J28 N O P 0 R S T U 1 2 B D E F G H M CASH FLOW PROBLEM CLOSING: Make entries in the green sections of the ledger. When complete, construct a cash flow statement using guide below. Use a minus-sign to indicate cash outflows. CASH ACCOUNTS PAYABLE COMMON STOCK RETAINED EARNINGS 100,000 32,000 15,000 100,000 3,000 14500 23,000 15,000 3,000 15,000 100,000 11500 SERVICE REVENUE 46,000 EXPENSES DEPRECIATION EXP RETAINED EARNINGS 3 4 30,000 1,500 14,500 5 6 7 8 9 NOTES PAYABLE EXPENSES 30,000 SERVICE REVENUE 46,000 46,000 10 73,000 30,000 11 12 ACCOUNTS RECEIVABLE 23,000 GAIN ON DISPOSAL DEPRECIATION EXPENSE 1,500 1,500 23,000 LAND 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CASH 29 ACCOUNTS RECEIVABLE 30 LAND POST to T-Accounts: 1. Johnson Corporation issued 100,000 shares of $1 par common stock and received cash of $100,000. 2. Johnson Corporation purchased equipment for $32,000, paying cash. 3. Johnson earned revenue of $46,000, one half in cash, the other half on account. ACCUM. DEPR. EQUIP. 4. Johnson incurred expenses of $30,000, paying one-half in cash; the rest was on account. 1,500 5. Depreciation is $1,500 on the equipment. 6. CLOSING: see entries to the right, to close revenues and expenses to Retained Earnings. See entries in RED above. 1,500 7. Johnson declared and paid a dividend of $3000 in cash to stockholders. Debit Retained Earnings, credit Cash. EQUIPMENT 32,000 32,000 DEBIT CREDIT 73,000 23,000 CASH FLOW STATEMENT--INDIRECT METHOD--use minus sign for negative cash flows. NET INCOME + DEPRECIATION EXPENSE -INCREASE IN ACCOUNTS RECEIVABLE J28 B D E F G R S T U EQUIPMENT 32,000 ACCUM. DEPR. EQUIP 1,500 H K L M N O P Q 3. Johnson earned revenue of $46,000, one half in cash, the other half on account. 4. Johnson incurred expenses of $30,000, paying one-half in cash; the rest was on account. 5. Depreciation is $1,500 on the equipment. 6. CLOSING: see entries to the right, to close revenues and expenses to Retained Earnings. See entries in RED above. 7. Johnson declared and paid a dividend of $3000 in cash to stockholders. Debit Retained Earnings, credit Cash. 32,000 1,500 CREDIT DEBIT 73,000 23,000 21 22 23 24 25 26 27 28 CASH 29 ACCOUNTS RECEIVABLE 30 LAND 31 EQUIPMENT 32 ACCUM. DEPR EQUIP. 33 ACCOUNTS PAYABLE 34 NOTES PAYABLE 35 COMMON STOCK 36 RETAINED EARNINGS 37 SERVICE REVENUE 38 EXPENSES 39 DEPRECIATION EXPENSE 40 GAIN ON DISPOSAL 41 TOTALS CASH FLOW STATEMENT--INDIRECT METHOD--use minus sign for negative cash flows. NET INCOME + DEPRECIATION EXPENSE -INCREASE IN ACCOUNTS RECEIVABLE +INCREASE IN ACCOUNTS PAYABLE =CASH FLOW FROM OPERATIONS 32,000 1,500 15,000 -PURCHASE OF EQUIPMENT = CASH FLOW FROM INVESTING 100,000 11,500 +ISSUANCE OF COMMON STOCK -PAYMENT OF DIVIDEND =CASH FLOW FROM FINANCING 128,000 128,000 42 NET CASH FLOW +BEGINNING BALANCE OF CASH =ENDING BALANCE OF CASH 43 44 45 46 47 48 49 50