Problems on Cash Flow Statement

1. Delta Corporation’s income statement for 2011 and its comparative balance sheets for 2011 and 2010 are
presented below. Income statement for the year ending December 31, 2011 is as follows:

Net Sales 825000

Cost of goods sold 460000
Gross Margin 365000
Operating Expenses (including depreciation
expense of $6000 on buildings and $11550 on
equipment and amortization of $2400) 235000
Operating Income 130000
Other Income
Interest expense (27500)
Dividend Income 1700
Gain on sale of investment 6250
Loss on disposal of equipment (1150) (20700)
Income before income taxes 109300
Income tax expense 26100
Net Income 83200

Comparative Balance Sheets are as follows:

Assets 2011 2010

Cash 52925 60925
Accounts Receivable (Net) 148000 157250
Inventory 161000 150500
Prepaid Expenses 3900 2900
Long-Term Investments 18000 43000
Land 75000 62500
Buildings 231000 231000
Accumulated Depreciation, buildings (45500) (39500)
Equipment 79865 83615
Accumulated depreciation, equipment (21700) (22800)
Intangible assets 9600 12000
Total Assets 712090 741390

Liabilities and Stockholders' Equity

Accounts payable 66875 116875
Notes payable 37850 72850
Accrued liabilities 2500 0
Income taxes payable 10000 0
Bonds payable 105000 155000
Mortgage payable 165000 175000
Common Stock, 10 par value 200000 170000
Additional paid-in capital 45000 25000
Retained Earnings 104865 46665
Treasury stock (25000) (20000)
Total liabilities and stockholders' equity 712090 741390
 The company’s records for 2011 provide this additional information:
a. Sold long-term investments that cost 35,000 for a gain of 6,250; made other long-term investments in
the amount of 10,000.
b. Purchased five acres of land to build a parking lot for 12,500.
c. Sold equipment that cost 18,750 and that had accumulated depreciation of 12,650 at a loss of 1,150;
purchased new equipment for 15,000.
d. Repaid notes payable in the amount of 50,000; borrowed 15,000 by signing new notes payable.
e. Converted 50,000 of bonds payable into 3,000 shares of common stock.
f. Reduced the Mortgage Payable account by 10,000.
g. Declared and paid cash dividends of 25,000.
h. Purchased treasury stock for 5,000.

Prepare Cash Flow Statement for the year ending December 31, 2011.

2. Gamma Corporation’s income statement for the year ended June 30, 2010 and its comparative balance sheets
for June 30, 2010 and 2009 follow:

Income Statement for the year ending on June 30, 2010

Net Sales 244000

Cost of goods sold 148100
Gross Margin 95900
Operating Expenses 45000
Operating Income 50900
Interest expense 2800
Income before income taxes 48100
Income tax expense 12300
Net Income 35800

Comparative Balance Sheets are as follows:

Assets 2010 2009

Cash 139800 25000
Accounts Receivable (Net) 42000 52000
Inventory 86800 96800
Prepaid Expenses 6400 5200
Furniture 110000 120000
Accumulated depreciation, furniture (18000) (10000)
Total Assets 367000 289000

Liabilities and Stockholders' Equity

Accounts payable 26000 28000
Income taxes payable 2400 3600
Notes payable 74000 70000
Common Stock, 10 par value 230000 180000
Retained Earnings 34600 7400
Total liabilities and stockholders' equity 367000 289000
The company issued a 44000 note payable for purchased of furniture; sold furniture that cost 54000 with
accumulated depreciation of 30,600 at carrying value; recorded depreciation on furniture for the year, 38,600;
repaid a note in the amount of 40,000; issued 50,000 of common stock at par value; and paid dividends of 8,600.
Prepare Gamma’s Cash Flow Statement for the year ending June 30, 2010.