Project #43150 - Accounting

1.)    Transaction Analysis

Following are the transactions of McKinley Company:

 a.  Sold equipment for $6,700. The original cost was $26,000; the book value is $6,000.

 b.  Purchased equipment costing $90,000 by paying cash of $40,000 and signing a $50,000

long-term note at 10% interest.

 c.  Received $11,300 of the principal and $950 in interest on a long-term note receivable.

 d.  Received $8,500 in cash dividends on stock held as a trading security.

 e.  Purchased treasury stock for $3,000.

Complete the following:

 1.  Prepare journal entries for each of the transactions. (Omit explanations.)

 2.  For each transaction, indicate the amount of cash inflow or outflow. Then, note how each

transaction would be classified on a statement of cash flows.

*****************************************************

2.)    Prepare a statement of cash flows. Use the direct method to report cash flows from operating activities.

 

North Western Company

Comparative Balance Sheets

December 31, 2012 and 2011

2012    2011

Assets

Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $    4,500 $     9,000

Accounts receivable (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   33,000           36,000

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    75,000           60,000

Plant and equipment (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     262,500       225,000

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $375,000      $ 330,000

Liabilities and Stockholders’ Equity

Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $  60,000 $        54,000

Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     225,000              217,500

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       90,000              58,500

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . .   $375,000         $ 330,000

North Western Company

Income Statement

For the Year Ended December 31, 2012

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $412,500

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   225,000

Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $187,500

Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   135,000

 

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,500

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