Reference no: EM13825398

Explain how you reached the answer or show your work if a mathematical calculation is needed, or both.

Question 1.

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.

Question 2.

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.

Question 3. 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:

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

2. Prepaid expenses increased $150,000 during the year.

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

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

5. 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.
 
Question 4. Presented below are the ?nancial statements of Nosker Company.

                                           NOSKER COMPANY
                                   Comparative Balance Sheets
                                               December 31

Awls	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)	(24,000)
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	33.000
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

Sales revenue	$242,000
Cost of goods sold	175,000
Gross profit	67,000
Operating expenses	24,000
Income from operations	43,000
Interest expense	3,000
Income before income taxes	40,000
Income tax expense	8,000
Net income	$ 32,000

Additional data:

1. Dividends declared and paid were $20,000.

2. 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.

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

4. All sales and purchases are on account.

Instructions

a) Prepare a statement of cash flows using the indirect method.

b) Compute free cash flow.