12.

Harry Company’s statement of cash flows shows the following items scattered among the three

sections of the statement.

Accounts receivable decrease

$36,000

Gain on sale of equipment

13,000

Prepaid rent increase

22,000

Cash used to repay long-term loans

80,000

Accounts payable decrease

18,000

Inventory decrease

50,000

Dividends (declared and paid)

40,000

Interest payable decrease

26,000

Cash paid to purchase new equipment

125,000

Depreciation expense

25,000

Net cash flow from operating activities

positive 100,000

This is not a list of all of the items in Harry’s statement of cash flows, but Harry has no other

items reported in the operating activities section of its statement of cash flows (prepared using

the indirect method). What is Harry’s net income?

$28,000

$42,000

$68,000

$118,000

$92,000

$290,000

$108,000

$132,000

13.

Lily Company had the following account totals as of December 31, 20X2.

Cost of goods sold

$150,000

Accounts receivable

100,000

Rent revenue

10,000

Accounts payable

25,000

Sales

200,000

Inventory

50,000

Bank Loan Payable*

20,000

Cash

18,000

Retained earnings (beginning of year, January 1, 20X2)

80,000

Prepaid insurance (6-month insurance policy)

15,000

Paid-in capital

38,000

Equipment

45,000

Unearned rent revenue (9-month contract)

5,000

*Of the $20,000 bank loan payable, $3,000 will be repaid in 20X3. What is Lily Company’s

CURRENT RATIO?

5.74

6.14

4.06

5.90

5.55

14.

The following items have been extracted from the financial statements of Lorien Company for the

year 20X1.

Total liabilities

$700

Net income

50

Gross profit

400

EBIT (also called operating income)

220

Sales

1,000

Total assets

1,600

Income tax expense

40

Cost of goods sold

600

Note: This list does not include all of the items in Lorien’s 20X1 financial statements. However,

the list does include all of the items you need to correctly answer the question below. What is the

value of Lorien Company’s TIMES INTEREST EARNED ratio for 20X1?

1.69

3.08

3.38

3.00

1.29

5.50

4.40

2.69

15.

Rocky Company borrowed $10,000 on February 1, 20X1. The loan has an annual interest rate of 14%. Rocky Company repaid the loan in full (both principal and interest) on January 31, 20X2; no payments were made on the loan between February 1, 20X1 and January 31, 20X2. [Note: The correct adjusting entry with respect to this loan was recorded on December 31, 20X1.] The single journal entry to record the repayment of the loan (both principal and interest) on January 31, 20X2 includes a

Debit to Interest Expense for $1,283

Credit to Interest Expense for $1,283

Debit to Interest Expense for $1,167

Credit to Interest Expense for $1,167

Debit to Interest Expense for $1,400

Credit to Interest Expense for $1,400