Balance Sheet as of December 31, Cash Accounts receivable Inventory PPE, at cost Less accumulated depreciation Right of use Asset Deferred income taxes Total Assets Accounts payable Income taxes payable Lease Liability Accrued pension cost Bonds payable Discount on bonds payable Common stock Additional paid in capital Retained earnings Total liabilities and stockholders' equity Income Statement for the year ended December 31, 2007 Revenue Cost of goods sold Wage expense Amortization expense Depreciation expense Pension expense Interest expense Gain on disposal of machinery 150,000 (70,000) (26,000) Income before tax (3,680) (13,000) Income tax expense (13,000) Net income (9,518)1,10015,902(5,200)10,702 The following additional information is available: (1) Henning signed a lease agreement on January 1, 2007. It requires $5,000 payments at the end of each of the next 10 years. The lease is a finance lease; the asset will revert back to the lessor at the end of the lease. The appropriate rate of interest in 6%. (2) The bond payable is a 6.5% 10-year bond that was issued on January 1,2005 with an effective rate of 8%. (3) Henning purchased a new machine for $22,000 in cash. The firm sold an old machine which had an original cost of $12,000 and accumulated depreciation of $8,000 for a gain of $1,100. Required: (1) Show the computations for (i) the gain on the sale of the machine, (ii) the balance in lease liability, (iii) depreciation and amortization expense, and (iv) interest expense. (2) Prepare a statement of cash flows for Henning. Use the indirect method for computing the cash flows from operating activities. (3) SFAS \#95 requires disclosure of significant transactions that do not use cash. This usually occurs in a separate schedule or the footnotes. Does Henning have any significant non-cash transactions? If so, should how they would be reported. Balance Sheet as of December 31, Cash Accounts receivable Inventory PPE, at cost Less accumulated depreciation Right of use Asset Deferred income taxes Total Assets Accounts payable Income taxes payable Lease Liability Accrued pension cost Bonds payable Discount on bonds payable Common stock Additional paid in capital Retained earnings Total liabilities and stockholders' equity Income Statement for the year ended December 31, 2007 Revenue Cost of goods sold Wage expense Amortization expense Depreciation expense Pension expense Interest expense Gain on disposal of machinery 150,000 (70,000) (26,000) Income before tax (3,680) (13,000) Income tax expense (13,000) Net income (9,518)1,10015,902(5,200)10,702 The following additional information is available: (1) Henning signed a lease agreement on January 1, 2007. It requires $5,000 payments at the end of each of the next 10 years. The lease is a finance lease; the asset will revert back to the lessor at the end of the lease. The appropriate rate of interest in 6%. (2) The bond payable is a 6.5% 10-year bond that was issued on January 1,2005 with an effective rate of 8%. (3) Henning purchased a new machine for $22,000 in cash. The firm sold an old machine which had an original cost of $12,000 and accumulated depreciation of $8,000 for a gain of $1,100. Required: (1) Show the computations for (i) the gain on the sale of the machine, (ii) the balance in lease liability, (iii) depreciation and amortization expense, and (iv) interest expense. (2) Prepare a statement of cash flows for Henning. Use the indirect method for computing the cash flows from operating activities. (3) SFAS \#95 requires disclosure of significant transactions that do not use cash. This usually occurs in a separate schedule or the footnotes. Does Henning have any significant non-cash transactions? If so, should how they would be reported
