Question

1. The income statement of Sandhill Company is shown below. SANDHILL COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2020 Sales revenue $6,380,000 Cost of goods sold Beginning inventory $2,080,000 Purchases 4,350,000 Goods available for sale 6,430,000 Ending inventory 1,460,000 Cost of goods sold 4,970,000 Gross profit 1,410,000 Operating expenses Selling expenses 430,000 Administrative expenses 670,000 1,100,000 Net income $310,000 Additional information: 1. Accounts receivable decreased $300,000 during the year. 2. Prepaid expenses increased $150,000 during the year. 3. Accounts payable to suppliers of merchandise decreased $280,000 during the year. 4. Accrued expenses payable decreased $110,000 during the year. 5. Administrative expenses include depreciation expense of $70,000. Prepare the operating activities section of the statement of cash flows for the year ended December 31, 2020, for Sandhill Company, using the indirect method.

2. The accounts below appear in the ledger of Pearl Company.

		Retained Earnings		Dr.		Cr.		Bal.
Jan. 1, 2020		Credit Balance						$42,300
Aug. 15		Dividends (cash)		$15,200				27,100
Dec. 31		Net Income for 2020				$40,400		67,500
		Equipment		Dr.		Cr.		Bal.
Jan. 1, 2020		Debit Balance						$140,300
Aug. 3		Purchase of Equipment		$62,200				202,500
Sept. 10		Cost of Equipment Constructed		48,100				250,600
Nov. 15		Equipment Sold				$56,100		194,500
		Accumulated Depreciation—Equipment		Dr.		Cr.		Bal.
Jan. 1, 2020		Credit Balance						$83,400
Apr. 8		Major Repairs		$20,900				62,500
Nov. 15		Accum. Depreciation on Equipment Sold		25,400				37,100
Dec. 31		Depreciation for 2020				$16,900		54,000

Prepare entries in journal form for all adjustments that should be made on a worksheet for a statement of cash flows. The loss on sale of equipment (November 15) was $5,800.

3. The transactions below took place during the year 2020.

1.		Convertible bonds payable with a par value of $297,300 were exchanged for unissued common stock with a par value of $297,300. The market price of both types of securities was par.
2.		The net income for the year was $403,200.
3.		Depreciation expense for the building was $90,100.
4.		Some old office equipment was traded in on the purchase of some dissimilar office equipment, and the following entry was made.

Equipment		49,400
Accum. Depreciation—Equipment		30,300
Equipment				39,300
Cash				34,400
Gain on Disposal of Plant Assets				6,000

		The Gain on Disposal of Plant Assets was included in income before income taxes.
5.		Dividends in the amount of $122,000 were declared. They are payable in January of next year.

Show by journal entries the adjustments that would be made on a worksheet for a statement of cash flows.

Answer 1

Cash Flow statement FOR THE YEAR ENDED DECEMBER 31, 2020
Cash Flow from Operating Activities	Amount($)
Profit as per Income Statement(Net Income)-(A)	3,10,000
Add: Non-operating and Noncash Expenses-(B)
Depreciation Expense	70,000
Add: Increase in CL, Decrease in CA-(C )
Inventory(from $2,080,000 to $1,460,000)	6,20,000
Accounts Receivable	3,00,000
Less: Increase in CA, Decrease in CL-(D)
Prepaid Expense	1,50,000
Acconts Payable	2,80,000
Accrued Expenses	1,10,000
Cash Flow generated from operating activities
(A+B+C-D)	7,60,000