Explain how you reached the answer or show your work if a mathematical calculation is needed, or both.
Question 1.
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.
Question 2.
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.
Question 3. 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:
1. Accounts receivable increased $200,000 during the year, and inventory decreased $500,000.
2. Prepaid expenses increased $150,000 during the year.
3. Accounts payable to suppliers of merchandise decreased $340,000 during the year.
4. Accrued expenses payable decreased $100,000 during the year.
5. 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.
Question 4. Presented below are the ?nancial statements of Nosker Company.
NOSKER COMPANY
Comparative Balance Sheets
December 31
|
Awls
|
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)
|
(24,000)
|
|
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
|
33.000
|
|
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
|
Sales revenue
|
$242,000
|
|
Cost of goods sold
|
175,000
|
|
Gross profit
|
67,000
|
|
Operating expenses
|
24,000
|
|
Income from operations
|
43,000
|
|
Interest expense
|
3,000
|
|
Income before income taxes
|
40,000
|
|
Income tax expense
|
8,000
|
|
Net income
|
$ 32,000
|
Additional data:
1. Dividends declared and paid were $20,000.
2. 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.
3. All depreciation expense, $14,500, is in the operating expenses.
4. All sales and purchases are on account.
Instructions
a) Prepare a statement of cash flows using the indirect method.
b) Compute free cash flow.