Reference no: EM131638202
Question 1 -(Multiple-Step and Single-Step) Two accountants for the firm of Elwes and Wright are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format. The discussion involves the following 2014 information related to P. Bride Company ($000 omitted).
Administrative expense Officers' salaries $ 4,900
Depreciation of office furniture and equipment 3,960
Cost of goods sold 60,570
Rent revenue 17,230
Selling expense
Delivery expense 2,690
Sales commissions 7,980
Depreciation of sales equipment 6,480
Sales revenue 96,500
Income tax 9,070
Interest expense 1,860
Instructions
(a) Prepare an income statement for the year 2014 using the multiple-step form. Common shares out-standing for 2014 total 40,550 (000 omitted).
(b) Prepare an income statement for the year 2014 using the single-step form.(c) Which one do you prefer? Discuss.
Question 2 - (Preparation of a Balance Sheet) Presented below is the trial balance of Scott Butler Corporation at December 31, 2014.
Debit Credit
Cash $ 197,000
Sales Revenue $ 8,100,000
Debt Investments (trading) (at cost, $145,000) 153,000
Cost of Goods Sold 4,800,000
Debt Investments (long-term) 299,000
Equity Investments (long-term) 277,000
Notes Payable (short-term) 90,000
Accounts Payable 455,000
Selling Expenses 2,000,000
Investment Revenue 63,000
Land 260,000
Buildings 1,040,000
Dividends Payable 136,000
Accrued Liabilities 96,000
Accounts Receivable 435,000
Accumulated Depreciation-Buildings 152,000
Allowance for Doubtful Accounts 25,000
Administrative Expenses 900,000
Interest Expense 211,000
Inventory 597,000
Gain (extraordinary) 80,000
Notes Payable (long-term) 900,000
Equipment 600,000
Bonds Payable 1,000,000
Accumulated Depreciation-Equipment 60,000
Franchises 160,000
Common Stock ($5 par) 1,000,000
Treasury Stock 191,000
Patents 195,000
Retained Earnings 78,000
Paid-in Capital in Excess of Par 80,000
Totals $12,315,000 $12,315,000
Instructions:
Prepare a balance sheet at December 31, 2014, for Scott Butler Corporation. (Ignore income taxes.)
Question 3 -(Preparation of a Statement of Cash Flows) Presented below is a condensed version of the comparative balance sheets for Zubin Mehta Corporation for the last two years at December 31.
2014 2013
Cash $177,000 $ 78,000
Accounts receivable 180,000 185,000
Investments 52,000 74,000
Equipment 298,000 240,000
Accumulated depreciation-equipment (106,000) (89,000)
Current liabilities 134,000 151,000
Common stock 160,000 160,000
Retained earnings 307,000 177,000
Additional information: Investments were sold at a loss (not extraordinary) of $10,000; no equipment was sold; cash dividends paid were $30,000; and net income was $160,000.
Instructions
(a) Prepare a statement of cash flows for 2014 for Zubin Mehta Corporation.
(b) Determine Zubin Mehta Corporation's free cash flow.