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PART I The comparative balance sheet of Cromme Inc. for December 31, 2016 and 2015, is shown as follows: 1 Dec. 31, 2016 Dec. 31,

PART I The comparative balance sheet of Cromme Inc. for December 31, 2016 and 2015, is shown as follows:

1

Dec. 31, 2016

Dec. 31, 2015

2

Assets

3

Cash

$626,100.00

$585,190.00

4

Accounts receivable (net)

228,630.00

208,060.00

5

Inventories

641,030.00

617,620.00

6

Investments

0.00

239,830.00

7

Land

328,160.00

0.00

8

Equipment

705,110.00

553,850.00

9

Accumulated depreciation-equipment

(166,840.00)

(147,700.00)

10

Total assets

$2,362,190.00

$2,056,850.00

11

Liabilities and Stockholders Equity

12

Accounts payable (merchandise creditors)

$423,690.00

$404,660.00

13

Accrued expenses payable (operating expenses)

42,340.00

53,240.00

14

Dividends payable

23,050.00

18,680.00

15

Common stock, $4 par

156,000.00

93,000.00

16

Paid-in capital: Excess of issue price over parcommon stock

417,000.00

279,200.00

17

Retained earnings

1,300,110.00

1,208,070.00

18

Total liabilities and stockholders equity

$2,362,190.00

$2,056,850.00

Additional data obtained from an examination of the accounts in the ledger for 2016 are as follows:

A. The investments were sold for $279,300 cash.
B. Equipment and land were acquired for cash.
C. There were no disposals of equipment during the year.
D. The common stock was issued for cash.
E. There was a $188,740 credit to Retained Earnings for net income.
F. There was a $96,700 debit to Retained Earnings for cash dividends declared.

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. In the operating activities section, use the minus sign to indicate cash outflows, decreases in cash and a net cash outflow, if required. In the investing and financing activities section, use a minus sign only to indicate a NET cash outflow for the section.

Cromme Inc.

Statement of Cash Flows

1

Cash flows from operating activities:

2

3

Adjustments to reconcile net income to net cash flow from operating activities:

4

5

6

Changes in current operating assets and liabilities:

7

8

9

10

11

12

13

Cash flows from investing activities:

14

15

16

17

18

19

Cash flows from financing activities:

20

21

22

23

24

Cash at the beginning of the year

25

Cash at the end of the year

PART II

For 2016, Macklin Inc. reported a significant increase in net income. At the end of the year, John Mayer, the president, is presented with the following condensed comparative income statement:

Macklin Inc.

Comparative Income Statement

For the Years Ended December 31, 2016 and 2015

1

2016

2015

2

Sales

$910,000.00

$700,000.00

3

Cost of goods sold

441,000.00

350,000.00

4

Gross profit

$469,000.00

$350,000.00

5

Selling expenses

$139,150.00

$115,000.00

6

Administrative expenses

99,450.00

85,000.00

7

Total operating expenses

$238,600.00

$200,000.00

8

Income from operations

$230,400.00

$150,000.00

9

Other income

65,000.00

50,000.00

10

Income before income tax

$295,400.00

$200,000.00

11

Income tax expense

65,000.00

50,000.00

12

Net income

$230,400.00

$150,000.00

1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 2015 as the base year. Use the minus sign to indicate an amount or percent decrease. If required, round percentages to one decimal place.

Macklin Inc.

Comparative Income Statement

For the Years Ended December 31, 2016 and 2015

1

Increase (Decrease)

Increase (Decrease)

2

2016

2015

Amount

Percent

3

Sales

$910,000.00

$700,000.00

4

Cost of goods sold

441,000.00

350,000.00

5

Gross profit

$469,000.00

$350,000.00

6

Selling expenses

$139,150.00

$115,000.00

7

Administrative expenses

99,450.00

85,000.00

8

Total operating expenses

$238,600.00

$200,000.00

9

Income from operations

$230,400.00

$150,000.00

10

Other income

65,000.00

50,000.00

11

Income before income tax

$295,400.00

$200,000.00

12

Income tax expense

65,000.00

50,000.00

13

Net income

$230,400.00

$150,000.00

2. To the extent the data permit, comment on the significant relationships revealed by the horizontal analysis prepared in (1).

Net income has from 2015 to 2016. Sales have ; however, the cost of goods sold has at a rate, causing net income to .

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