The Roy Turtle Company provided the following comparative income statements for the endins December 31.2014 1n Sales 940.000 Cost of eoods sold 600,000 Gross Profit 350,000 Salary Expense 80,000 Depreciation Expense 60.000 Warranty Expense 28.000 Bad Debt Expense 6.000 Other Operating Expenses 100,000 274,000 Oneratins Income 76,000 Realized sain on sale of investments 1s.000 Unrealized gain on trading investments 8.000 Impairment loss on buildine (20,000) Gain on sale of machinery 5,000 Interest Expense (9.242\ (1.242\ Net income before taxes 64.758 Income Tax Expense (22,427) Net Income 42.33r

ive Balance Sheets are given below are grven t2l3ll14 r2l3v13 Cash 372.691 100.000 Inventory 170.000 120,000 Investments in Trading Securities 50,000 100,000 Market value adjustment - trading investments 4,000 (4,000) Accounts Receivable 34,000 67,000 Allowance for Bad Debts (3,000) (5,000) Trade Notes Receivable 25.000 15.000 Plant and Equipment 185,000 150.000 Accumulated Depreciation (105,000) (70,000) Accounts Payable (90,000) (60,000) Estimated Wananty LiabilitY (13,000) (8.000) Defened Income Tax LiabilitY (15,700) (17,000) Installment Note Payable (90,000) Bonds Pavable (100,000) Discount on Bonds Payable 6,340 Common Stock, $5 par (55,000) (50,000) Paid in Capital r110.000) (100.000) Retained Earnings (265,33t) (238.000)

Roy Tuttle Company Problem The Roy Turtle Company provided the following comparative income statements for the 1n endins December 31.2014 940.000 600,000 350,000 Sales Cost of eoods sold Gross Profit Salary Expense Depreciation Expense Warranty Expense Bad Debt Expense Other Operating Expenses Oneratins Income Realized sain on sale of investments Unrealized gain on trading investments Impairment loss on buildine Gain on sale of machinery Interest Expense Net income before taxes Income Tax Expense Net Income 80,000 60.000 28.000 6.000 100,000 274,000 76,000 1s.000 8.000 (20,000) 5,000 (9.242\\ (1.242\\ 64.758 (22,427) 42.33r grven ive Balance Sheets are given below t2l3ll14 Cash Inventory Investments in Trading Securities Market value adjustment - trading r2l3v13 372.691 170.000 50,000 100.000 120,000 100,000 4,000 (4,000) 34,000 67,000 (5,000) investments Accounts Receivable Allowance for Bad Debts Trade Notes Receivable Plant and Equipment Accumulated Depreciation Accounts Payable Estimated Wananty LiabilitY Defened Income Tax LiabilitY Installment Note Payable Bonds Pavable Discount on Bonds Payable Common Stock, $5 par Paid in Capital Retained Earnings (3,000) 25.000 185,000 (105,000) (90,000) (13,000) (15,700) (90,000) (100,000) 6,340 (55,000) r110.000) (265,33t) 15.000 150.000 (70,000) (60,000) (8.000) (17,000) (50,000) (100.000) (238.000) t69 . The following additional information is also supplied New machinery was purchased for an agreed price of $100,000 on December 31' 2014. The selling dealer required a down payment of $10,000 and the dealer provided the financing for the remaining $90,000 which was payable in 6 months l. 2. 3. 4. 5. with interest. An old machine with an original cost of $45,000, and accumulated depreciation of $25,000 was sold at a $5,000 gain Trading investments with a cost of $50,000 were sold for $65,000 A five-year 8% annual interest, $100,000 term bond was issued on January 1, 2014 to yield an effective interest rate of l0%o annual. Effective interest arnortization is used. Be sure to calculate the sale price of the bond and do an anortization table for the first period. A l0% stock dividend was issued when the market price was $15 Required: a. b. Complete a worksheet to prepare a statement of cash flows. Convert the cash flows from operations to the direct method. 170 Cash Flow Worksheet Roy Tuttle Non Cash Accounts: Accounts receivable Allowance for Bad Debts Inventory Trade Investments Trade allowance to market Trade note rec. blank Plant and equipment Net Change Dr Cr key 33,000 Cash Flows Increases Operations key 50,000 8,000 10,000 35,000 35,000 30,000 90,000 5,000 1,300 Total operations Investing 100,000 6,340 5,000 10,000 Retained Earnings Totals Change in cash Balance Cr 2,000 50,000 Accumulated Depreciation blank blank Accounts Payable Notes Payable Est warranty lia. Def income tax lia Bonds payable Premium/Discount on bonds Mortgage payable Common stock Paid-in Excess Explanation Dr key Total investing Financing 27,331 112,640 272,691 385,331 Total financing Total cash flow Non Cash Financing/Investing Amount Decreases key Amount Conversion to Direct Income adjustments: Income Statement Sales Cost of goods sold Adds Accrual Dr Cr key 940,000 Deducts Conversion Dr key Cash Basis Cash Opeations Cr 600,000 Salary exp 80,000 Depreciation exp 60,000 Warranty exp 28,000 Bad debt exp 6,000 Other operating exp 100,000 Real gain on invest Unreal gain on invest Impairment loss 20,000 Gain on machinery Interest expense 9,242 Income tax expense 22,427 Sale of Trading investment Net income 15,000 8,000 5,000 42,331 Cash Operations