Acc557 homework 5 — e13-3 e13-4 p13-3a p13-7a

ACC557 Homework 5


Due Week 9 and worth 50 points


Directions: Answer the following questions on a separate Microsoft Word or Excel document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in Blackboard.



E13-3.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.



For each transaction above, (a) prepare the journal entry, and (b) indicate how it would affect the statement of cash flows using the indirect method.


E13-4.Gutierrez Company reported net income of $225,000 for 2015. Gutierrez also reported depreciation expense of $45,000 and a loss of $5,000 on the disposal of equipment. The comparative balance sheet shows a decrease in accounts receivable of $15,000 for the year, a $17,000 increase in accounts payable, and a $4,000 decrease in prepaid expenses.



Prepare the operating activities section of the statement of cash flows for 2015. Use the indirect method.



P13-3A.The income statement of Whitlock Company is presented here.

Whitlock Company

Income Statement

For the Year Ended November 30, 2015

Sales revenue



Cost of goods sold



   Beginning Inventory






   Goods available for sale



   Ending inventory



Total cost of goods sold



Gross profit



Operating expenses



Net income




Additional information:

Accounts receivable increased $200,000 during the year, and inventory decreased $500,000.

Prepaid expenses increased $150,000 during the year.

Accounts payable to suppliers of merchandise decreased $340,000 during the year.

Accrued expenses payable decreased $100,000 during the year.

Operating expenses include depreciation expense of $70,000.



Prepare the operating activities section of the statement of cash flows for the year ended November 30, 2015, for Whitlock Company, using the indirect method.


P13-7A.Presented below are the financial statements of Nosker Company.


Comparative balance Sheet

December 31







Accounts receivable









Accumulated depreciation – equipment






Liabilities and Stockholders Equity



Accounts payable



Income taxes payable



Bonds payable



Common stock



Retained earnings









Income Statement

For the year Ended December 31, 2015-12-03

Sales revenue                           $242,000

Cost of goods sold                   175,000

Gross profit                             67,000

Operating expenses                  24,000

Income from operation                        43,000

Intrest expense                         3,000

Income before income taxes    40,000

Income tax expense                 8,000

Net income                              $32,000


Additional data:

Dividends declared and paid were $20,000.

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.

All depreciation expense, $14,500, is in the operating expenses.

All sales and purchases are on account.



Prepare a statement of cash flows using the indirect method.

Compute free cash flow

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