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Problem P14-7A, Prepare a statement of cash flows—indirect method. Problem P14-8A, Prepare a statement of cash flows — Direct method.

ACC 363 P14-7A The financial statements of Ernest Banks Company appear below. indirect method.
ACC 363 P14-8A Data for Ernest Banks Company is presented in P14-7A. Further analysis reveals the following. Direct method.

Problem P14-7A, Prepare a statement of cash flows—indirect method.
Problem P14-8A, Prepare a statement of cash flows — Direct method.

ACC 363 P14-7A P14-8A Ernest Banks Company

Axia College of University of Phoenix (UoP)
Financial Accounting: Weygandt, Kieso, and Kimmel, 5th Edition
Financial Accounting II

Problem P14-7A, Prepare a statement of cash flows—indirect method.
P14-7A The financial statements of Ernest Banks Company appear below.

The financial statements of Ernest Banks Company appear below.

Ernest Banks Company
Comparative Balance Sheets
December 31

     Assets                                                                     2006               2005      
     Cash                                                                       $23,000           $13,000
     Accounts Receivable                                              24,000             33,000
     Merchandise inventory                                           20,000             27,000
     Prepaid expenses                                        20,000             13,000
     Land                                                                       40,000             40,000
     Property, plant and equipment                    200,000           225,000           
     Less: Accumulated Depreciation               (50,000)           (67,500)
          Total                                                      $277, 000        $283,500
     Liabilities and Stockholders' Equity
     Accounts Payable                                       $9,000             $18,500
     Accrued expenses payable                        9,500               7,500
     Interest payable                                          1,000               1,500
     Income taxes payable                                 3,000               2,000
     Bonds Payable                                            50,000             80,000
     Common stock                                           123,000           105,000
     Retained earnings                                       81,500             69,000
          Total                                                      $277,000        $283,500

Ernest Banks Company
Income Statement
For the Year Ended December 31, 2006

     Revenues
          Sales                                                      $600,000
          Gain on sale of plant assets                   2,500               $602,500
     Less: Expenses
          Cost of goods sold                                 500,000
          Operating expenses (excluding
            Depreciation)                                       60,000
          Depreciation Expense                                        7,500
          Interest Expense                                    5,000
          Income tax expense                                           9,000               581,500
     Net Income                                                 $21,000

Additional Information:
1.     Plant assets were sold at a sales price of $62,500.
2.     Additional equipment was purchased at a cost of $60,000.
3.     Dividends of $8,500 were paid.
4.     All sales and purchases were on account.
5.     Bonds were redeemed at face value.
6.     Additional shares of stock were issued for cash.

Instructions
Prepare a statement of cash flows for Ernest Banks Company for the year ended December 31, 2006, using the indirect method.

Hints:
(a) Cash receipts from customers $206,000

          Net cash provided by operating activities $28,000
          Investing activities provided $2,500
 
Problem P14-8A, Prepare a statement of cash flows — Direct method.
P14-8A Data for Ernest Banks Company is presented in P14-7A. Further analysis reveals the following.
1. Accounts payable relates to merchandise creditors.
2. All operating expenses, except depreciation expense, were paid in cash.

Instructions
Prepare a statement of cash flows for Ernest Banks Company for the year ended December 31, 2006, using the direct method.
Hints: Net cash provided by operating activities $28,000
     Investing activities provided $2,500
 
File name: ACC-363-P14-7A-P14-8A-Ernest-Banks-Company.xls File type: application/vnd.ms-excel Price: $9