1. Refer to the following financial statements for Delta Corporation: a) Prepare a statement of cash flows for the Delta Corporation using the general procedures. Delta Corporation Income Statement

For the Year Ended December 31, 20X9

Revenues $3,500,100 Cost of goods sold 1,950,000 Gross profits 1,550,100 Selling and administrative expense 650,000 Depreciation expense 230,000 Operating income 670,100 Interest expense 80,000 Earnings before taxes 590,100 Taxes 135,000 Earnings after taxes 455,100 Preferred stock dividends 26,000 Earnings available to common stockholders $ 429,100 Shares outstanding 160,000 Earnings per share $ 2.68

Statement of Retained Earnings For the Year Ended December 31, 20X9

Retained earnings, balance, January 1, 20X9 $590,000 Add: Earnings available to common stockholders, 20X9 429,100 Deduct: Cash dividends declared and paid in 20X9 319,100 Retained earnings, balance, December 31, 20X9 $700,000

Comparative Balance Sheets For 20X8 and 20X9

Year-End Year-End Assets 20X8 20X9

Current assets: Cash $ 100,000 $120,000 Accounts receivable (net) 500,000 510,000 Inventory 510,000 530,000 Prepaid expenses 60,000 40,000 Total current assets 1170,000 1200,000 Investments (long-term securities) 90,000 80,000 Plant and equipment 2,000,000 2,500,000 Less: Accumulated depreciation 1,200,000 1,430,000 Net plant and equipment 800,000 1,070,000 Total assets $2,060,000 $2,350,000

Liabilities and Stockholders Equity

Current liabilities: Accounts payable $ 300,000 $ 550,000 Notes payable 400,000 300,000 Accrued expenses 60,000 30,000 Total current liabilities 760,000 880,000 Long-term liabilities: Bonds payable, 20X5 100,000 160,000 Total liabilities 860,000 1,040,000 Stockholders equity: Preferred stock, $100 par value 100,000 100,000 Common stock, $1 par value 160,000 160,000 Capital paid in excess of par 350,000 350,000 Retained earnings 590,000 700,000 Total stockholders equity 1,200,000 1,310,000 Total liabilities and stockholders equity $2,060,000 $2,350,000 ____________________________________________________

2. The following financial statements are for Magic company: a) You are required to prepare a cash flow statement for Magic Company and determine whether the company has a surplus of cash or shortage for the year ended 2020. _______________________________________________________________________

Magic Company Income Statement

For the Year Ended December 31, 2020

Sales $9,720,050 Cost of goods sold 5,330,230 Gross profits 4,389,820 Selling and administrative expense 560,000 Depreciation expense 200,000 Earnings before interest and tax (EBIT) 3,629,820 Interest expense 100,000 Earnings before taxes (EBT) 3,529,820 Taxes 200,000 Earnings after taxes (EAT) 3,329,820 Preferred stock dividends 630,000 Earnings available to common stockholders $ 2,699,820 Shares outstanding 800,000 Earnings per share $ 3.37

Statement of Retained Earnings For the Year Ended December 31, 2020

Retained earnings, balance, January 1, 2020 $700,000 Add: Earnings available to common stockholders, 2020 2,699,820 Deduct: Cash dividends declared and paid in 2020 1,600,000 Retained earnings, balance, December 31, 2020 $1,799,820

Comparative Balance Sheets For 2019 and 2020

Year-End Year-End Assets 2019 2020

Current assets: Cash $ 150,000 $100,000 Accounts receivable (net) 330,000 400,000 Inventory 510,000 470,000 Prepaid expenses 120,000 80,000 Total current assets 1,110,000 1,050,000 Investments (long-term securities) 550,000 700,000 Plant and equipment 3,000,000 4,000,000 Less: Accumulated depreciation 1,000,000 1,200,000 Net plant and equipment 2,000,000 2,800,000 Total assets $3,660,000 $4,550,000

Liabilities and Stockholders Equity

Current liabilities: Accounts payable $ 300,000 $ 280,000 Notes payable 600,000 500,000 Accrued expenses 170,000 200,180 Total current liabilities 1,070,000 980,180 Long-term liabilities: Bonds payable, 2025 170,000 50,000 Total liabilities 1,240,000 1,030,180 Stockholders equity: Preferred stock, $100 par value 400,000 400,000 Common stock, $1 par value 800,000 800,000 Capital paid in excess of par 520,000 520,000 Retained earnings 700,000 1,799,820 Total stockholders equity 2,420,000 3,519,820 Total liabilities and stockholders equity $3,660,000 $4,550,000

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