Student Name: ……………………………………… Grade: ……… / 20
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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 Year Beginning of Year Cash $20,000 $15,000 Accounts receivable 24,000 32,000 Inventories 50,000 65,000 Prepaid expenses 7,500 5,000 Accounts payable 12,000 18,000 Income taxes payable 1,600 1,200
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 profit 2,600,000 Operating expenses Selling expenses $500,000 Administrative expense 700,000 Depreciation expense 90,000 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