General Guidelines:
1. Organization and proper indication of answers will be taken into account in the grade.
2. No digital answers will be taken into account.
3. All calculations must be provided.
1. On the basis of the following data for Larson Co. for the year ending December 31, 2011 and the preceding year ended December 31, 2010, prepare a statement of cash flows. Use the indirect method of reporting cash flows from operating activities. In addition to the balance sheet data, assume that:
Equipment costing $125,000 was purchased for cash.
Equipment costing $85,000 with accumulated depreciation of $65,000 was sold for
$15,000.
The stock was issued for cash.
The only entries in the retained earnings account were net income of $51,000 and cash dividends declared of $13,000.
|
|
Year
|
Year
|
|
2011
|
2010
|
|
Cash
|
$100,000
|
$ 78,000
|
|
Accounts receivable (net)
|
78,000
|
85,000
|
|
Inventories
|
101,500
|
90,000
|
|
Equipment
|
410,000
|
370,000
|
|
Accumulated depreciation
|
(150,000)
|
(158,000)
|
|
|
$539,500
|
$465,000
|
|
Accounts payable (merchandise creditors)
|
$ 58,500
|
$ 55,000
|
|
Cash dividends payable
|
5,000
|
4,000
|
|
Common stock, $10 par
|
200,000
|
170,000
|
|
Paid--in capital in excess of par---- common stock
|
62,000
|
60,000
|
|
Retained earnings
|
214,000
|
176,000
|
|
|
$539,500
|
$465,000
|
II. The comparative balance sheet of Posner Company, for 2011 and the preceding year ended December 31, 2010, appears below in condensed form:
|
|
Year
|
Year
|
|
2011
|
2010
|
|
Cash
|
$ 53,000
|
$ 50,000
|
|
Accounts receivable (net)
|
37,000
|
48,000
|
|
Inventories
|
108,500
|
100,000
|
|
Investments
|
.....
|
70,000
|
|
Equipment
|
573,200
|
450,000
|
|
Accumulated depreciation--equipment
|
(142,000)
|
(176,000)
|
|
|
$629,700
|
$542,000
|
|
Accounts payable
|
$ 62,500
|
$ 43,800
|
|
Bonds payable, due 2011
|
.....
|
100,000
|
|
Common stock, $10 par
|
325,000
|
285,000
|
|
Paid--in capital in excess of par----
|
|
|
|
common stock
|
80,000
|
55,000
|
|
Retained earnings
|
162,200
|
58,200
|
|
|
$629,700
|
$542,000
|
|
The income statement for the current year is as follows:
|
|
|
|
Sales
|
|
$625,700
|
|
Cost of merchandise sold
|
|
340,000
|
|
Gross profit
|
|
$285,700
|
|
Operating expenses:
|
|
|
|
Depreciation expense
|
$26,000
|
|
|
Other operating expenses
|
68,000
|
94,000
|
|
Income from operations
|
|
$191,700
|
|
Other income:
Gain on sale of investment
|
$ 4,000
|
|
|
Other expense:
|
|
|
|
Interest expense
|
6,000
|
(2,000)
|
|
Income before income tax
|
|
$189,700
|
|
Income tax
|
|
60,700
|
|
Net income
|
|
$129,000
|
|
Additional data for the current year are as follows:
|
|
|
Additional data for the current year are as follows:
(a) Fully depreciated equipment costing $60,000 was scrapped, no salvage, and equipment was purchased for $183,200.
(b) Bonds payable for $100,000 were retired by payment at their face amount.
(c) 5,000 shares of common stock were issued at $13 for cash.
(d) Cash dividends declared and paid, $25,000.
Prepare a statement of cash flows, using the indirect method of reporting cash flows from operating activities.