Overview of Financial Statements Analysis

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You have 120 minutes to finish. Feel free to use a calculator to back up your answers. Textbooks and mobile phones are NOT allowed. Any verbal contact among students is considered cheating and will be punished: the student involved will be assigned zero points on this exam. Good luck! Student Name: ……………………………………… Grade: ……… / 20 ______________________________________________________________________________ Exercise 1:

Pierce Company reported net income of $200,000 for the current year. Depreciation recorded on buildings and equipment amounted to $80,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

End of YearBeginning of Year
Cash$20,000$15,000
Accounts receivable24,00032,000
Inventories50,00065,000
Prepaid expenses7,5005,000
Accounts payable12,00018,000
Income taxes payable1,6001,200
Instructions
Prepare the cash flows from the operating activities section of the statement of cash flows using the indirect method.

Exercise 2:
The income statement of Haslett Company is shown below:
HASLETT COMPANY
Income Statement
For the Year Ended December 31, 2008
Sales$8,000,000
Cost of goods sold 5,400,000
Gross profit2,600,000
Operating expenses
Selling expenses$500,000
Administrative expense700,000
Depreciation expense90,000
Amortization expense 30,000 1,320,000
Net income$1,280,000
Additional information:
1.Accounts receivable increased $500,000 during the year.
2.Inventory increased $250,000 during the year.
3.Prepaid expenses increased $200,000 during the year.
4.Accounts payable to merchandise suppliers increased $150,000 during the year.
5.Accrued expenses payable increased $180,000 during the year. Instructions
Prepare the operating activities section of the statement of cash flows for the year ended December 31, 2008, for Haslett Company, using the direct...
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