ACC 363 P14-7A P14-8A

ACC 363 P14-7A  P14-8A

Problem P14-7A, Prepare a statement of cash flows—indirect method.
P14-7A The financial statements of Ernest Banks Company appear below.

The financial statements of Ernest Banks Company appear below.

Ernest Banks Company
Comparative Balance Sheets
December 31

     Assets                                      2006                2005      
     Cash                                      $23,000      $13,000
     Accounts Receivable                            24,000       33,000
     Merchandise inventory                       20,000       27,000
     Prepaid expenses                            20,000       13,000
     Land                                       40,000       40,000
     Property, plant and equipment                200,000      225,000           
     Less: Accumulated Depreciation                (50,000)      (67,500)
          Total                                $277, 000      $283,500
     Liabilities and Stockholders' Equity
     Accounts Payable                            $9,000      $18,500
     Accrued expenses payable                         9,500         7,500
     Interest payable                               1,000         1,500
     Income taxes payable                              3,000         2,000
     Bonds Payable                                 50,000       80,000
     Common stock                           123,000      105,000
     Retained earnings                            81,500       69,000
          Total                 $277,000         $283,500

Ernest Banks Company
Income Statement
For the Year Ended December 31, 2006

     Revenues
          Sales                            $600,000
          Gain on sale of plant assets  2,500      $602,500
     Less: Expenses
          Cost of goods sold                 500,000
          Operating expenses (excluding
            Depreciation)                        60,000
          Depreciation Expense                      7,500
          Interest Expense                      5,000
          Income tax expense                      9,000       581,500
     Net Income                                      $21,000

Additional Information:
1.     Plant assets were sold at a sales price of $62,500.
2.     Additional equipment was purchased at a cost of $60,000.
3.     Dividends of $8,500 were paid.
4.     All sales and purchases were on account.
5.     Bonds were redeemed at face value.
6.     Additional shares of stock were issued for cash.

Instructions
Prepare a statement of cash flows for Ernest Banks Company for the year ended December 31, 2006, using the indirect method.

Hints:
(a) Cash receipts from customers $206,000
 
          Net cash provided by operating activities $28,000
          Investing activities provided $2,500


Problem P14-8A, Prepare a statement of cash flows — Direct method.
P14-8A Data for Ernest Banks Company is presented in P14-7A. Further analysis reveals the following.
1. Accounts payable relates to merchandise creditors.
2. All operating expenses, except depreciation expense, were paid in cash.

Instructions
Prepare a statement of cash flows for Ernest Banks Company for the year ended December 31, 2006, using the direct method.
Hints: Net cash provided by operating activities $28,000
     Investing activities provided $2,500