Question
Katy Perry Company Comparative Balance Sheets December 1 ASSETS 2014 2013 Cash $38,000 $20,000 Accounts Receivable 30,000 14,000 Inventory 27,000 20,000 Equipment 60,000 78,000 Accumulated
Katy Perry Company
Comparative Balance Sheets
December 1
ASSETS
2014
2013
Cash
$38,000
$20,000
Accounts Receivable
30,000
14,000
Inventory
27,000
20,000
Equipment
60,000
78,000
Accumulated Dep'n-equipment
(29,000)
(24,000)
TOTAL
$126,000
$108,000
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts Payable
24,000
15,000
Income Taxes Payable
7,000
8,000
Bonds Payable
27,000
33,000
Common Stock
18,000
14,000
Retained Earnings
50,000
38,000
TOTAL
$126,000
$108,000
Katy Perry Company
Income Statement
For the year ended December 1, 2014
Sales revenue
$242,000
Cost of Goods Sold
175,000
Gross Profit
67,000
Operating Expenses
24,000
Income from Operations
43,000
Interest Expense
3,000
Income before income taxes
40,000
Income tax expense
8,000
Net Income
$32,000
Additional information:
1.Dividends declared and paid were $20,000
2.During the year, the equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had a book value of $8,500 at the time of sale.
3.All depreciation expense $14,500, is in the operating expenses.
4.All sales and purchases are on account.
How would youmake statement of cash flows using the indirect method?
How would you compute free cash flow?
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