Acc557 Financial Accounting: Week 9 Homework 5 Chapter 13 (E13-3, E13-4, P13-3A, P13-7A)

Acc557 Financial Accounting
Week 9 Homework 5
Chapter 13 (E13-3, E13-4, P13-3A, 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.

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 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.

Prepare the operating activities section of the statement of cash flows for 2015. Use the indirect method.

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, 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.

Instruction:
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.

P13-7A. 
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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