# 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 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.

Instructions

Prepare the operating activities section of the statement of cash ﬂows 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

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 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 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

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 ﬂows using the indirect method.

Compute free cash ﬂow