Problems: Set A 17-51

A small stock dividend was declared and issued in 2020. The result of the stock dividend was to decrease
retained earnings by $10,500 and increase common stock by $10,500. Cash dividends were $15,000 in both
2020 and 2019. The common stock has no par or stated value.

Instructions
a. What was the amount of net income reported by Kerbs Corp. in 2020? a. Net income $75,500
b. Determine the amounts of any cash inflows or outflows related to the common stock and dividend
accounts in 2020.
c. Indicate where each of the cash inflows or outflows identified in (b) would be classified on the state-
ment of cash flows.

P17.3A (LO 2) Financial Statement The income statement of Whitlock Company is presented here. Prepare the operating activities
section—indirect method.

Whitlock Company Excel

Income Statement
For the Year Ended November 30, 2020
Sales revenue $7,700,000
Cost of goods sold
Beginning inventory $1,900,000
Purchases 4,400,000
Goods available for sale 6,300,000
Ending inventory 1,400,000
Total cost of goods sold 4,900,000
Gross profit 2,800,000
Operating expenses 1,150,000
Net income $1,650,000

Additional information:
1. Accounts receivable increased $200,000 during the year, and inventory decreased $500,000.
2. Prepaid expenses increased $150,000 during the year.
3. Accounts payable to suppliers of merchandise decreased $340,000 during the year.
4. Accrued expenses payable decreased $100,000 during the year.
5. Operating expenses include depreciation expense of $70,000.

Instructions
Prepare the operating activities section of the statement of cash flows for the year ended November 30, Cash from operating activities
2020, for Whitlock Company, using the indirect method. $1,430,000

*P17.4A (LO 4) Financial Statement Data for Whitlock Company are presented in P17.3A. Prepare the operating activities
section—direct method.
Instructions Cash from operating activities
Prepare the operating activities section of the statement of cash flows using the direct method. $1,430,000
P17.5A (LO 2) Financial Statement Zumbrunn Company’s income statement contained the following Prepare the operating activities
condensed information. section—indirect method.

Zumbrunn Company Excel

Income Statement
For the Year Ended December 31, 2020
Service revenue $970,000
Operating expenses, excluding depreciation $624,000
Depreciation expense 60,000
Loss on disposal of plant assets 16,000 700,000
Income before income taxes 270,000
Income tax expense 40,000
Net income $230,000
17-52 CH A PT ER 17 Statement of Cash Flows

Zumbrunn’s balance sheets contained the comparative data at December 31, shown below.

2020 2019
Accounts receivable $75,000 $65,000
Accounts payable 46,000 28,000
Income taxes payable 11,000 7,000
Accounts payable pertain to operating expenses.

Cash from operating activities Instructions

$318,000 Prepare the operating activities section of the statement of cash flows using the indirect method.

Prepare the operating activities *P17.6A (LO 4) Financial Statement Data for Zumbrunn Company are presented in P17.5A.
section—direct method.
Excel Instructions
Cash from operating activities Prepare the operating activities section of the statement of cash flows using the direct method.
$318,000
Prepare a statement of cash flows— P17.7A (LO 2, 3) Financial Statement The following are the financial statements of Nosker
indirect method, and compute free Company.
cash flow.
Nosker Company
Excel
Comparative Balance Sheets
December 31
Assets 2020 2019
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, 2020
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.
Problems: Set A 17-53

Instructions
a. Prepare a statement of cash flows using the indirect method. a. Cash from operating
b. Compute free cash flow. activities $31,500

*P17.8A (LO 3, 4) Financial Statement Data for Nosker Company are presented in P17.7A. Further Prepare a statement of cash flows—
analysis reveals the following. direct method, and compute free cash
flow.
1. Accounts payable pertain to merchandise suppliers.
2. All operating expenses except for depreciation were paid in cash. Excel

Instructions
a. Prepare a statement of cash flows for Nosker Company using the direct method. a. Cash from operating
b. Compute free cash flow. activities $31,500

P17.9A (LO 2) Financial Statement Condensed financial data of Cheng Inc. follow. Prepare a statement of cash flows—
indirect method.

Cheng Inc.
Comparative Balance Sheets
December 31
Assets 2020 2019
Cash $ 80,800 $ 48,400
Accounts receivable 92,800 33,000
Inventory 117,500 102,850
Prepaid expenses 28,400 26,000
Investments 143,000 114,000
Equipment 270,000 242,500
Accumulated depreciation—equipment (50,000) (52,000)
Total $682,500 $514,750

Liabilities and Stockholders’ Equity

Accounts payable $112,000 $ 67,300
Accrued expenses payable 16,500 17,000
Bonds payable 110,000 150,000
Common stock 220,000 175,000
Retained earnings 224,000 105,450
Total $682,500 $514,750

Cheng Inc.
Income Statement
For the Year Ended December 31, 2020
Sales revenue $392,780
Less:
Cost of goods sold $135,460
Operating expenses, excluding
depreciation 12,410
Depreciation expense 46,500
Income tax expense 27,280
Interest expense 4,730
Loss on disposal of plant assets 7,500 233,880
Net income $158,900

Additional information:
1. New equipment costing $85,000 was purchased for cash during the year.
2. Old equipment having an original cost of $57,500 was sold for $1,500 cash.
3. Bonds matured and were paid off at face value for cash.
4. A cash dividend of $40,350 was declared and paid during the year.
17-54 CH A PT ER 17 Statement of Cash Flows

Cash from operating activities Instructions

$180,250 Prepare a statement of cash flows using the indirect method.

Prepare a statement of cash flows— *P17.10A (LO 4) Financial Statement Data for Cheng Inc. are presented in P17.9A. Further analysis
direct method. reveals that accounts payable pertain to merchandise creditors.

Cash from operating activities Instructions

$180,250 Prepare a statement of cash flows for Cheng Inc. using the direct method.

Prepare a statement of cash flows— P17.11A (LO 2) Financial Statement The comparative balance sheets for Rothlisberger Company
indirect method. as of December 31 are presented below.
Rothlisberger Company
Comparative Balance Sheets
December 31
Assets 2020 2019
Cash $ 81,000 $ 45,000
Accounts receivable 41,000 62,000
Inventory 151,450 142,000
Prepaid expenses 15,280 21,000
Land 105,000 130,000
Buildings 200,000 200,000
Accumulated depreciation—buildings (60,000) (40,000)
Equipment 221,000 155,000
Accumulated depreciation—equipment (45,000) (35,000)
Total $709,730 $680,000

Liabilities and Stockholders’ Equity

Accounts payable $ 47,730 $ 40,000
Bonds payable 260,000 300,000
Common stock, $1 par 200,000 160,000
Retained earnings 202,000 180,000
Total $709,730 $680,000

Additional information:
1. Operating expenses include depreciation expense of $42,000 and charges from prepaid expenses of
$5,720.
2. Land was sold for cash at book value.
3. Cash dividends of $20,000 were paid.
4. Net income for 2020 was $42,000.
5. Equipment was purchased for $88,000 cash. In addition, equipment costing $22,000 with a book
value of $10,000 was sold for $6,000 cash.
6. Bonds were converted at face value by issuing 40,000 shares of $1 par value common stock.

Cash from operating activities Instructions

$113,000 Prepare a statement of cash flows for the year ended December 31, 2020, using the indirect method.

Prepare a worksheet—indirect method. *P17.12A (LO 5) Condensed financial data of Oakley Company appear below.

Excel Oakley Company

Comparative Balance Sheets
December 31
Assets 2020 2019
Cash $ 82,700 $ 47,250
Accounts receivable 90,800 57,000
Inventory 126,900 102,650
Investments 84,500 87,000
Equipment 255,000 205,000
Accumulated depreciation—equipment (49,500) (40,000)
$590,400 $458,900