Northwest Corporation Comparative Balance Sheets December 31, 20x5 and 20x4 Increase 20x5 Change 20x4 Decrease Assets $ 105,850 Cash Accounts receivable (net) 296,000 322,000 $ 121,850 314,500 301,000 ($16,000) (18,500) Decree Inventory 7,800 5,800 21,000 2,000 Decrose Incresse Prepaid expenses 86,000 (50,000) Increase 36,000 Long-term investments 150,000 125,000 25,000 Decrease Increase Land 462,000 462,000 Buildings Accumulated depreciation, buildings (91,000) (79,000) (12,000) Increase 159,730 167,230 (7,500) Equipment Accumulated depreciation, equipment (43,400) (45,600) 2,200 Decrease Decrease 19,200 24,000 (4,800) Decrone Intangible assets $1,424,180 $1,482,780 ($58,600) Total assets Accounts payable Notes payable (current). Accrued liabilities Liabilities and Stockholders' Equity $ 133,750 $ 233,750 ($100,000) Decrease 75,700 145,700 (70,000) Decrease 5,000 5,000 Increase 20,000 Income taxes payable 20,000 Increase Bonds payable 210,000 310,000 (100,000) Decrease Mortgage payable 330,000 350,000 (20,000) Decrease Common stock, $10 par value 400,000 340,000 60,000 Increase Paid-in capital in excess of par value, common 90,000 50,000 40,000 Increase Retained earnings 209,730 93,330 116,400 Increase Treasury stock (50,000) (40,000) (10,000) Increase Total liabilities and stockholders' equity $1,424,180 $1,482,780 ($ 58,600) REQUIRED The company's records for 20x5 provide the following additional information: a. Long-term investments (available-for-sale securities) that cost $70,000 were sold at a gain of $12,500; additional long-term investments were made in the amount of $20,000. b. Five acres of land to build a parking lot were purchased for $25,000. c. Equipment that cost $37,500 with accumulated depreciation of $25,300 was sold at a loss of $2,300; new equipment costing $30,000 was purchased. d. Notes payable in the amount of $100,000 were repaid; an additional $30,000 was borrowed by signing notes payable. e. Bonds payable in the amount of $100,000 were converted into 6,000 shares of com mon stock, f The Mortgage Payable account was reduced by $20,000. g Cash dividends declared and paid were $50,000. h. Treasury stock was purchased for $10,000. 1. Prepare a statement of cash flows using the indirect method. 2. Compute cash flow yield, cash flows to sales, cash flows to assets, and free cash flow for 20x5. Northwest Corporation Comparative Balance Sheets December 31, 20x5 and 20x4 20x5 Assets Increase ot Change Decrease 20x4 $ 105,850 Cash 296,000 $ 121,850 314,500 ($16,000) (18,500) Decrease Accounts receivable (net) 322,000 301,000 5,800 21,000 2,000 Increase Decrease Inventory 7,800 Prepaid expenses 36,000 86,000 (50,000) Increase Long-term investments 150,000 125,000 25,000 Decrease Increase Land 462,000 462,000 Buildings Accumulated depreciation, buildings (91,000) (79,000) (12,000) Increase 159,730 167,230 (7,500) Decrease Equipment Accumulated depreciation, equipment (43,400) (45,600) 2,200 Decrease Intangible assets 19,200 24,000 (4,800) Decrease $1,424,180 $1,482,780 ($58,600) Total assets Liabilities and Stockholders' Equity Accounts payable Accrued liabilities $ 133,750 $ 233,750 ($100,000) Decrease Notes payable (current) 75,700 145,700 (70,000) Decrease 5,000 5,000 Increase Income taxes payable 20,000 20,000 Increase Bonds payable 210,000 310,000 (100,000) Decrease Mortgage payable 330,000 350,000 (20,000) Decrease Common stock, $10 par value 400,000 340,000 60,000 Increase Paid-in capital in excess of par value, common 90,000 50,000 40,000 Increase Retained earnings 209,730 93,330 116,400 Increase Treasury stock (50,000) (40,000) (10,000) Increase Total liabilities and stockholders' equity $1,424,180 $1,482,780 ($ 58,600) REQUIRED The company's records for 20x5 provide the following additional information: a. Long-term investments (available-for-sale securities) that cost $70,000 were sold at a gain of $12,500; additional long-term investments were made in the amount of $20,000. b. Five acres of land to build a parking lot were purchased for $25,000. c. Equipment that cost $37,500 with accumulated depreciation of $25,300 was sold at a loss of $2,300; new equipment costing $30,000 was purchased. d. Notes payable in the amount of $100,000 were repaid; an additional $30,000 was borrowed by signing notes payable. e. Bonds payable in the amount of $100,000 were converted into 6,000 shares of com mon stock. f The Mortgage Payable account was reduced by $20,000. g. Cash dividends declared and paid were $50,000. h. Treasury stock was purchased for $10,000. 1. Prepare a statement of cash flows using the indirect method. 2. Compute cash flow yield, cash flows to sales, cash flows to assets, and free cash flowi for 20x5. REVIEW PROBLEM L02 and financing activities have affected cash during an accounting period. statement that shows how a company's operat- The Statement of Cash Flows Northwest Corporation's 20x5 income statement appears below. Its comparative bal- LO3 ance sheets for 20x5 and 20x4 are presented on the next page. LO4 LO5 Net sales Cost of goods sold Gross margin Northwest Corporation Income Statement For the Year Ended December 31, 20x5 Operating expenses (including depreciation expense of $12,000 on buildings and $23,100 on equipment, and amortization expense of $4,800) Operating income Other income (expenses) Interest expense Dividend income Gain on sale of investments Loss on disposal of equipment Income before income taxes Income taxes Net income ($ 55,000) 3,400 12,500 (2,300) $1,650,000 920,000 $ 730,000 470,000 $ 260,000 (41,400) $ 218,600 52,200 $ 166,400