E23-1 (Classification of Transactions) Springsteen Co.had the following activity in its most recent year ofoperations.
(a) Pension expense exceeds amount funded.
(b) Redemption of bonds payable.
(c) Sale of building at book value.
(d) Depreciation.
(e) Exchange of equipment for furniture.
(f) Issuance of capital stock.
(g) Amortization of intangible assets.
(h) Purchase of treasury stock.
(i) Issuance of bonds for land.
(j) Payment of dividends.
(k) Increase in interest receivable on notes receivable.
(l) Purchase of equipment.
Instructions
Classify the items as (1) operating—add to net income; (2)operating—deduct from net income; (3) investing; (4) financing; or(5) significant noncash investing and financing activities. Use theindirect method.
E23-4 (Preparation of Operating ActivitiesSection—Direct Method) Data for the Rodriquez Company are presentedin E23-3.
data from E23-3
Rodriquez Company
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2010
Sales $6,900,000
Cost of goods sold
Beginning inventory $1,900,000
Purchases 4,400,000
Goods available for sale 6,300,000
Ending inventory 1,600,000
Cost of goods sold 4,700,000
Gross profit 2,200,000
Operating expenses
Selling expenses 450,000
Administrative expenses 700,000 1,150,000
Net income $1,050,000
and so on …
E23-7 (Computation of Operating Activities—Direct Method)Presented below are two independent situations.
Situation A:
Chenowith Co. reports revenues of $200,000 and operating expensesof $110,000 in its first year of operations, 2010. Accountsreceivable and accounts payable at year-end were $71,000 and$39,000, respectively. Assume that the accounts payable related tooperating expenses. Ignore income taxes.
Instructions
Using the direct method, compute net cash provided (used) byoperating activities.
Situation B:
The income statement for Edgebrook Company shows cost of goods sold$310,000 and operating expenses (exclusive of depreciation)$230,000. The comparative balance sheet for the year shows thatinventory increased $21,000, prepaid expenses decreased $8,000,accounts payable (related to merchandise) decreased $17,000, andaccrued expenses payable increased $11,000.
Instructions
Compute (a) cash payments to suppliers and (b) cash payments foroperating expenses.
E23-11 (SCF—Indirect Method) Condensed financial data ofFairchild Company for 2010 and 2009 are presentedbelow.
Fairchild Company
COMPARATIVE BALANCE SHEET
AS OF DECEMBER 31, 2010 AND 2009
2011 2010
Cash $1,800 $1,100
Receivables 1,750 1,300
Inventory 1,600 1,900
Plant assets 1,900 1,700
Accumulated depreciation (1,200) (1,170)
Long-term investments (Held-to-maturity) 1,300 1,470
$7,150 $6,300
Accounts payable $1,200 $ 800
Accrued liabilities 200 250
Bonds payable 1,400 1,650
Capital stock 1,900 1,700
Retained earnings 2,450 1,900
$7,150 $6,300
and so on …
E23-12 (SCF—Direct Method) Data for Fairchild Company arepresented in E23-11.
Instructions
Prepare a statement of cash flows using the direct method. (Do notprepare a reconciliation schedule.)
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