Week Four ACC 421 Assignment
E23-1 (Classification of Transactions) Springsteen Co. had the following activity in its most recent year of operations.
(a) Pension expense exceeds amount funded. (e) Exchange of equipment for furniture.
(b) Redemption of bonds payable. (f) Issuance of capital stock.
(c) Sale of building at book value. (g) Amortization of intangible assets.
(d) Depreciation. (h) Purchase of treasury stock. (i) Issuance of bonds for land. (k) Increase in interest receivable on notes receivable. (j) Payment of dividends. (l) Purchase of equipment.
Classify the items as (1) operating—add to net income; (2) operating—deduct from net income; (3) investing; (4) financing; or (5) significant noncash investing and financing activities. Use the indirect method.
E23-3 (Preparation of Operating Activities Section—Indirect Method, Periodic Inventory). The income statement of Rodriquez Company is shown below.
FOR THE YEAR ENDED DECEMBER 31, 2010
Cost of goods sold
Beginning inventory $1,900,000
Goods available for sale 6,300,000
Ending inventory 1,600,000
Cost of goods sold 4,700,000
Gross profit 2,200,000
Selling expenses 450,000
Administrative expenses 700,000 1,150,000
Net income $1,050,000
1. Accounts receivable decreased $310,000 during the year.
2. Prepaid expenses increased $170,000 during the year.
3. Accounts payable to suppliers of merchandise decreased $275,000 during the year.
4. Accrued expenses payable decreased $120,000 during the year.
5. Administrative expenses include depreciation expense of $60,000.
Prepare the operating activities section of the statement of cash flows for the year ended December 31, 2010, for Rodriquez Company, using the indirect method.
E23-4 (Preparation of Operating Activities Section—Direct Method) Data for the Rodriquez Company are presented in E23-3.
Prepare the operating activities section of the statement of cash flows using the direct method.
E23-7 (Computation of Operating Activities—Direct Method) Presented below are two independent situations.
Chenowith Co. reports revenues of $200,000 and operating expenses of $110,000 in its first year of operations, 2010. Accounts receivable and accounts payable at year-end were $71,000 and $39,000, respectively. Assume that the accounts payable related to operating expenses. Ignore income taxes.
Using the direct method, compute net cash provided (used) by operating activities.
The income statement for Edgebrook Company shows cost of goods sold $310,000 and operating expenses (exclusive of depreciation) $230,000. The comparative balance sheet for the year shows that inventory increased $21,000, prepaid expenses decreased $8,000, accounts payable (related to merchandise) decreased $17,000, and accrued expenses payable increased $11,000.
Compute (a) cash payments to suppliers and (b) cash payments for operating expenses.
E23-11 (SCF—Indirect Method) Condensed financial data of Fairchild Company for 2010 and 2009 are presented below.
COMPARATIVE BALANCE SHEET
AS OF DECEMBER 31, 2010 AND 2009
Cash $1,800 $1,100
Receivables 1,750 1,300
Inventory 1,600 1,900
Plant assets 1,900 1,700
Accumulated depreciation (1,200) (1,170)
Long-term investments (Held-to-maturity) 1,300 1,470
Accounts payable $1,200 $ 800
Accrued liabilities 200 250
Bonds payable 1,400 1,650
Capital stock 1,900 1,700
Retained earnings 2,450 1,900
FOR THE YEAR ENDED DECEMBER 31, 2010
Cost of goods sold 4,700
Gross margin 2,200
Selling and administrative expense 930
Income from operations 1,270
Other revenues and gains
Gain on sale of investments 80
Income before tax 1,350
Income tax expense 540
Net income $ 810
During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2010. Cash dividends were $260.
Prepare a statement of cash flows using the indirect method.
E23-12 (SCF—Direct Method) Data for Fairchild Company are presented in E23-11.
Prepare a statement of cash flows using the direct method. (Do not prepare a reconciliation schedule.)
P5-3 (Balance Sheet Adjustment and Preparation) The adjusted trial balance of Eastwood Company and other related information for the year 2010 are presented on the next page.
ADJUSTED TRIAL BALANCE
DECEMBER 31, 2010
Cash $ 41,000
Accounts Receivable 163,500
Allowance for Doubtful Accounts $ 8,700
Prepaid Insurance 5,900
Long-term Investments 339,000
Construction Work in Progress 124,000
Accumulated Depreciation of Equipment 240,000
Unamortized Discount on Bonds Payable 20,000
Accounts Payable 148,000
Accrued Expenses 49,200
Notes Payable 94,000
Bonds Payable 200,000
Common Stock 500,000
Paid-in Capital in Excess of Par—Common Stock 45,000
Retained Earnings 138,000
1. The LIFO method of inventory value is used.
2. The cost and fair value of the long-term investments that consist of stocks and bonds is the same.
3. The amount of the Construction Work in Progress account represents the costs expended to date on a building in the process of construction. (The company rents factory space at the present time.) The land on which the building is being constructed cost $85,000, as shown in the trial balance.
4. The patents were purchased by the company at a cost of $40,000 and are being amortized on a straight-line basis.
5. Of the unamortized discount on bonds payable, $2,000 will be amortized in 2011.
6. The notes payable represent bank loans that are secured by long-term investments carried at $120,000. These bank loans are due in 2011.
7. The bonds payable bear interest at 8% payable every December 31, and are due January 1, 2021.
8. 600,000 shares of common stock of a par value of $1 were authorized, of which 500,000 shares were issued and outstanding.
Prepare a balance sheet as of December 31, 2010, so that all important information is fully disclosed.