Assignment

Statement of Cash Flow

1. Rojas Corporation’s comparative balance sheets are presented below.

ROJAS CORPORATION
Comparative Balance Sheets
December 31

Assets 2017 2016

Cash $ 14,300 $ 10,700
Accounts receivable 21,200 23,400
Land 20,000 26,000
Buildings 70,000 70,000
Accumulated depreciation—buildings (15,000) (10,000)
Total $110,500 $120,100

Liabilities and Stockholders’ Equity $ 12,370 $ 31,100

Accounts payable 75,000 69,000
Common stock
Retained earnings 23,130 20,000
Total $110,500 $120,100

Additional information:
1. Net income was $22,630. Dividends declared and paid were $19,500.
2. No noncash investing and financing activities occurred during 2017.
3. The land was sold for cash of $4,900.

Required:
(a) Prepare a statement of cash flows for 2017 using the indirect method.
(b) Compute free cash flow.

2. Here are comparative balance sheets for Velo Company.

VELO COMPANY
Comparative Balance Sheets
December 31

Assets 2017 2016

Cash $ 63,000 $ 22,000
Accounts receivable 85,000 76,000
Inventory 170,000 189,000
Land 75,000 100,000
Equipment 270,000 200,000
Accumulated depreciation—equipment (66,000) (32,000)
Total $597,000 $555,000

Liabilities and Stockholders’ Equity

Accounts payable $ 39,000 $ 47,000
Bonds payable 150,000 200,000
Common stock ($1 par) 216,000 174,000
Retained earnings 192,000 134,000
Total $597,000 $555,000

Additional information:
1. Net income for 2017 was $93,000.
2. Cash dividends of $35,000 were declared and paid.
3. Bonds payable amounting to $50,000 were redeemed for cash $50,000.
4. Common stock was issued for $42,000 cash.
5. No equipment was sold during 2017, but land was sold at cost.

Required
Prepare a statement of cash flows for 2017 using the indirect method.
3. 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.

Required:

1. For each transaction above, (a) prepare the journal entry, and (b) indicate how it would affect the statement of cash fl ows
using the indirect method.
Financial Statement Analysis

1. The comparative condensed balance sheets of Gurley Corporation are presented below:

GURLEY CORPORATION
Comparative Condensed Balance Sheets
December 31

Assets 2017 2016

Current assets $ 74,000 $ 80,000
Property, plant, and equipment (net) 99,000 90,000
Intangibles 27,000 40,000
Total assets $200,000 $210,000

Liabilities and stockholders’ equity

Current liabilities $ 42,000 $ 48,000
Long-term liabilities 143,000 150,000
Stockholders’ equity 15,000 12,000
Total liabilities and stockholders’ equity $200,000 $210,000

Required:
(a) Prepare a horizontal analysis of the balance sheet data for Gurley Corporation using 2016 as a base.
(b) Prepare a vertical analysis of the balance sheet data for Gurley Corporation in columnar form for 2017.

2. Wiemers Corporation’s comparative balance sheets are presented on the next page.

WIEMERS CORPORATION
Balance Sheets
December 31

Assets 2017 2016

Cash $ 4,300 $ 3,700
Accounts receivable (net) 21,200 23,400
Inventory 10,000 7,000
Land 20,000 26,000
Buildings 70,000 70,000
Accumulated depreciation—buildings (15,000) (10,000)
Total $110,500 $120,100

Liabilities and stockholder’s equity

Accounts payable $ 12,370 $ 31,100
Common stock 75,000 69,000
Retained earnings 23,130 20,000
Total $110,500 $120,100

Wiemers’s 2017 income statement included net sales of $100,000, cost of goods sold of $60,000, and net income of $15,000.

Required:
Compute the following ratios for 2017.
(a) Current ratio.
(f) Asset turnover.
(b) Acid-test ratio.
(g) Return on assets.
(c) Accounts receivable turnover.
(h) Return on common stockholders’ equity.
(d) Inventory turnover.
(i) Debt to assets ratio.
(e) Profit margin.
Corporations

1. Rolman Corporation is authorized to issue 1,000,000 shares of $5 par value common stock. In its fi rst year, the company
has the following stock transactions.
Jan. 10 Issued 400,000 shares of stock at $8 per share.
July 1 Issued 100,000 shares of stock for land. The land had an asking price of $900,000.
The stock is currently selling on a national exchange at $8.25 per share.
Sept. 1 Purchased 10,000 shares of common stock for the treasury at $9 per share.
Dec. 1 Sold 4,000 shares of the treasury stock at $10 per share.

Required:
(a) Journalize the transactions.
(b) Prepare the stockholders’ equity section assuming the company had retained earnings of $200,000 at December 31.

2. DeLong Corporation was organized on January 1, 2017. It is authorized to issue 10,000 shares of 8%, $100 par value
preferred stock, and 500,000 shares of no-par common stock with a stated value of $2 per share. The following stock
transactions were completed during the first year.

Jan. 10 Issued 80,000 shares of common stock for cash at $4 per share.
Mar. 1 Issued 5,000 shares of preferred stock for cash at $105 per share.
Apr. 1 Issued 24,000 shares of common stock for land. The asking price of the land was $90,000. The fair
value of the land was $85,000.
May 1 Issued 80,000 shares of common stock for cash at $4.50 per share.
Aug. 1 Issued 10,000 shares of common stock to attorneys in payment of their bill of
$30,000 for services performed in helping the company organize.
Sept. 1 Issued 10,000 shares of common stock for cash at $5 per share.
Nov. 1 Issued 1,000 shares of preferred stock for cash at $109 per share.

Required:
(a) Journalize the transactions.
(b) Post to the stockholders’ equity accounts.
Partnership

1. Sedgwick Company at December 31 has cash $20,000, noncash assets $100,000, liabilities $55,000, and the following
capital balances: Floyd $45,000 and DeWitt $20,000. The fi rm is liquidated, and $105,000 in cash is received for the
noncash assets. Floyd and DeWitt income ratios are 60% and 40%, respectively.

Required:
1. Prepare a schedule of cash payments.

2. The Braun Company at December 31 has cash $15,000, noncash assets $110,000, liabilities $60,000, and the following
capital balances: Ho $40,000 and Li $25,000. The firm is liquidated, and $90,000 in cash is received for the noncash assets.
Ho’s and Li’s income ratios are 60% and 40%, respectively.

Required:

(a) Prepare a cash distribution schedule.

(b) Prepare the entries to record the following, assuming that The Braun Company decides
to liquidate the company.
(1) The sale of noncash assets.
(2) The allocation of the gain or loss on liquidation to the partners.
(3) Payment of creditors.
(4) Distribution of cash to the partners.

3. On January 1, 2017, the capital balances in Hollingsworth Company are Lois Holly $26,000 and Jim Worth $24,000. In
2017 the partnership reports net income of $30,000. The income ratio provides for salary allowances of $12,000 for Holly
and $10,000 to Worth and the remainder to be shared equally. Neither partner had any drawings in 2017.

Required:
(a) Prepare a schedule showing the distribution of net income in 2017.
(b) Journalize the division of 2017 net income to the partners.

4. McGill and Smyth have capital balances on January 1 of $50,000 and $40,000, respectively. The partnership income-
sharing agreement provides for (1) annual salaries of $22,000 for McGill and $13,000 for Smyth, (2) interest at 10% on
beginning capital balances, and (3) remaining income or loss to be shared 60% by McGill and 40% by Smyth.

Required:

(a) Prepare a schedule showing the distribution of net income, assuming net income is (1) $50,000 and (2) $36,000.