Ch05In-ClassEx - Chapter 5 In-Class Exercise Solution...

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Chapter 5 In-Class Exercise Balance Sheets at December 31 2009 2008 Cash $ 22,000 $ 17,750 Accounts receivable 20,500 26,500 Inventories 28,500 20,500 Prepaid advertising 4,500 6,000 Building and equipment 100,000 100,000 Less: Accumulated depreciation (30,000) (25,000) Land 70,000 50,000 Total assets $215,500 $195,750 Rent payable $ 14,000 $13,000 Wages payable 10,000 4,500 Taxes payable 8,000 10,000 Loan payable, long-term 70,000 111,250 Common stock, $1 par value 80,000 50,000 Retained earnings 33,500 7,000 Total liabilities and shareholders’ equity $215,500 $195,750 Income Statement for 2009 Sales revenue $1,775,000 Cost of goods sold 1,207,000 Gross profit 568,000 Operating expenses: Advertising 41,500 Depreciation 5,000 Insurance 17,500 Rent 156,000 Wages 286,900 Operating income $ 61,100 Interest expense 7,250 Income before taxes $ 53,850 Provision for taxes 18,850 Net income $ 35,000 Required Prepare a statement of cash flow in good form for the above company using the indirect method.
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Unformatted text preview: Chapter 5 In-Class Exercise Solution Statement of Cash Flows (indirect format) For the Year Ended December 31, 2009 Operating Activities Net income $35,000 Add (deduct): Adjustments to convert net income to cash flow from operating activities: Depreciation expense $ 5,000 Decrease in accounts receivable 6,000 Increase in inventory (8,000) Decrease in prepaid advertising 1,500 Increase in rent payable 1,000 Decrease in taxes payable (2,000) Increase in wages payable 5,500 9,000 Cash provided by operating activities 44,000 Investing Activities Purchase of land (20,000) Cash used by investing activities (20,000) Financing Activities Repayment on loan (41,250) Sale of common stock 30,000 Payment of dividends (8,500 ) Cash used by financing activities (19,750 ) Net increase in cash $ 4,250...
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This note was uploaded on 11/30/2010 for the course ACC 310F taught by Professor Verduzco during the Spring '07 term at University of Texas.

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Ch05In-ClassEx - Chapter 5 In-Class Exercise Solution...

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