ACCT 3512: Chapter 23 Cash Flows HW Exercises & Problems-1 With Answers.

E23-13 (SCF—Direct Method) Andrews Inc., a greeting card company, had the following statements prepared as of December 31, 2010. Andrews Inc. COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2010 AND 2009 12/31/10 12/31 ...

E23-13 (SCF—Direct Method) Andrews Inc., a greeting card company, had the following statements prepared as of December 31, 2010. Andrews Inc. COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2010 AND 2009 12/31/10 12/31/09 Cash $ 6,000 $ 9,000 Accounts receivable 62,000 49,000 Short-term investments (Available-for-sale) 35,000 18,000 Inventories 40,000 60,000 Prepaid rent 5,000 4,000 Printing equipment 154,000 130,000 Accumulated depr.—equipment (35,000) (25,000) Copyrights 46,000 50,000 Total assets $313,000 $295,000 Accounts payable $ 46,000 $ 42,000 Income taxes payable 4,000 6,000 Wages payable 8,000 4,000 Short-term loans payable 8,000 10,000 Long-term loans payable 60,000 67,000 Common stock, $10 par 100,000 100,000 Contributed capital, common stock 30,000 30,000 Retained earnings 57,000 36,000 Total liabilities & stockholders' equity $313,000 $295,000 Andrews Inc. INCOME STATEMENT FOR THE YEAR ENDING DECEMBER 31, 2010 Sales $338,150 Cost of goods sold 175,000 Gross margin 163,150 Operating expenses 120,000 Operating income 43,150 Interest expense $11,400 Gain on sale of equipment 2,000 9,400 Income before tax 33,750 Income tax expense 6,750 Net income $ 27,000 Additional information:Instructions Prepare a statement of cash flows using the direct method. (Do not prepare a reconciliation schedule.) E23-14 (SCF—Indirect Method) Data for Andrews Inc. are presented in E23-13. Instructions Prepare a statement of cash flows using the indirect method P23- 4 (SCF—Direct Method) Michaels Company had available at the end of 2010 the information on page 1300. Michaels Company COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31, 2010 and 2009 2010 2009 Cash $ 10,000 $ 4,000 Accounts receivable 20,500 12,950 Short-term investments 22,000 30,000 Inventory 42,000 35,000 Prepaid rent 3,000 12,000 Prepaid insurance 2,100 900 Office supplies 1,000 750 Land 125,000 175,000 Building 350,000 350,000 Accumulated depreciation (105,000) (87,500) Equipment 525,000 400,000 Accumulated depreciation (130,000) (112,000) Patent 45,000 50,000 Total assets $910,600 $871,100 Accounts payable $ 22,000 $ 32,000 Income taxes payable 5,000 4,000 Wages payable 5,000 3,000 Short-term notes payable 10,000 10,000 Long-term notes payable 60,000 70,000 Bonds payable400,000 400,000 Premium on bonds payable 20,303 25,853 Common stock 240,000 220,000 Paid-in capital in excess of par 25,000 17,500 Retained earnings 123,297 88,747 Total liabilities and stockholders' equity $910,600 $871,100 Michaels Company INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2010 Sales revenue $1,160,000 Cost of goods sold (748,000) 412,000 Gross margin Operating expenses Selling expenses $ 79,200 Administrative expenses 156,700 Depreciation/Amortization expense 40,500 Total operating expenses (276,400) Income from operations 135,600 Other revenues/expensesInstructions Prepare a statement of cash flows for Michaels Company using the direct method accompanied by a reconciliation schedule. Assume the short-term investments are available-for-sale securities. P23-8 (SCF—Direct and Indirect Methods) Comparative balance sheet accounts of Sharpe Company are presented below. Sharpe Company COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31 Debit Balances 2010 2009 Cash $ 70,000 $ 51,000 Accounts Receivable 155,000 130,000 Merchandise Inventory 75,000 61,000 Investments (Available-for-sale) 55,000 85,000 Equipment 70,000 48,000 Buildings 145,000 145,000 Land 40,000 25,000 Totals $610,000 $545,000 Credit Balances Allowance for Doubtful Accounts $ 10,000 $ 8,000 Accumulated Depreciation—Equipment 21,000 14,000 Accumulated Depreciation—Building 37,000 28,000 Accounts Payable 66,000 60,000 Income Taxes Payable12,000 10,000 Long-Term Notes Payable 62,000 70,000 Common Stock 310,000 260,000 Retained Earnings 92,000 95,000 Totals $610,000 $545,000 Additional data: 1. Equipment that cost $10,000 and was 60% depreciated was sold in 2010. 2. Cash dividends were declared and paid during the year. 3. Common stock was issued in exchange for land. 4. Investments that cost $35,000 were sold during the year. 5. There were no write-offs of uncollectible accounts during the year. Sharpe's 2010 income statement is as follows. Sales $950,000 Less: Cost of goods sold 600,000 Gross profit 350,000 Less: Operating expenses (includes depreciation expense and bad debt expense) 250,000 Income from operations 100,000 Other revenues and expenses Gain on sale of investments $15,000 Loss on sale of equipment (3,000)12,000 Income before taxes 112,000 Income taxes 45,000Instructions (a) Compute net cash provided by operating activities under the direct method. (b) Prepare a statement of cash flows using the indirect method