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ACC557 Week 9 E13-3 E13-4 E13-6 P13-3A

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ACC557 Week 9 E13-3 E13-4 E13-6 P13-3A

E13-3 Tim Latimer Corporation had the following transactions.

1. Sold land (cost $12,000) for $10,000.
2. Issued common stock at par value for $22,000.
3. Recorded depreciation on buildings for $14,000.
4. Paid salaries of $7,000.
5. Issued 1,000 shares of $1 par value common stock for equipment worth $9,000.
6. Sold equipment (cost $10,000, accumulated depreciation $8,000) for $3,200.

For each transaction above, (a) prepare the journal entry, and (b) indicate how it would
affect the statement of cash flows under the direct method.

E13-4 Bracewell Company reported net income of $195,000 for 2014. Bracewell also
reported depreciation expense of $40,000 and a gain of $5,000 on disposal of plant assets.
The comparative balance sheet shows an increase in accounts receivable of $15,000
for the year, a $17,000 increase in accounts payable, and a $4,000 decrease in prepaid

Prepare the operating activities section of the statement of cash flows for 2014. Use the

indirect method.

E13-6 The three accounts shown below appear in the general ledger of Chaudry Corp.
during 2014.

From the postings in the accounts, indicate how the information is reported on a statement
of cash flows using the indirect method. The loss on disposal of plant assets was
$5,000. (Hint: Cost of equipment constructed is reported in the investing activities section
as a decrease in cash of $53,000.)

P13-3A The income statement of Toby Zed Company is presented here.

Additional information:
1. Accounts receivable increased $200,000 during the year, and inventory decreased $500,000.
2. Prepaid expenses increased $175,000 during the year.
3. Accounts payable to suppliers of merchandise decreased $340,000 during the year.
4. Accrued expenses payable decreased $105,000 during the year.
5. Operating expenses include depreciation expense of $85,000

Prepare the operating activities section of the statement of cash flows for the year ended
November 30, 2014, for Toby Zed Company, using the indirect method.

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