Answer Happy

SECTION THREE-THIS QUESTION MUST BE ATTEMPTED PLEASE WRITE YOUR ANSWER ON THE RULED PAPER PROVIDED Millwood and Thompson Inc. Years 1 and 2 Comparative Balance Sheets ended December 31 in a condensed format are below: Year 2 You 1 Cash Accounts receivable (net) Inventories Investments Equipment Accumulated depreciation equipment Accounts payable Bonds payable, due Year 2 Common stock, $10 par Paid-in capital in excess of par-common stock Retained earnings $ $3,000 37,000 108,500 - 573,200 (142.000) (176.000) $629,700 $542,000 $ 62,500 $ 30,000 48,000 100,000 70,000 - 325,000 450,000 80,000 $43,800 100,000 285,000 $5,000 162.200 58.200 $629,700 $542.000

The Income Statement for the current year is as follows: Sales Cost of goods sold Gross profit Operating expenses: Depreciation expense Other operating expenses Total operating expenses Income from operations Other income: Gain on sale of investment Other expense: Interest expense Income before income tax Income tax Net income $26,000 68.000 (b) $4,000 $625,700 340.000 $285,700 6.000 94,000 $191,700 (2.000) $189,700 60,700 $129,000 Additional data for the current year are as follows: (a) Fully depreciated equipment costing $60,000 was scrapped, no salvage, and new equipment was purchased for $183,200. Bonds payable for $100,000 were retired by payment at their face amount. (c) 5,000 shares of common stock were issued at $13 for cash. (d) Cash dividends declared and paid, $25,000. Prepare a Statement of Cash Flow, using the indirect method of reporting cash flows from operating activities. 20 Marks