The 2018 income statement and comparative balance sheet of Rolling Hills, Inc. follow:

Additionally, Rolling Hills purchased land of $21,100 by financing it 100% with long-term notes payable during 2018. During the year, there were no sales of land, no retirements of stock, and no treasury stock transactions. A plant asset was disposed of for $0. The cost and the accumulated depreciation of the disposed asset was $13,410. The plant acquisition was for cash.
Requirements
1. Prepare the 2018 statement of cash flows, formatting operating activities by the indirect method.
2. How will what you learned in this problem help you evaluate an investment?

Transcribed Image Text:

ROLLING HILLS, INC. Income Statement Year Ended December 31, 2018 $ 440,000 Net Sales Revenue Cost of Goods Sold 209,200 Gross Profit 230,800 Operating Expenses: $ 77,400 Salaries Expense Depreciation Expense-Plant Assets 14,400 Other Operating Expenses 10,200 Total Operating Expenses 102,000 Operating Income 128,800 Other Income and (Expenses): 8,700 Interest Revenue Interest Expense (21,100) Total Other Income and (Expenses) (12,400) Net Income Before Income Taxes 116,400 Income Tax Expense 20,000 $ 96,400 Net Income ROLLING HILLS, INC. Comparative Balance Sheet December 31, 2018 and 2017 2018 2017 Assets Current Assets: $ 26,900 $ 15,700 Cash Accounts Receivable 26,500 25,400 Merchandise Inventory 79,800 91,500 Long-term Assets: Land 35,100 14,000 Plant Assets 124,840 114,650 Accumulated Depreciation-Plant Assets (18,940) (17,950) Total Assets $ 274,200 $ 243,300 Liabilities Current Liabilities: Accounts Payable $ 35,700 $ 30,400 Accrued Liabilities 28,700 30,300 Long-term Liabilities: Notes Payable 79,000 108,000 Total Liabilities 143,400 168,700 Stockholders' Equity Common Stock, no par 88,900 64,500 Retained Earnings 41,900 10,100 Total Stockholders' Equity 130,800 74,600 Total Liabilities and Stockholders' Equity $ 274,200 $ 243,300