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The current sections of Pearl Corp.’s balance sheets at December 31, 2016 and 2017, are presented here. Pearl Corp.’s net income for 2017 was $157,437. Depreciation expense was $27,783. 2017 2016 Current assets Cash $108,045 $ 101,871 Accounts receivable 82,320 91,581 Inventory 172,872 176,988 Prepaid expenses 27,783 22,638 Total current assets $391,020 $393,078 Current liabilities Accrued expenses payable $ 15,435 $ 5,145 Accounts payable 87,465 94,668 Total current liabilities $102,900 $ 99,813 Prepare the net cash provided (used) by operating activities section of the company’s statement of cash flows for the year ended December 31, 2017, using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

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Reid Wolff
Reid WolffLv2
28 Sep 2019

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Problem 23-3 Sunland Company has not yet prepared a formalstatement of cash flows for the 2017 fiscal year. Comparativebalance sheets as of December 31, 2016 and 2017, and a statement ofincome and retained earnings for the year ended December 31, 2017,are presented as follows.

SUNLAND COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS FORTHE YEAR ENDED DECEMBER 31, 2017 ($000 OMITTED) Sales revenue$3,840 Expenses Cost of goods sold $1,210 Salaries and benefits 730 Heat,light, and power 80 Depreciation 70 Property taxes 20 Patentamortization 30 Miscellaneous expenses 10 Interest 30 2,180 Income before income taxes1,660 Income taxes 830 Net income 830 Retained earnings—Jan. 1,2017 280 1,110 Stock dividend declared and issued 590 Retainedearnings—Dec. 31, 2017 $520

SUNLAND COMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31($000 OMITTED) Assets 2017 2016 Current assets Cash $235 $140 U.S. Treasurynotes (available-for-sale) 10 50 Accountsreceivable 790 500 Inventory 740 540 Total current assets 1,775 1,230Long-term assets Land 150 70 Buildings and equipment 930 590 Accumulated depreciation—buildings and equipment(170 ) (100 ) Patents (less amortization) 90 120 Total long-term assets 1,000 680 Total assets $2,775 $1,910Liabilities and Stockholders’ Equity Current liabilities Accounts payable $391 $370 Income taxes payable 44 30 Notes payable 300 300 Total current liabilities 735 700Long-term notes payable—due 2019 220 220 Totalliabilities 955 920 Stockholders’ equity Commonstock 1,300 710 Retained earnings 520 280 Total stockholders’ equity 1,820 990 Total liabilities and stockholders’equity $2,775 $1,910

Prepare a statement of cash flows using the direct method.Changes in accounts receivable and accounts payable relate to salesand cost of goods sold. (Show amounts in the investing andfinancing sections that decrease cash flow with either a - signe.g. -15,000 or in parenthesis e.g. (15,000).) SUNLAND COMPANYStatement of Cash Flows ($000 Omitted) $ $ $

Presented here are the comparative balance sheets of Hames,Inc., at December 31, 2017 and 2016. Sales for the year endedDecember 31, 2017, totaled $650,000.

HAMES, INC.,
Balance Sheets
December 31, 2017 and 2016

2017

2016

Assets

Cash

$

21,000

$

20,000

Accounts receivable

78,000

72,000

Merchandise inventory

103,000

99,000

Total current assets

$

202,000

$

191,000

Land

50,000

40,000

Plant and equipment

125,000

110,000

Less: Accumulated depreciation

(65,000

)

(60,000

)

Total assets

$

312,000

$

281,000

Liabilities

Short-term debt

$

18,000

$

17,000

Accounts payable

64,800

75,500

Other accrued liabilities

20,000

18,000

Total current liabilities

$

102,800

$

110,500

Long-term debt

22,000

30,000

Total liabilities

$

124,800

$

140,500

Stockholders’ Equity

Common stock, no par, 100,000 shares authorized
40,000 and 25,000 shares issued, respectively

$

74,000

$

59,000

Retained earnings:

Beginning balance

$

81,500

$

85,000

Net income for the year

51,700

1,500

Dividends for the year

(20,000

)

(5,000

)

Ending balance

$

113,200

$

81,500

Total stockholders’ equity

$

187,200

$

140,500

Total liabilities and stockholders’ equity

$

312,000

$

281,000

g. Assume that instead of paying $15,000 of accounts payable onDecember 31, 2017. Hames, Inc., collected $15,000 of accountsreceivable. What impact, if any, this receipt will have on theanswers you calculated for requirements a-d (increase, decrease, orno effect)

a. ROI for the year ended December 31, 2017:

No effect

Increase

Decrease

b. ROE for the year ended December 31, 2017:

Decrease

Increase

No effect

c. Working capital as at December 31, 2017:

Decrease

Increase

No effect

d. Current ratio as at December 31, 2017:

No effect

Decrease

Increase

Exercise 13-13

The condensed financial statements of Crane Company for theyears 2016 and 2017 are presented below.

CRANE COMPANY
Balance Sheets
December 31 (in thousands)

2017

2016
Current assets
Cash and cash equivalents

$330

$360
Accounts receivable (net)

530

460
Inventory

640

570
Prepaid expenses

130

160
Total current assets

1,630

1,550
Property, plant, and equipment (net)

410

380
Investments

70

70
Intangibles and other assets

530

510
Total assets

$2,640

$2,510
Current liabilities

$880

$850
Long-term liabilities

660

560
Stockholders’ equity—common

1,100

1,100
Total liabilities andstockholders’ equity

$2,640

$2,510

CRANE COMPANY
Income Statements
For the Year Ended December 31 (in thousands)

2017

2016
Sales revenue

$3,980

$3,640
Costs and expenses
Cost of goods sold

1,030

950
Selling & administrative expenses

2,400

2,330
Interest expense

10

20
Total costs and expenses

3,440

3,300
Income before income taxes

540

340
Income tax expense

216

136
Net income

$ 324

$ 204


Compute the following ratios for 2017 and 2016. (Roundcurrent ratio and inventory turnover to 2 decimal places, e.g 1.83and all other answers to 1 decimal place, e.g. 1.8 or12.6%.)

(a) Current ratio.
(b) Inventory turnover. (Inventory on December 31, 2015, was$390.)
(c) Profit margin.
(d) Return on assets. (Assets on December 31, 2015, were$2,720.)
(e) Return on common stockholders’ equity. (Equity on December 31,2015, was $950.)
(f) Debt to assets ratio.
(g) Times interest earned.

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