1—Balance sheet computations.
(Balance Sheet) Presented below is the trial balance of Hightower Corporation at December 31, 2017.
|Debt Investments (trading) (at cost, $218,000)||230,000|
|Cost of Goods Sold||7,200|
|Debt Investments (long-term)||448,000|
|Equity Investments (long-term)||416,000|
|Notes Payable (short-term)||135,000|
|Allowance for Doubtful Accounts||38,000|
|Notes Payable (long-term)||1,350,000|
|Common Stock ($5 par)||1,500,000|
|Paid-in Capital in Excess of Par||120,000|
Compute each of the following:
1. Total current assets
2. Total property, plant, and equipment
3. Total assets
4. Total liabilities
5. Total stockholders’ equity
2—Statement of cash flows.
A comparative balance sheet for Talkington Corporation is presented below.
|Accounts receivable||$ 68,100||$ 21,600|
|Liabilities and Stockholders’ Equity|
|Accounts payable||$ 34,000||$ 47,000|
|Common stock ($1 par)||164,000||164,000|
1. Net income for 2017 was $155,000; there were no gains or losses.
2. Cash dividends of $400,000 were declared and paid.
3. Bonds payable of $50,000 were retired.
Compute each of the following:
1. Net cash provided by operating activities
2. Net cash provided (used) by investing activities
3. Net cash provided (used) by financing activities
3—Statement of cash flows ratios.
Financial statements for Hilton Company are presented below:
December 31, 2017
Assets Liabilities & Stockholders’ Equity
Cash $ 40,000 Accounts payable $ 20,000
Accounts receivable 35,000 Bonds payable 50,000
Buildings and equipment 150,000 Common stock 65,000
Accumulated depreciation— Retained earnings 60,000
buildings and equipment (50,000) $195,000
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income $50,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in accounts receivable $(16,000)
Increase in accounts payable 8,000
Depreciation—buildings and equipment 15,000
Gain on sale of equipment (6,000)
Amortization of patents 2,000 3,000
Net cash provided by operating activities 53,000
Cash flows from investing activities
Sale of equipment 12,000
Purchase of land (25,000)
Purchase of buildings and equipment (48,000)
Net cash used by investing activities (61,000)
Cash flows from financing activities
Payment of cash dividend (15,000)
Sale of bonds 30,000
Net cash provided by financing activities 15,000
Net increase in cash 7,000
Cash, January 1, 2017 33,000
Cash, December 31, 2017 $40,000
At the beginning of 2017, Accounts Payable amounted to $12,000 and Bonds Payable was $20,000.
Calculate the following for Hilton Company:
a. Current cash debt coverage
b. Cash debt coverage
c. Free cash flow
d. Explain the purpose of free cash flow analysis.
4—Sales with returns and discounts.
On July 2, 2018, Lake Company sold to Sue Black merchandise having a sales price of $9,000 (cost $5,400) with terms of 2/10. n/30. f.o.b. shipping point. Lake estimates that merchandise with a sales value of $900 will be returned. An invoice totaling $120, terms n/30, was received by Black on July 6 from Pacific Delivery Service for the freight cost. Upon receipt of the goods, on July 3, Black notified Lake that $350 of merchandise contained flaws. The same day, Lake issued a credit memo covering the defective merchandise and asked that it be returned at Lake’s expense. Lake estimates the returned items to have a fair value of $140. The freight on the returned merchandise was $20 paid by Lake on July 7. On July 12, the company received a check for the balance due from Black.
(a)Prepare journal entries for Lake Company to record all the events noted above assuming sales and receivables are entered at gross selling price.
(b) Prepare the journal entry assuming that Sue Black did not remit payment until August 5.