Question: Jack Werth, the owner-president of Computer
Jack Werth, the owner-president of Computer Services Company, is unfamiliar with the statement of cash flows that you, as his accountant, prepared. He asks for further explanation.
Instructions:
Write him a brief memo explaining the form and content of the statement of cash flows as shown in Illustration 12-14
Illustration 12-14:
Transcribed Image Text:
COMPUTER SERVICES COMPANY Statement of Cash Flows-Indirect Method For the Year Ended December 31, 2014 Cash flows from operating activities $ 145,000 Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense Loss on disposal of plant assets $ 9,000 3,000 Decrease in accounts receivable Increase in inventory Increase in prepaid expenses Increase in accounts payable Decrease in income taxes payable 10,000 (5,000) (4,000) 16,000 (2,000) 27,000 Net cash provided by operating activities Cash flows from investing activities Sale of equipment Purchase of building Purchase of equipment 172,000 4,000 (120,000) (25,000) Net cash used by investing activities Cash flows from financing activities Issuance of common stock (141,000) 20,000 Payment of cash dividends Net cash used by financing activities (29,000) (9,000) 22,000 33,000 Net increase in cash Cash at beginning of period Cash at end of period Noncash investing and financing activities Issuance of bonds payable to purchase land $ 55,000 $ 110,000
> You are provided with the following transactions that took place during a recent fiscal year. Instructions: Complete the table, indicating whether each item (1) affects operating (O) activities, investing (I) activities, financing (F) activities, or is
> On January 1, 2014, Everett Corporation had these stockholders’ equity accounts. Common Stock ($10 par value, 70,000 shares issued and outstanding) ………..$700,000 Paid-in Capital in Excess of Par Value ……………………………………………………………500,000 Retained Earnings ……
> Suppose the 2014 Adidas financial statements contain the following selected data (in millions). Compute the following values and provide a brief interpretation of each. (a) Working capital. (b) Current ratio. (c) Debt to assets ratio. (d) Times inte
> Cepeda Company manufactures backpacks. During 2014, Cepeda issued bonds at 10% interest and used the cash proceeds to purchase treasury stock. The following financial information is available for Cepeda Company for the years 2014 and 2013. Instructions
> On January 1, 2014, Kessler Inc. had these stockholders’ equity balances. Common Stock, $1 par (2,000,000 shares authorized, 600,000 shares issued and outstanding) ……………………………………… $ 600,000 Paid-in Capital in Excess of Par Value …………………………………………. 1,500,
> Pringle Corporation has been authorized to issue 20,000 shares of $100 par value, 7%, noncumulative preferred stock and 1,000,000 shares of no-par common stock. The corporation assigned a $5 stated value to the common stock. At December 31, 2014, the led
> The ledger of Wade Corporation at December 31, 2014, after the books have been closed, contains the following stockholders’ equity accounts. Preferred Stock (10,000 shares issued) ………………………………………. $1,000,000 Common Stock (300,000 shares issued) ……………………
> On December 31, 2013, Paxson Company had 1,300,000 shares of $5 par common stock issued and outstanding. At December 31, 2013, stockholders’ equity had the amounts listed here. Common Stock …………………………………………. $6,500,000 Additional Paid-in Capital …………………
> The stockholders’ equity accounts of Miley Corporation on January 1, 2014, were as follows. Preferred Stock (7%, $100 par noncumulative, 5,000 shares authorized) …………………$ 300,000 Common Stock ($4 stated value, 300,000 shares authorized) ………………………….…1,00
> Tidwell Corporation was organized on January 1, 2014. It is authorized to issue 20,000 shares of 6%, $50 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. The following stock transactions were comple
> Wempe Co. sold $3,000,000, 8%, 10-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. The company uses straight-line amortization on bond premiums and discounts. Financial statements are prepared annually.
> Yung Corporation sold $2,000,000, 7%, 5-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. Yung Corporation uses the straight-line method to amortize bond premium or discount. Instructions: (a) Prepare al
> The following information is taken from Oler Corp.’s balance sheet at December31, 2013. Interest is payable annually on January 1. The bonds are callable on any annual interest date. Oler uses straight-line amortization for any bond p
> Presented here are liability items for Desmond Inc. at December 31, 2014. Prepare the liabilities section of Desmond’s balance sheet. $ 7,800 Accounts payable Notes payable (due May 1, 2015) Bonds payable (due 2018) Unearned FICA t
> Suppose you have been presented with selected information taken from the financial statements of Southwest Airlines Co., shown below. Instructions: (a) Calculate each of the following ratios for 2014 and 2013. (1) Current ratio. (2) Free cash flow. (3)
> Slocombe Company sold $6,000,000, 7%, 15-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on December 31. The bonds were sold at 98. Instructions: (a) Prepare the journal entry to record the issuance of the bonds on
> On October 1, 2013, Koppa Corp. issued $700,000, 5%, 10-year bonds at face value. The bonds were dated October 1, 2013, and pay interest annually on October 1. Financial statements are prepared annually on December 31. Instructions: (a) Prepare the jour
> The following section is taken from Mareska’s balance sheet at December 31, 2013. Current liabilities Interest payable ……………………………………………………..$ 40,000 Long-term liabilities Bonds payable (8%, due January 1, 2017) ………………..500,000 Interest is payable annual
> Ermlar Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2014, Ermlar had the following transactions related to notes payable. Sept. 1 Issued a $12,000 note to Lippe
> Grace Herron has just approached a venture capitalist for financing for her new business venture, the development of a local ski hill. On July 1, 2013, Grace was loaned $150,000 at an annual interest rate of 7%. The loan is repayable over 5 years in annu
> Frevert purchased a new piece of equipment to be used in its new facility. The $370,000 piece of equipment was purchased with a $50,000 down payment and with cash received through the issuance of a $320,000, 8%, 3-year mortgage note payable issued on Oct
> On January 1, 2014, Jade Company issued $2,000,000 face value, 7%, 10-year bonds at $2,147,202. This price resulted in a 6% effective-interest rate on the bonds. Jade uses the effective-interest method to amortize bond premium or discount. The bonds pay
> On January 1, 2014, Lock Corporation issued $1,800,000 face value, 5%, 10-year bonds at $1,667,518. This price resulted in an effective-interest rate of 6% on the bonds. Lock uses the effective-interest method to amortize bond premium or discount. The bo
> On January 1, 2014, the ledger of Hiatt Company contained these liability accounts. Accounts Payable …………………………………………$42,500 Sales Taxes Payable …………………………………………6,600 Unearned Service Revenue ……………………………. 19,000 During January, the following selected tr
> Suppose the 2014 Adidas financial statements contain the following selected data (in millions). Compute the following values and provide a brief interpretation of each. (a) Working capital. (b) Current ratio. (c) Debt to assets ratio. (d) Times inte
> Grace Herron has just approached a venture capitalist for financing for her new business venture, the development of a local ski hill. On July 1, 2013, Grace was loaned $150,000 at an annual interest rate of 7%. The loan is repayable over 5 years in annu
> Frevert purchased a new piece of equipment to be used in its new facility. The $370,000 piece of equipment was purchased with a $50,000 down payment and with cash received through the issuance of a $320,000, 8%, 3-year mortgage note payable issued on Oct
> On January 1, 2014, Jade Company issued $2,000,000 face value, 7%, 10-year bonds at $2,147,202. This price resulted in a 6% effective-interest rate on the bonds. Jade uses the effective-interest method to amortize bond premium or discount. The bonds pay
> On January 1, 2014, Lock Corporation issued $1,800,000 face value, 5%, 10-year bonds at $1,667,518. This price resulted in an effective-interest rate of 6% on the bonds. Lock uses the effective-interest method to amortize bond premium or discount. The bo
> Wempe Co. sold $3,000,000, 8%, 10-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. The company uses straight-line amortization on bond premiums and discounts. Financial statements are prepared annually.
> Yung Corporation sold $2,000,000, 7%, 5-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. Yung Corporation uses the straight-line method to amortize bond premium or discount. Instructions: (a) Prepare al
> The following information is taken from Oler Corp.’s balance sheet at December31, 2013. Interest is payable annually on January 1. The bonds are callable on any annual interest date. Oler uses straight-line amortization for any bond p
> Suppose you have been presented with selected information taken from the financial statements of Southwest Airlines Co., shown below. Instructions: (a) Calculate each of the following ratios for 2014 and 2013. (1) Current ratio. (2) Free cash flow. (3)
> Slocombe Company sold $6,000,000, 7%, 15-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on December 31. The bonds were sold at 98. Instructions: (a) Prepare the journal entry to record the issuance of the bonds on
> On October 1, 2013, Koppa Corp. issued $700,000, 5%, 10-year bonds at face value. The bonds were dated October 1, 2013, and pay interest annually on October 1. Financial statements are prepared annually on December 31. Instructions: (a) Prepare the jour
> Presented here are liability items for Desmond Inc. at December 31, 2014. Prepare the liabilities section of Desmond’s balance sheet. $ 7,800 Accounts payable Notes payable (due May 1, 2015) Bonds payable (due 2018) Unearned FICA t
> The following section is taken from Mareska’s balance sheet at December 31, 2013. Current liabilities Interest payable ……………………………………………………..$ 40,000 Long-term liabilities Bonds payable (8%, due January 1, 2017) ………………..500,000 Interest is payable annual
> Ermlar Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2014, Ermlar had the following transactions related to notes payable. Sept. 1 Issued a $12,000 note to Lippe
> On January 1, 2014, the ledger of Hiatt Company contained these liability accounts. Accounts Payable …………………………………………$42,500 Sales Taxes Payable …………………………………………6,600 Unearned Service Revenue ……………………………. 19,000 During January, the following selected tr
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> Mike Haden, president of Haden Corporation, believes that it is a good practice for a company to maintain a constant payout of dividends relative to its earnings. Last year, net income was $600,000, and the corporation paid $120,000 in dividends. This ye
> Explain how IFRS defines a provision and give an example.
> 5.1. A pollution tax on automobiles provides an incentive to buy , maintain , drive , and use alternative . 5.2. Arrows up or down: A gasoline tax will shift the supply curve for gasoline , causing the equ
> 3.1. Consider a market with two firms managed by Harry and Vera. Under a cartel (both firms pick the high price), each firm earns a profit of $80. Under a duopoly (both firms pick the low price), each firm earns a profit of $60. If the two firms pick dif
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> 2.1. The relationship between the quantity of output produced and the quantity of inputs used to produce it is called the __________. 2.2. Which of the following would be counted as part of the stock of capital? a. copy machines in a photocopying shop b.
> 2.1. A fire extinguisher is an example of a (n) good with a (n) benefit. 2.2. Education generates three types of external benefits: , , and . 2.3. The external benefit of transforming a high school
> 1.1. Suppose 2,000 people would each get a benefit of $60 from a bridge. Building the bridge is socially efficient if its cost is less than $ . If the cost is $80,000, a tax of $ per person would generate unanimous support for the bridge. 1
> 5.1. The reservation price is the price at which the consumer is about additional search, meaning that the of search equals the . 5.2. If a consumer knows that TVs are available at BestBuy at a price as low as $200,
> 2.1. Consider a thin used-car market. Someone just developed a device that can instantly identify the nearest plum in a used-car lot. The device works only once. The maximum amount that a consumer would be willing to pay for the device equals
> 4.1. In the market for insurance, the moral-hazard problem is that encourages . 4.2. While shopping for office equipment, an office manager sees a display of fire extinguishers. After making a single phone call, the manager decides not to buy
> 3.1. Suppose the average annual penalty is $10,000 for reckless drivers and $1,000 for careful drivers. If half of an insurance company’s insured drivers are reckless, the company will earn zero economic profit if the price of insurance is $ .
> 1.1. There is asymmetric information in the used-car market because (buyers/sellers) cannot distinguish between lemons and plums but (buyers/sellers) can. 1.2. The supply curve for high-quality used cars lies (above
