Question

1. A company's income statement showed the following: net income, $117,000; depreciation expense, $31,500; and gain on sale of plant assets, $5,500. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,700; merchandise inventory increased $19,500; prepaid expenses increased $6,500; accounts payable increased $3,700. Calculate the net cash provided or used by operating activities.

2. Marlow Company purchased a point of sale system on January 1 for $5,400. This system has a useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?

3. Fernwood Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:              

Retained earnings balance at the beginning of the year   $   293,000  

Cash dividends declared for the year      65,000  

Proceeds from the sale of equipment      111,400  

Gain on the sale of equipment      6,300  

Cash dividends payable at the beginning of the year      28,600  

Cash dividends payable at the end of the year      36,000  

Net income for the year      143,000      

The amount of cash paid for dividends was:

Answer 1

Calculate the net cash provided or used by operating activities.

Net income	117000
Depreciation expense	31500
gain on sale of plant assets	-5500
accounts receivable decreased	9700
Increase inventory	-19500
prepaid expenses increased	-6500
Increase account payable	3700
Net cash flow from operating activities	130400

2) Double decline rate = 100/10*2 = 20%

Depreciation expense for second year = 5400*80%*20% = 864

3) Cash dividend paid = Beginning dividend payable+Declared-Ending payable = 28600+65000-36000 = 57600