homework

Chapter 23

E23.8 (LO 2, 3) (Schedule of Net Cash Flow from Operating Activities—Indirect Method) Bal- lard Co. reported $145,000 of net income for 2020. The accountant, in preparing the statement of cash flows, noted the following items occurring during 2020 that might affect cash flows from operating activities.

1. Ballard purchased 100 shares of treasury stock at a cost of $20 per share. These shares were then resold at $25 per share.

2. Ballard sold 100 shares of IBM common at $200 per share. The acquisition cost of these shares was $145 per share. There were no unrealized gains or losses recorded on this investment in 2020.

3. Ballard revised its estimate for bad debts. Before 2020, Ballard’s bad debt expense was 1% of its receivables. In 2020, this percentage was increased to 2%. Net accounts receivable decreased by $12,000 during 2020.

4. Ballard issued 500 shares of its $10 par common stock for a patent. The market price of the shares on the date of the transaction was $23 per share.

5. Depreciation expense is $39,000.

6. Ballard Co. holds 40% of the Nirvana Company’s common stock as a long-term investment. Nirvana Company reported $27,000 of net income for 2020.

7. Nirvana Company paid a total of $2,000 of cash dividends to all investees in 2020.

8. Ballard declared a 10% stock dividend. One thousand shares of $10 par common stock were distrib- uted. The market price at date of issuance was $20 per share.

Instructions

Prepare a schedule that shows the net cash flow from operating activities using the indirect method. Assume no items other than those listed above affected the computation of 2020 net cash flow from operating activities.

E23.11 (LO 2) (SCF—Indirect Method) Condensed financial data of Pat Metheny Company for 2020 and 2019 are presented below.

Pat Metheny Company Comparative Balance Sheet As of December 31, 2020 and 2019

2020 2019

Cash $1,800$1,150 Receivables 1,7501,300

2020

2019

Increase (Decrease)

$ 10,000 30,000

(11,000)

$ 3,000 3,000 3,000 6,000 13,000

Selected balance sheet accounts:

Assets

Accounts receivable

Property, plant, and equipment Accumulated depreciation—plant assets

Liabilities and stockholders’ equity Bonds payable

Dividends payable Common stock, $1 par Additional paid-in capital Retained earnings

34,000 277,000

$ (178,000)

$ (167,000)

24,000 247,000

$

49,000 8,000 22,000 9,000 104,000

$ 46,000 5,000 19,000 3,000 91,000

Inventory

Plant assets

Accumulated depreciation

Long-term investments (held-to-maturity)

Accounts payable Accrued liabilities Bonds payable Common stock Retained earnings

1,600

1,900 (1,200) 1,300

$7,150

$1,200 200 1,400 1,900 2,450 $7,150

1,900

1,700 (1,170) 1,420

$6,300

$ 900 250 1,550 1,700 1,900 $6,300

Pat Metheny Company Income Statement

For the Year Ended December 31, 2020

Sales revenue

Cost of goods sold

Gross margin

Selling and administrative expense Income from operations

Other revenues and gains

Gain on sale of investments Income before tax

Income tax expense

Net income

Cash dividends

Income retained in business

$6,900 4,700 2,200

930 1,270

80 1,350 540 810 260 $ 550

Exercises 23-51

Additional information:

During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2020.

Instructions

Prepare a statement of cash flows using the indirect method.

E23.15 (LO 2) Company.

(SCF—Indirect Method) The following data are taken from the records of Alee

December 31, December 31, 2020 2019

Cash $15,000$8,000

Current assets other than cash Long-term debt investments Plant assets

Accumulated depreciation Current liabilities

Bonds payable

Common stock

Retained earnings

85,000

10,000 335,000 $445,000

$ 20,000 40,000 75,000 254,000 56,000 $445,000

60,000

53,000 215,000 $336,000

$ 40,000 22,000

–0– 254,000

20,000 $336,000

Additional information:

1. Held-to-maturity debt securities carried at a cost of $43,000 on December 31, 2019, were sold in 2020 for $34,000. The loss (not unusual) was incorrectly charged directly to Retained Earnings.

2. Plant assets that cost $50,000 and were 80% depreciated were sold during 2020 for $8,000. The loss was incorrectly charged directly to Retained Earnings.

3. Net income as reported on the income statement for the year was $57,000.

4. Dividends paid amounted to $10,000.

5. Depreciation charged for the year was $20,000.

Instructions

Prepare a statement of cash flows for the year 2020 using the indirect method.