Reference no: EM13829286

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.

Exercises

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: Presented below are the financial statements of Nosker Company.

                                NOSKER COMPANY
                            Comparative Balance Sheets
                                      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)	(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.