Reference no: EM13555801
1.) Transaction Analysis
Following are the transactions of McKinley Company:
a. Sold equipment for $6,700. The original cost was $26,000; the book value is $6,000.
b. Purchased equipment costing $90,000 by paying cash of $40,000 and signing a $50,000
long-term note at 10% interest.
c. Received $11,300 of the principal and $950 in interest on a long-term note receivable.
d. Received $8,500 in cash dividends on stock held as a trading security.
e. Purchased treasury stock for $3,000.
Complete the following:
1. Prepare journal entries for each of the transactions. (Omit explanations.)
2. For each transaction, indicate the amount of cash in?ow or out?ow. Then, note how each
transaction would be classi?ed on a statement of cash ?ows.
2.) Prepare a statement of cash flows. Use the direct method to report cash flows from operating activities.
North Western Company
Comparative Balance Sheets
December 31, 2012 and 2011
2012 2011
Assets
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,500 $ 9,000
Accounts receivable (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,000 36,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000 60,000
Plant and equipment (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262,500 225,000
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $375,000 $ 330,000
Liabilities and Stockholders' Equity
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,000 $ 54,000
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225,000 217,500
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000 58,500
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . . . $375,000 $ 330,000
North Western Company
Income Statement
For the Year Ended December 31, 2012
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $412,500
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225,000
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $187,500
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,500