ACC557 Homework 5 E13-3 E13-4 P13-3A P13-7A

ACC557 Homework 5

Due Week 9 and worth 50 points

Directions: Answer the following questions on a separate Microsoft Word or Excel document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in Blackboard.

Exercises

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 ?ows 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.

Instructions

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

Problems

P13-3A.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:

Accounts receivable increased $200,000 during the year, and inventory decreased $500,000.

Prepaid expenses increased $150,000 during the year.

Accounts payable to suppliers of merchandise decreased $340,000 during the year.

Accrued expenses payable decreased $100,000 during the year.

Operating expenses include depreciation expense of $70,000.

Instructions

Prepare the operating activities section of the statement of cash ?ows for the year ended November 30, 2015, for Whitlock Company, using the indirect method.

P13-7A.Presented below are the ?nancial statements of Nosker Company.

NOSKER COMPANY

Comparative balance Sheet

December 31

Assets	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)	$108,000
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	33,300
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, 2015-12-03

Sales revenue $242,000

Cost of goods sold 175,000

Gross profit 67,000

Operating expenses 24,000

Income from operation 43,000

Intrest expense 3,000

Income before income taxes 40,000

Income tax expense 8,000

Net income $32,000

Additional data:

Dividends declared and paid were $20,000.

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.

All depreciation expense, $14,500, is in the operating expenses.

All sales and purchases are on account.

Instructions

Prepare a statement of cash ?ows using the indirect method.

Compute free cash ?ow.