ACC557 Homework 5

ACC557 Homework 5

Due Week 9 and worth 50 points

Directions: Answer the following questions on a separate Microsoft Word or Excel document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in Blackboard.

Exercises

E13-3.Cushenberry Corporation had the following transactions.

1. Sold land (cost $12,000) for $15,000.

2. Issued common stock at par for $20,000.

3. Recorded depreciation on buildings for $17,000.

4. Paid salaries of $9,000.

5. Issued 1,000 shares of $1 par value common stock for equipment worth $8,000.

6. Sold equipment (cost $10,000, accumulated depreciation $7,000) for $1,200.

Instructions

For each transaction above, (a) prepare the journal entry, and (b) indicate how it would affect the statement of cash flows using the indirect method.

E13-4.Gutierrez Company reported net income of $225,000 for 2015. Gutierrez also reported depreciation expense of $45,000 and a loss of $5,000 on the disposal of equipment. The comparative balance sheet shows a decrease in accounts receivable of $15,000 for the year, a $17,000 increase in accounts payable, and a $4,000 decrease in prepaid expenses.

Instructions

Prepare the operating activities section of the statement of cash flows for 2015. Use the indirect method.

Problems

P13-3A.The income statement of Whitlock Company is presented here.

Whitlock Company

Income Statement

For the Year Ended November 30, 2015 

Sales revenue                                                   $7,700,000

Cost of goods sold

   Beginning Inventory                         $1,900,000

   Purchases                              4,400,000

   Goods available for sale       6,300,000

   Ending inventory                  1,400,000

Total cost of goods sold                                               4,900,000

Gross profit                                                     2,800,000

Operating expenses                                          1,150,000

Net income                                                      $1,650,000

Additional information:

Accounts receivable increased $200,000 during the year, and inventory decreased $500,000.

Prepaid expenses increased $150,000 during the year.

Accounts payable to suppliers of merchandise decreased $340,000 during the year.

Accrued expenses payable decreased $100,000 during the year.

Operating expenses include depreciation expense of $70,000.

Instructions

Prepare the operating activities section of the statement of cash flows for the year ended November 30, 2015, for Whitlock Company, using the indirect method.

P13-7A.Presented below are the financial statements of Nosker Company.

NOSKER COMPANY

Comparative balance Sheet

December 31

Assets                                                              2015                2014

Cash                                                                $38,000                       $20,000

Accounts receivable                                        30,000            14,000

Inventory                                                         27,000            20,000

Equipment                                                       60,000            78,000

Accumulated depreciation – equipment                       (29,000)           $108,000

Total                                                                $126,000         $108,000

Liabilities and Stockholders Equity                 

Accounts payable                                            $24,000                       $15,000

Income taxes payable                                      7,000               8,000

Bonds payable                                                27,000            33,300

Common stock                                                            18,000            14,000

Retained earnings                                            50,000            38,000

Total                                                                $126,000         $108,000 

NOSKER COMPANY

Income Statement

For the year Ended December 31, 2015-12-03 

Sales revenue                           $242,000

Cost of goods sold                   175,000

Gross profit                             67,000

Operating expenses                  24,000

Income from operation                        43,000

Intrest expense                         3,000

Income before income taxes    40,000

Income tax expense                 8,000

Net income                              $32,000

Additional data:

Dividends declared and paid were $20,000.

During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had a book value of $8,500 at the time of sale.

All depreciation expense, $14,500, is in the operating expenses.

All sales and purchases are on account.

Instructions

Prepare a statement of cash flows using the indirect method.

Compute free cashflow.