Green Brands, Inc. (GBI), presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from GBI's 2017 and 2016 year-end balance sheets:

$$\begin{array}{lrr} \textbf{Account Title} & \textbf{2017} & \textbf{2016}\\ \\ \text{Accounts receivable} & \$48,000 & \$52,000\\ \text{Merchandise inventory} & \text{78,000} & \text{72,000}\\ \text{Prepaid insurance} & \text{24,000} & \text{32,000}\\ \text{Accounts payable} & \text{31,000} & \text{28,000}\\ \text{Salaries payable} & \text{8,200} & \text{7,800}\\ \text{Unearned service revenue} & \text{2,400} & \text{3,600}\\ \end{array}$$

The 2017 income statement is shown below:

$$\begin{array}{c} \textbf{Income Statement}\\ \end{array}$$

$$\begin{array}{lrr} \text{Sales}&&\$ \hspace{5pt}720,000\\ \text{Cost of goods sold}&& \underline{\text{(398,000)}}\\ \text{Gross margin}&&\text{322,000}\\ \text{Service revenue}&&\text{6,000}\\ \text{Insurance expense}&&\text{(36,000)}\\ \text{Salaries expense}&&\text{(195,000)}\\ \text{Depreciation expense}&& \underline{\text{(12,000)}}\\ \text{Operating income}&&\text{85,000}\\ \text{Gain on sale of equipment}&&\underline{\text{4,500}}\\ \text{Net Income}&& \underline{\underline{\$ \hspace{10pt} \text{89,500}}}\\ \end{array}$$

Required

Prepare the operating activities section of the statement of cash flows using the indirect method.

The following accounts and corresponding balances were drawn from Pixi Company's 2017 and 2016 year-end balance sheets:

$$\begin{array}{lrr} \textbf{Account Title} & \textbf{2017} & \textbf{2016}\\ \\ \text{Accounts receivable} & \$62,000 & \$56,000\\ \text{Interest receivable} & \text{8,000} & \text{6,000}\\ \text{Other operating expenses payable} & \text{26,000} & \text{29,000}\\ \text{Salaries payable} & \text{12,000} & \text{9,000}\\ \end{array}$$

The 2017 income statement is shown below:

$$\begin{array}{c} \textbf{Income Statement}\\ \end{array}$$

$$\begin{array}{lrr} \text{Sales}&&\$ \hspace{5pt}650,000\\ \text{Salary expense}&&\text{(420,000)}\\ \text{Other operating expenses}&& \underline{\text{(110,000)}}\\ \text{Operating income}&&\text{120,000}\\ \text{Nonoperating items: Interest revenue}&& \underline{\text{15,000}}\\ \text{Net Income}&& \underline{\underline{\$ \hspace{5pt} \text{135,000}}}\\ \end{array}$$

Required

Use the direct method to compute the amount of cash outflows from operating activities.

Chen Company established a $200 petty cash fund on January 1, 2016.

Required

Record the establishment of the petty cash fund in a horizontal statements model like the following one:

$$\begin{array}{|l|r|r|} \textbf{ \hspace{15pt}Assets \hspace{30pt}= Liab. + Equity} & \textbf{Rev. - Exp. = Net. Inc.} & \textbf{Cash Flow}\\ \hline \text{Cash + Petty Cash}\\ \end{array}$$

Consider the following events:

1. A petty cash fund of $200 was established on April 1, 2016.

2. Employees were reimbursed when they presented petty cash vouchers to the petty cash custodian.

3. On April 30, 2016, the petty cash fund contained vouchers totaling$196.50 plus $2.20 of currency.

Required

When are petty cash expenses recognized (at the time of establishment, reimbursement, or replenishment)?

The following accounts and corresponding balances were drawn from Jogger Company's 2017 and 2016 year-end balance sheets:

$$\begin{array}{lrr} \text{Account Title} \hspace{125pt} \text{2017} \hspace{51pt} \text{2016} \\ \\ \text{Accounts receivable} \hspace{90pt} \text{\$57,000} \hspace{38pt} \text{\$62,000} \hspace{15pt}\\ \text{Prepaid rent} \hspace{131pt} \text{1,100} \hspace{49pt} \text{1,300} \hspace{15pt}\\ \text{Utilities payable} \hspace{122pt} \text{900} \hspace{57pt} \text{750} \hspace{15pt}\\ \text{Other operating expenses payable} \hspace{35pt} \text{21,300} \hspace{44pt} \text{22,400} \hspace{15pt}\\ \end{array}$$

The 2017 income statement is shown below:

$$\begin{array}{lrr} \hspace{87pt}\text{Income Statement}\\ \text{Sales}&&\$ \hspace{5pt}268,000\\ \text{Rent expense}&&{\hspace{5pt} \text{36,000}}\\ \text{Utilities expense}&&{\hspace{5pt} \text{(18,300)}}\\ \text{Other operating expenses}&&\underline{{\hspace{5pt} \text{(79,100)}}}\\ \text{Net income}&& \underline{\underline{\$ \hspace{5pt} \text{ 134,600}}}\\ \end{array}$$

Required

Prepare the operating activities section of the statement of cash flows using the indirect method.

Edwards Corporation reports the following information in its January 1, 2016, balance sheet:

$$\begin{array}{lr} \text{Stockholders' equity}\\ \text{\hspace{10pt}Common stock, \$10 par value, 100,000 shares authorized,}\\ \text{\hspace{20pt}50,000 shares issued and outstanding} & \$ \hspace{2pt}500,000\\ \text{\hspace{10pt}Paid-in capital in excess of par value} & \text{150,000}\\ \text{Retained earnings} & \underline{\text{120,000}}\\ \text{Total stockholders' equity} & \underline{\underline{\$770,000}}\\ \end{array}$$

During 2016, Edwards was affected by the following accounting events:

1. Purchased 2,000 shares of treasury stock at $15 per share.

2. Reissued 1,200 shares of treasury stock at$18 per share.

3. Earned $72,000 of cash revenues.

4. Paid$41,000 of cash operating expenses.

Required

Prepare the stockholders' equity section of the year-end balance sheet.

The following accounting information pertains to Mobile and Casper companies at the end of 2016. The only difference between the two companies is that Mobile uses FIFO while Casper uses LIFO.

$$\begin{array}{lrrr} &&\textbf{Mobile Co.} & \textbf{Casper Co.}\\ \\ \text{Cash} && \$ \hspace{15pt}70,000 & \$ \hspace{15pt}70,000\\ \text{Accounts receivable} && \text{230,000} & \text{230,000}\\ \text{Merchandise Inventory} && \text{220,000} & \text{190,000}\\ \text{Accounts payable} && \text{210,000} & \text{210,000}\\ \text{Cost of goods sold} && \text{1,350,000} & \text{1,380,000}\\ \text{Building} && \text{300,000} & \text{300,000}\\ \text{Sales} && \text{1,800,000} & \text{1,800,000}\\ \end{array}$$

Required

Explain why a company with the lower gross margin percentage has the higher inventory turnover ratio.

In 2013 and 2012, Sears Holding Corporation reported net losses and negative cash flows from operating activities. Using the company's Form 10-K for the fiscal year ended February 1, 2014 (2013), complete the requirement below. The Form 10-K can be found on the company's website, where it is called the Annual Report. It can also be obtained using the EDGAR system.

Required

How was Sears able to pay its bills given that it has such large, negative net cash flows from operating activities in 2012 and 2013? Provide a separate answer for each year.

Consider the following events:

1. A petty cash fund of $200 was established on April 1, 2016.

2. Employees were reimbursed when they presented petty cash vouchers to the petty cash custodian.

3. On April 30, 2016, the petty cash fund contained vouchers totaling$171.40 plus $26.10 of currency.

Required

What is the amount of total petty cash expenses to be recognized during April?

On January 1, 2016, Sanita Company had a balance of $76,300 in its Office Equipment account. During 2016, Sanita purchased office equipment that cost$30,300. The balance in the Office Equipment account on December 31, 2016, was $75,400. The 2016 income statement contained a gain from the sale of equipment of$6,000. On the date of sale, accumulated depreciation on the equipment sold amounted to $14,400.

Required

Determine the amount of cash flow from the sale of office equipment that should be shown in the investing activities section of the 2016 statement of cash flows.

Mountain Timber Company established a $180 petty cash fund on January 1, 2016.

Required

Record the establishment of the petty cash fund in a horizontal statements model like the following one:

$$\begin{array}{|l|r|r|} \textbf{ \hspace{15pt}Assets \hspace{30pt}= Liab. + Equity} & \textbf{Rev. - Exp. = Net. Inc.} & \textbf{Cash Flow}\\ \hline \text{Cash + Petty Cash}\\ \end{array}$$

During 2016 the Lake Corporation and the River Corporation reported net incomes of $700,000 and$960,000, respectively. Both companies had 200,000 shares of common stock issued and outstanding. The market price per share of Lake's stock was $50, while River's sold for$85 per share.

Required

Based on the P/E ratios for each company, which company do investors believe has the greater potential for growth in income?

On October 1, 2016, Nicholes Corporation declared a $50,000 cash dividend to be paid on December 15 to shareholders of record on November 1.

Required

Prepare journal entries for all events associated with the dividend.

On January 1, 2016, Bacco Company had a balance of $72,350 in its Delivery Equipment account. During 2016, Bacco purchased delivery equipment that cost$22,100. The balance in the Delivery Equipment account on December 31, 2016, was $69,400. The 2016 income statement reported a gain from the sale of equipment for$5,000. On the date of sale, accumulated depreciation on the equipment sold amounted to $22,000.

Required

Determine the amount of cash flow from the sale of delivery equipment that should be shown in the investing activities section of the 2016 statement of cash flows.