Problem 18: Solution

1. Dividends Declared 20X2

$5,000 - $30,000 + $35000 = $10,000 $35,000

2. Note Payable 20X2 $10,000

3. Change in inventory's impact on cash $5,000

4. Change in A/P's impact on cash $(8,000)

5. Net Income for 20X2

$30,000 + $35,000 = $65,000 $65,000

6. Investments Purchased

$110,000 - $10,000 + $5,000 = $105,000 $5,000

7. Depreciation Expense for 20X2

$20,000 - $17,000 + $47,000 = $50,000 $47,000

8. Working Capital Beginning 20X2

$55,000 - $33,000 = $22,000 $22,000

Problem 18: Solution (continued)

9. Cash from sale of marketable securities $7,000

10. Treasury Stock sold during 20X2 $-0-

but $10,000 was purchased

Problem 19: Solution

Rosa’s Cafe

Statement of Cash Flows

20X2

Cash Flow Provided by Operating Activities:

Net Income $29,000

Adjustments to Reconcile Net Income to

Net Cash Flows Provided by Operating

Activities:

Depreciation Expense $15,000

Gain on Sale of Equipment (5,000)

Loss on Sale of Investments 5,000

Gain on Sale of Marketable Securities (5,000)

Increase in Accounts Receivable (1,000)

Decrease in Inventory 1,000

Increase in Accounts Payable 1,000

11,000

Net Cash Flows from Operating Activities: 40,000

Cash Flow Provided by Investing Activities:

Proceeds from Sale of Equipment 15,000

Proceeds from Sale of Investments 10,000

Proceeds from Sale of Marketable

Securities 10,000

Purchase of Investments (15,000)

Purchase of Marketable Securities (5,000)

Purchase of Equipment (5,000)

Net Cash Flows from Investing Activities: 10,000

Cash Flow Provided by Financing Activities:

Payment of Dividends (30,000)

Borrowing Long-Term Debt 20,000

Purchase of Common Stock (20,000)

Payment of Long-Term Debt (20,000)

(50,000)

Increase in Cash -0-

Cash at the Beginning of 20X2 15,000

Cash at the End of 20X2 $15,000

Problem 20: Solution

1. $5,000 - $10,000 + $15,000 = $10,000 $15,000

2. $10,000

3. +$5,000

4. -$8,000

5. $40,000 - $15,000 + $45,000 = $70,000 $45,000

6. $10,000 - $10,000 + $5,000 = $5,000 $5,000

7. $20,000 - $17,000 + $47,000 = $50,000 $47,000

Problem 21: Solution

Nathan's Motel

Balance Sheet

December 31, 20X2

Assets:

Cash $ 18,500

Equipment 231,500

Accumulated depreciation: equip. (10,000)

Investments 24,000

Total $264,000

Liabilities and Owner’s Equity:

Long-term notes $122,000

E. Nathan, Capital 142,000

Total $264,000

Problem 22: Solution

Balance Sheet

November 30, 20X3

Assets:

Cash $2,000

Inventory 15,000

Equipment 305,000

Accumulated depreciation -50,000

Total $272,000

Liabilities and Owner's Equity:

Accounts payable $20,000

Long-term debt 192,000

Owner's equity 60,000

Total $272,000

Problem 23: Solution

Part I Hawkeye Hotel

Comparative Balance Sheets

December 31, 20X5 and 20X6

Dollar Percentage

Assets 20X5 20X6 Diff. Diff.

Current Assets

Cash $ 12,540 $ 19,278 $ 6,738 53.73%

Marketable Securities 100,000 0 (100,000) -100.00

Accounts Receivable 73,811 75,000 1,189 1.61

Less Allowance for

Doubtful Accounts 0 1,211 1,211 100.00

Net Receivables 73,811 73,789 (22) -0.03

Food Inventory 10,833 11,936 1,103 10.18

Prepaid Insurance 4,318 4,667 349 8.08

Total Current Assets 201,502 109,670 (91,832) -45.57

Property and Equipment, at Cost

Land 262,000 262,000 -0- 0.00

Building 1,572,805 1,927,817 355,012 22.57

Equipment 213,843 241,470 27,627 12.92

2,048,648 2,431,287 382,639 18.68

Less Accumulated

Depreciation 303,227 411,137 107,910 35.59

Net Property and Equipment 1,745,421 2,020,150 274,729 15.74

Total Assets $1,946,923 $2,129,820 $182,897 9.39 %

Liabilities

Current Liabilities

Notes Payable $ 0 $ 25,000 $ 25,000 100.00%

Mortgage Payable

--Current 50,000 0 (50,000) -100.00

Accounts Payable 18,776 6,821 (11,955) -63.67

Accrued Wages 6,843 7,953 1,110 16.22

Total Current

Liabilities 75,619 39,774 (35,845) -47.40

Long-Term Liabilities

Mortgage Payable 950,695 1,155,399 204,704 21.53

Owners' Equity

Common Stock, No Par, Authorized

100,000 Shares, Issued

75,000 Shares 750,000 750,000 0 0.00

Retained Earnings 170,609 184,647 14,038 8.23

Total Liabilities and

Owners' Equity $1,946,923 $2,129,820 $182,897 9.39 %

Problem 23: Solution (continued)

Part II

Hawkeye Hotel

Income Statement

For the Year Ended December 31, 20X6

Payroll and

Net Cost of Related Other Income

Revenue Sales Expenses Expenses (Loss)

Operated Departments

Rooms $1,349,866 $ -0- $450,000 $115,037 $784,829

Food 753,722 225,000 250,000 149,161 129,561

Telephone 73,936 52,470 22,000 2,000 (2,534)

Rentals & Other

Income 1,791 -0- -0- -0- 1,791

Total Operated

Departments 2,179,315 277,470 722,000 266,198 913,647

Undistributed Operating Expenses

Administrative

& General 150,677 100,000 250,677

Marketing 45,000 45,000

Property Operation

and Maintenance 42,000 10,000 52,000

Utility Costs 57,478 57,478

Total Undistributed

Operating

Expenses _______ _______ 192,677 212,478 405,155

Gross Operating

Profit $2,179,315 $277,470 $914,677 $478,676 $508,492

Property Taxes 80,000

Insurance 31,462

Interest Expense 161,087

Depreciation 110,225

Income Before Income

Taxes and Gain or

Loss on Sale of

Property 125,718

Gain on Sale of Property 3,000

Income Before Income Taxes 128,718

Income Taxes 51,180

Net Income $77,538

Problem 23: Solution (continued)

Part III

Hawkeye Hotel

Statement of Cash Flows

For the Year Ending December 31, 20X6

Cash Flow from Operating Activities:

Net Income $ 77,538

Adjustments to Reconcile Net Income to Net

Cash Flows from Operating Activities:

Depreciation $110,225

Increase in Inventory (1,103)

Increase in Notes Payable 25,000

Gain on Sale of Equipment (3,000)