ESSAY. Complete your work in a separate Word or Excel file and upload it to the assignment link in Blackboard.
1) Truesdell Brewery Company uses the direct method for its statement of cash flow. Assume Accrued Liabilities relate to Operating Expenses. It reports the following information regarding the year ending December 31, 2017:
Truesdell Brewery Company
Income Statement
For the Year Ended December 31, 2017
Sales Revenue $312,000
Cost of Goods Sold 247,000
Operating expenses 32,500
Net Income $32,500
Truesdell Brewery Company
Partial Balance Sheet
2017 2016
Accounts Receivable (net) $19,500 $15,600
Merchandise Inventory 23,400 28,600
Accrued Liabilities 1,560 3,900
Accounts Payable (Merchandise Inventory) 15,600 9,100
Assume that there were no sales of long-term assets, no interest revenue, and no expenses other than the expenses shown above. Also, assume that Accounts Payable is for purchases of merchandise inventory only. Prepare the operating activities section of the statement of cash flows.
2) Peterson, Inc. issued 4,000 shares of preferred stock for $240,000. The stock has a par value of $60 per share. Prepare the journal entry for this transaction.
3) Orange Office Supply Corporation completed the following stock issuance transactions:
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Mar. 28
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Issued 5,000 shares of $4 stated value common stock for cash of $20 per share
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May 1
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Received merchandise inventory with a market value of $46,000 in exchange for 2,000 shares of the $4 stated value common stock.
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May 14
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Issued 450 shares of 5%, $20 par value preferred stock for $50 per share
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Prepare the journal entries to record these transactions. Explanations are not required.
4) What does the debt to equity ratio show, and how is it calculated?
5) Hernandez Carpets Company buys a building for $115,000, paying $30,000 cash and signing a 30-year mortgage note for $85,000 at 11%. Prepare the journal entry for the purchase.
6) List and discuss three ways in which the statement of cash flows helps financial statement users.
7) Johnson Tires Company uses the indirect method to prepare the statement of cash flows. Refer to the following comparative balance sheet for Johnson Tires Company and complete the third column to show the increases or decreases.
Johnson Tires Company
Comparative Balance Sheet
December 31, 2017 and 2016
Increase/
2016 2015 (Decrease)
Cash $39,600 $19,800
Accounts Receivable 26,400 38,500
Merchandise Inventory 204,000 126,500
Total Assets 270,000 184,800
Accounts Payable 4,800 6,600
Accrued Liabilities 2,400 1,100
Long-term Notes Payable 100,800 99,000
Total Liabilities 108,000 106,700
Common Stock 36,000 2,200
Retained Earnings 135,600 81,400
Treasury Stock (9,600) (5,500)
Total Stockholders' Equity 162,000 78,100
Total Liabilities and Stockholders' Equity $270,000 $184,800
8) Marketplace, Inc. completed the following treasury stock transactions in 2016:
June. 3 Purchased 2,000 shares of the company's $5 par value common stock as treasury stock, paying cash of $15 per share.
June 14 Sold 800 shares of the treasury stock for cash of $20 per share.
Journalize these transactions. Explanations are not required.
How will Marketplace, Inc. report treasury stock on its balance sheet as of December 31, 2016?