Reference no: EM131196135

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 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 2017. Use the indirect method.

Prepare the operating activities section-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	30,000		41,000
Dec.	31	Depreciation for year		28,000	69,000
Retained Earnings
Date			Debit	Credit	Balance
Jan.	1	Balance			105,000
Aug.	23	Dividends (cash)	14,000		91,000
Dec.	31	Net income		77,000	168,000

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 $7,000. (Hint: Cost of equipment constructed is reported in the investing activities section as a decrease in cash of $53,000.)

Prepare statement of cash flows and compute free cash flow.

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

1. Prepare a statement of cash flows for 2017 using the indirect method.
2. Compute free cash flow.

Prepare a statement of cash flows-indirect method.

P13-1A You are provided with the following transactions that took place during a recent fiscal year.

	Transaction	Statement of  Cash Flow Activity Affected	Cash Inflow, Outflow, or No Effect?
(a)	Recorded depreciation expense on the plant assets.
(b)	Recorded and paid interest expense.
(c)	Recorded cash proceeds from a disposal of plant assets.
(d)	Acquired land by issuing common stock.
(e)	Paid a cash dividend to preferred stockholders.
(f)	Paid a cash dividend to common stockholders.
(g)	Recorded cash sales.
(h)	Recorded sales on account.
(i)	Purchased inventory for cash.
(j)	Purchased inventory on account.

Instructions

Complete the table indicating whether each item (1) affects operating (O) activities, investing (I) activities, financing (F) activities, or is a noncash (NC) transaction reported in a separate schedule, and (2) represents a cash inflow or cash outflow or has no cash flow effect. Assume use of the indirect approach.

Determine cash flow effects of changes in equity accounts.