ACCOUNTING-Use the following information to prepare a statement of cash flows.

QUESTION

1. Use the
following information to prepare a statement of cash flows.
Comparative Balance Sheets, December 31

2014

2013

Cash

$ 6,100

$ 4,200

Accounts Receivable

10,200

11,000

Inventory

14,900

13,500

Long-term Investments

8,000

6,500

Equipment

33,600

31,000

Accumulated Depreciation

(5,000)

(4,100)

Total Assets

$67,800

$62,100

Accounts Payable

$15,300

$14,700

Wages Payable

400

700

Long Term Note Payable

18,200

17,000

Common Stock

14,100

12,200

Retained Earnings

19,800

17,500

Total Liab. & Equity

$67,800

$62,100

Additional information:
A. Net Income
for the year ended December 31, 2014 was $5,300. Net income included depreciation expense of
$900.
B. Long-term investments
were purchased for $1,500 in cash.
C. Equipment was purchased for $2,600 in cash.
D. The company
paid $3,000 in cash dividends.
E. The company
borrowed $1,200 in cash on the long-term note payable.
F. The company
issued common stock for $1,900 in cash.

Required:
Use the indirect method to prepare a statement of cash
flows for the year ended December 31, 2014.

2. Giles Company
began operations on January 1, 2015.
Following are the income statement and balance sheet for its first year
of operations:

Income Statement
For the Year Ended December 31, 2015

Sales

$270,200

Cost of goods sold

37,200

Gross profit

233,000

General &
Administrative Expenses

18,423

Depreciation expense

17,500

Interest expense

1,000

Income before tax

196,077

Income tax expense (35%)

68,627

Net income

$127,450

Balance Sheet
At December 31, 2015

Cash

$78,627

Accounts receivable

15,000

Inventory

12,950

Buildings and equipment,
net

512,500

Total assets

$619,077

Accounts payable

13,000

Interest payable

1,000

Income taxes payable

68,627

Note payable

69,000

Total liabilities

151,627

Contributed capital

340,000

Retained earnings

127,450

Total equity

467,450

Total liabilities and
equity

$619,077

Required:
a. Giles
Company used specific identification to prepare the above financial statements.
The CEO of Giles would like to know the effect on the financial statements of
using LIFO and FIFO. How would the above
financial statements change if the company used LIFO? If it used FIFO?

Use the
following information regarding Giles Company’s inventory to determine the
effect:
Beginning
Inventory, January 1, 2015: 1,300 units @ $9.00
March
1, 2015 – Purchased 2,000 units @ $10.00
June
5, 2015 – Purchased 500 units @ $10.50
October
10, 2015 – Purchased 1,100 units @ $12.00
Ending
Inventory, December 31, 2015: 1,200 units

b. Giles used
straight-line depreciation to prepare the above financial statements. Explain how the above financial statements
would change if the company used double-declining balance. Assume that the cost of the building and
equipment is $530,000. The salvage value
is $5,000 and the assets have a useful life of 30 years. Note: This question is independent of
question a.

ANSWER:

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