NAMA: HAERUDIN SANI

NIM: A0C018044

EXERCISE 5-13

(a) 1. (f) 1. (k) 5.

(b) 4. (g) 5. (l) 4.
(c) 4. (h) 3. (m) 4.
(d) 2. (i) 3.
(e) 2. (j) 1.

EXERCISE 5-14

(a) Grant Wood Corporation

Statement of Cash Flows
For the Year Ended December 31, 2019

Cash flows from operating activities

Net income................................................................ $55,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Loss on sale of equipment................................ $ 2,000*
Depreciation expense ........................................ 13,000
Patent amortization............................................ 2,500
Increase in current liabilities............................. 13,000
Increase in current assets (other than cash)....... (29,000) 1,500
Net cash provided by operating activities ............. 56,500

Cash flows from investing activities

Sale of equipment .................................................... 10,000
Addition to building ................................................. (27,000)
Investment in stock.................................................. (16,000)
Net cash used by investing activities .................... (33,000)

Cash flows from financing activities

Issuance of bonds.................................................... 50,000
Payment of dividends .............................................. (30,000)
Purchase of treasury stock ..................................... (11,000)
Net cash provided by financing activities.............. 9,000
Net increase in cash ...................................................... $32,500a
EXERCISE 5-14

*[$10,000 – ($20,000 – $8,000)]

a
An additional proof to arrive at the increase in cash is provided as follows:

Total current assets—end of period $ 296,500 [from part (b)]

Total current assets—beginning of period 235,000
Increase in current assets during the period 61,500
Increase in current assets other than cash 29,000
Increase in cash during year $ 32,500
(b) Grant Wood Corporation
Balance Sheet
December 31, 2019

Assets
Current assets ................................................. $296,500b
Long-term investments................................... 16,000
Property, plant, and equipment
Land............................................................ $ 30,000
Building ($120,000 + $27,000) .................. $147,000
Less: Accum. Depreciation
($30,000 + $4,000)................................... (34,000) 113,000
Equipment ($90,000 – $20,000) ................ 70,000
Less: Accum. Depreciation
($11,000 – $8,000 + $9,000).................... (12,000) 58,000
Total property, plant, and equipment..... 201,000
Intangible assets—patents
($40,000 – $2,500)................................... 37,500
Total assets ........................................ $551,000

Liabilities and Stockholders’ Equity

Current liabilities ($150,000 + $13,000) ...................... $163,000

Long-term liabilities
Bonds payable ($100,000 + $50,000) .................... 150,000
Total liabilities .................................................. 313,000
Stockholders’ equity
Common stock ....................................................... $180,000
Retained earnings ($44,000 + $55,000 – $30,000) ...... 69,000
Total paid-in capital and retained earnings ..... 249,000
Less: Cost of treasury stock ................................. (11,000)
Total stockholders’ equity............................... 238,000
Total liabilities and stockholders’ equity ....... $551,000
EXERCISE 5-14

b
The amount determined for current assets could be computed last and then is a “plug” figure. That is, total
liabilities and stockholders’ equity is computed because information is available to determine this amount.
Because the total assets amount is the same as total liabilities and stockholders’ equity amount, the amount of
total assets is determined. Information is available to compute all the asset amounts except current assets and
therefore current assets can be determined by deducting the total of all the other asset balances from the total
asset balance (i.e., $551,000 – $37,500 – $201,000 – $16,000). Another way to compute this amount, given the
information, is that beginning current assets plus the $29,000 increase in current assets other than cash plus the
$32,500 increase in cash equals $296,500.

EXERCISE 5-15

Constantine Cavamanlis Inc.

Statement of Cash Flows
For the Year Ended December 31, 2019

Cash flows from operating activities

Net income............................................................ $44,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation expense .................................... $ 6,000
Increase in accounts receivable ................... (3,000)
Increase in accounts payable ....................... 5,000 8,000

Net cash provided by operating activities ......... 52,000

Cash flows from investing activities
Purchase of equipment ....................................... (17,000)
Cash flows from financing activities
Issuance of common stock ................................. 20,000
Payment of cash dividends................................. (23,000)
Net cash used by financing activities ................ (3,000)
EXERCISE 5-15 (Continued)

Net increase in cash .................................................. 32,000

Cash at beginning of year ......................................... 13,000
Cash at end of year .................................................... $45,000

EXERCISE 5-16

(a) Zubin Mehta Corporation

Statement of Cash Flows
For the Year Ended December 31, 2019

Cash flows from operating activities

Net income............................................................ $160,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation expense .................................... $17,000
Loss on sale of investments ......................... 10,000
Decrease in accounts receivable.................. 5,000
Decrease in current liabilities ....................... (17,000) 15,000

Net cash provided by operating activities ......... 175,000

Cash flows from investing activities
Sale of investments.............................................. 12,000
[($74,000 – $52,000) – $10,000]
Purchase of equipment........................................ (58,000)

Net cash used by investing activities................. (46,000)

Cash flows from financing activities

Payment of cash dividends ................................. (30,000)

Net increase in cash .................................................. 99,000

Cash at beginning of year ......................................... 78,000
EXERCISE 5-16

Cash at end of year .................................................... $177,000

(b) Free Cash Flow Analysis

Net cash provided by operating activities ............... $ 175,000

Less: Purchase of equipment .................................. (58,000)
Dividends ......................................................... (30,000)
Free cash flow ............................................................ $ 87,000

EXERCISE 5-17

(a) Madrasah Corporation

Statement of Cash Flows
For the Year Ended December 31, 2019

Cash flows from operating activities

Net income............................................................ $44,000
Adjustment to reconcile net income
to net cash provided by operating activities:
Depreciation .........................................................
Increase in accounts payable ............................. $ 6,000
5,000
Increase in accounts receivable .........................
(18,000) (7,000)
Net cash provided by operating activities .........
37,000
Cash flows from investing activities
Purchase of equipment .......................................
(17,000)
Cash flows from financing activities
Issuance of stock .................................................
Payment of dividends .......................................... 20,000
Net cash used by financing activities ................ (33,000)
(13,000)
EXERCISE 5-17

Net increase in cash .................................................. $ 7,000

Cash at beginning of year ......................................... 13,000
Cash at end of year .................................................... $20,000

2007 2006
(b) Current ratio 6.3 6.73
$ 126,000 $ 101,000
$ 20,000 $ 15,000

Free Cash Flow Analysis

Net cash provided by operating activities ............................ $ 37,000

Less: Purchase of equipment ............................................... (17,000)
Pay dividends ............................................................... (33,000)
Free cash flow ......................................................................... $ (13,000)

(c) Although, Madrasah’s current ratio has declined from 2006 to 2007, it is still in excess of 6. It
appears the company has good liquidity and financial flexibility.