Accounting homework, needed by 04/30/15 10PM

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Question 5.

“Look how great we are doing,” said Sawyer Mittlestaedt, president of Elliott Company. “Our sales have grown from $1.6 million to $2.0 million this year, we about doubled our warehouse space, and we have more cash in the bank than we started with. A few more years of growth like this and we’ll be tops in the industry.”

“Yes, our statements look pretty good,” replied Endia Bush, the company’s vice president for finance. “But I have concerns that we’re doing business with a lot of companies we don’t know much about. But I do agree, we’re certainly selling a lot of merchandise; our inventory is actually down from last year.”

See statements on next page.

Elliott Company

Comparative Balance Sheets

At December 31, 2015 and 2014

	2015	2014
Assets
Current assets:
Cash.	$42,000	$ 27,000	15000 incr
Marketable securities	19,000	13,000
Accounts receivable.	710,000	530,000
Inventory	848,000	860,000
Prepaid expenses	10,000	5,000
Total current assets	1,435,000	1,629,000
Long-term investments	60,000	110,000
Loans to subsidiaries	130,000	80,000
Plant and equipment	3,170,000	2,600,000
Less accumulated depreciation	810,000	755,000
Net plant and equipment	2,360,000	1,845,000
Patents	84,000	90,000
Total assets	$4,263,000	$3,560,000

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$ 970,000	$ 670,000
Accrued liabilities	65,000	82,000
Total current liabilities	1,035,000	752,000
*Long-term Bonds Payable*	820,000	600,000
Notes payable	95,000	80,000
Total liabilities	1,950,000	1,432,000
Stockholders’ equity:
Common stock	1,740,000	1,650,000
Retained earnings .	573,000	478,000
Total stockholders’ equity	2,313,000	2,128,000
Total liabilities and stock	$4,263,000	3,560,000

Elliott’s income statement for 2015 follows

Sales		$2,000,000
Cost of goods sold		1,300,000
Gross profit		700,000
Selling and administrative expenses		490,000
Net operating income		210,000
Nonoperating items:
Gain on sale of investments	$60,000
Loss on sale of equipment.	20,000	40,000
Income before taxes		250,000
Income taxes		80,000
Net income		$ 170,000

The following additional information is available about Elliott’s activities during 2015:

Cash dividends declared and paid to the common stockholders totaled $75,000.
Long-term BONDS with a value of $380,000 were repaid during the year.
Equipment was sold during the year for $70,000. The equipment had cost $130,000 and had $40,000 in accumulated depreciation on the date of sale.
Long-term investments were sold during the year for $110,000. These investments had cost $50,000 when purchased several years ago.

5-1. Ms. Bush asks you to prepare a statement of cash ﬂow (indirect method) for 2015.

5-2. What is Elliott’s free cash flow? Interpret your findings.

5-3. Is Elliott Corp. doing as well as its CEO believes? Discuss.

Question 7.

Thompson Co. had the following investment transactions during the current year.

Feb. 6	Purchased 1,000 shares of Fernandez Finance Co. for $40 per share plus brokerage costs of $225. Thompson intends to sell these shares when the timing is right to make a gain.

Mar. 31	Purchased 15 $1,000 face, 8% bonds of Brown Corp. at 97½. They mature in ten years, and interest is paid seminannually on February 1 and August 1. Thompson has the intent and ability to hold these until maturity. Thompson also determines that the difference between effective interest rate amortization and straight-line is immaterial.

June 20	Received a $2.20 per share dividend on Fernandez Finance Co. shares.

August 1	Received interest check from Brown Corp.

Sept. 4	Acquired 4,000 shares of Jurgeson Conglomerate's stock for $30 per share plus $600 transaction costs. These shares were classified as available-for-sale securities.

Dec. 31	Market values of Fernandez Finance Co. and Jurgeson Conglomerate stock were $45 and $28 per share, respectively. Brown Corp. bonds were trading at 99.