500	9,000
Accounts Payable	35,000	24,750
Accrued Payables	3,375	2,625
Long-Term Note Payable	21,000	31,000
Common Stock, no par	150,000	125,000
Retained Earnings	39,000	42,625
	$269,750	$238,750

Additional data (ignoring taxes):

1.	Net income for the year was $42,500.
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2.	Cash dividends declared and paid during the year were $21,125.
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3.	A 20% stock dividend was declared during the year. $25,000 of retained earnings was capitalized (debited) and common stock was credited.
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4.	Investments that cost $25,000 were sold during the year for $28,750.
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5.	Machinery that cost $3,750, on which $750 of depreciation had accumulated, was sold for $2,200.

Luke's 2014 income statement follows (ignoring taxes).

Sales		$540,000
Less: Cost of goods sold		380,000
Gross margin		160,000
Less: Operating expenses (includes $8,625 depreciation and $5,400 bad debts)		120,450
Income from operations		39,550
Other: Gain on sale of investments	$3,750
Loss on sale of machinery	(800)	2,950
Net income		$ 42,500

(a)

Compute net cash flow from operating activities using the direct method.

(b)

Prepare a statement of cash flows using the indirect method.