Chapter 4 & 5 questions
CHAPTER 4
E4-5 (Multiple-Step and Single-Step) Two accountants for the firm of Elwes and Wright are arguing about
the merits of presenting an income statement in a multiple-step versus a single-step format. The
discussion involves the following 2014 information related to P. Bride Company ($000 omitted).
Administrative expense Officers’ salaries $ 4,900 Depreciation of office furniture and equipment 3,960 Cost of goods sold 60,570 Rent revenue 17,230 Selling expense
Delivery expense 2,690 Sales commissions 7,980 Depreciation of sales equipment 6,480 Sales revenue 96,500 Income tax 9,070 Interest expense 1,860 Instructions
(a) Prepare an income statement for the year 2014 using the multiple-step form. Common shares outstanding for 2014 total 40,550 (000 omitted).
(b) Prepare an income statement for the year 2014 using the single-step form.(c) Which one do you
prefer? Discuss. CHAPTER 5
E5-12 (Preparation of a Balance Sheet) Presented below is the trial balance of Scott Butler Corporation at December
31, 2014.
Debit
Cash $ 197,000 Sales Revenue
Debt Investments (trading) (at cost, $145,000)
Cost of Goods Sold $ 8,100,000
153,000
4,800,000 Debt Investments (long-term) 299,000 Equity Investments (long-term) 277,000 Notes Payable (short-term) 90,000 Accounts Payable
Selling Expenses 455,000
2,000,000 Investment Revenue
Land
Buildings Credit 63,000
260,000
1,040,000 Dividends Payable 136,000 Accrued Liabilities 96,000 Accounts Receivable 435,000 Accumulated Depreciation—Buildings 152,000 Allowance for Doubtful Accounts 25,000 Administrative Expenses 900,000 Interest Expense 211,000 Inventory 597,000 Gain (extraordinary) 80,000 Notes Payable (long-term)
Equipment 900,000
600,000 Bonds Payable 1,000,000 Accumulated Depreciation—Equipment
Franchises
Common Stock ($5 par) 60,000
160,000
1,000,000 Treasury Stock 191,000 Patents 195,000 Retained Earnings 78,000 Paid-in Capital in Excess of Par 80,000 Totals $12,315,000 $12,315,000 Instructions:
Prepare a balance sheet at December 31, 2014, for Scott Butler Corporation. (Ignore income taxes.)
E5-15 (Preparation of a Statement of Cash Flows) Presented below is a condensed version of the comparative
balance sheets for Zubin Mehta Corporation for the last two years at December 31.
2014
Cash
Accounts receivable
Investments
Equipment
Accumulated depreciation—equipment 2013 $177,000 $ 78,000 180,000 185,000 52,000 74,000 298,000 240,000 (106,000) (89,000) Current liabilities 134,000 151,000 Common stock 160,000 160,000 Retained earnings 307,000 177,000 Additional information: Investments were sold at a loss (not extraordinary) of $10,000; no equipment was sold; cash
dividends paid were $30,000; and net income was $160,000.
Instructions
(a) Prepare a statement of cash flows for 2014 for Zubin Mehta Corporation.
(b) Determine Zubin Mehta Corporation’s free cash flow.