Financial and Managerial Accounting: Week 9 (E13-3, E13-4, E13-6, E13-7, P13-3A and P13-7A)

Financial and Managerial AccountingWeek 9 Assignment (E13-3, E13-4, E13-6, E13-7, P13-3A and P13-7A)
 
E13-3
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.
 
E13-4
Gutierrez Company reported net income of $225,000 for 2017. Gutierrez also reported depreciation expense of $45,000 and a loss of $5,000 on the disposal of equipment. The comparative balance sheetshows a decrease in accounts receivable of $15,000 for the year, a $17,000 increase in accountspayable, and a $4,000 decrease in prepaid expenses.
 
Instructions
Prepare the operating activities section of the statement of cash flows for 2017. Use the indirect method.
 
E13-6
The three accounts shown below appear in the general ledger of Herrick Corp. during 2017.
Equipment
Date      Debit Credit Balance
Jan. 1 Balance 160,000 
July 31 Purchase of equipment 70,000 230,000 
Sept. 2 Cost of equipment constructed 53,000 283,000 
Nov. 10 Cost of equipment sold 49,000 234,000 
 
Accumulated Depreciation—Equipment
Date      Debit Credit Balance
Jan. 1 Balance 71,000 
Nov. 10 Accumulated depreciation on equipment sold 28,000 43,000 
Dec. 31 Depreciation for year 23,000 66,000 
 
Retained Earnings
Date      Debit Credit Balance 
Jan. 1 Balance 105,000 
Aug. 23 Dividends (cash) 17,000 88,000 
Dec. 31 Net income 67,000 155,000 
 
Instructions
From the postings in the accounts, indicate how the information is reported on a statement of cash flows using the indirect method. The loss on disposal of equipment was $5,000. (Hint: Cost of equipment constructed is reported in the investing activities section as a decrease in cash of $53,000.)
 
E13-7
Rojas Corporation's comparative balance sheets are presented below.
Rojas Corporation
Comparative Balance Sheets
December 31
2017 2016
Cash 14,300 10,700
Accounts receivable 21,200 23,400
Land 20,000 26,000
Buildings 70,000 70,000
Accumulated depreciation—buildings (15,000) (10,000)
   Total $110,500 $120,100
 
Accounts payable 12,370 31,100
Common stock 75,000 69,000
Retained earnings 23,130 20,000
   Total $110,500 $120,100
 
Additional information:
1. Net income was $22,630. Dividends declared and paid were $19,500.
2. No noncash investing and financing activities occurred during 2017.
3. The land was sold for cash of $4,900.
 
Instructions:
a. Prepare a statement of cash flows for 2017 using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000, or in parenthesis e.g. (15,000).)
b. Compute free cash flow.
 
P13-3A Prepare the Operating Activities Section - Indirect Method
The income statement of Whitlock Company is presented here.
WHITLOCK COMPANY
Income Statement
For the Year Ended November 30, 2017
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, 2017, for Whitlock Company, using the indirect method.
 
P13-7A Prepare a Statement of Cash Flows - Indirect method, and compute free cash flow
Presented below are the financial statements of Nosker Company.
NOSKER COMPANY
Comparative Balance Sheets December 31
Assets 2017 2016
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, 2017
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
1. Prepare a statement of cash flows using the indirect method.
2. Compute free cash flow.
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