Problem Set 2: Week FourACC/300Problem Set 2: Week Four ACC/300P12-1AYou are given the following transactions that occurred in the latest fiscal year.Distinguish among operating, investing, and financing activities.Complete the table, indicating whether each item (1) should be reported as an operating (O) activity, investing (I) activity, financing (F) activity, or as a noncash (NC) transaction reported in a separateschedule, and (2) represents a cash inflow or cash outflow or has no cash flow effect. Assume use of the indirect approach.Transaction Where Reported Cash Inflow, Outflow, or No Effect?Depreciation expense on the plant assets Noncash (NC) InflowPaid interest expense. Investing (I) OutflowCash from a sale of plant assets. Investing (I) InflowAcquired land by issuing common stock. Noncash (NC) No EffectPaid a cash dividend Financing (F) InflowDistributed a stock dividend Noncash (NC) No EffectRecorded cash sales. Operating (O) InflowRecorded sales on account. Operating (O) OutflowPurchased inventory for cash. Operating (O) OutflowPurchased inventory on account Noncash (NC) No EffectP12-2AThe aforementioned account balances relate to the stockholder’s equity accounts of Patil Corporation at the end of the year.4 2012 2011Common stock, 10,500 and 10,000 shares, respectively, for 2012 and 2011 $160,800 $140,000Preferred stock, 5,000 shares 125,000 125,000Retained earnings 300,000 270,000A minimal stock dividend was announced and assigned in 2012. The market value of the shares is $8,800.In 2011 and 2012, the cash dividends were $20,000. The common stock has no declared value.Determine cash flow effects of changes in equity accounts.(SO 4),4ANInstructionsA. What was the amount of net income declared by the Patil Corporation in 2012? Net Income = Beginning Balance Retained Earnings + Cash Dividends – Ending Balance Retained EarningsNet Income = $300,000 + $20,000 – $270,000Net Income = $50,000B. In 2012, what is the amount of cash inflows and outflows in accordance to the common stock and dividend accounts? Cash Inflow (Outflow) from Common Stock = $160,800 - $140,000 Cash Inflow (Outflow) from Common Stock = $20,800 Cash Inflow (Outflow) from Dividends = $20,000 (given)C. Determine where cash inflows or outflows are determined in would be classified on the statement of cash flows. Cash Inflow (Outflow) from Common Stock => Reported in Financing ActivitiesCash Inflow (Outflow) from Dividends => Reported in Financing ActivitiesP12-3AThe income statement of Mazor Company is presented here.MAZOR COMPANYIncome StatementFor the Year Ended November 30, 2012Sales 4 $7,600,000Cost of goods sold 4 44 Beginning inventory $1,900,000 44 Purchases 4,400,000 44 Goods available for sale 6,300,000 44 Ending inventory 1,600,000 4Total cost of goods sold 4 4,700,000Gross profit 4 2,900,000Operating expenses 4 44 Selling expenses 450,000 44 Administrative expenses 700,000 1,150,000Net income 4 $1,750,000Additional information:In the year: a.) Accounts receivable declined by $380,000 and inventory declined by $300,000.b.) Prepaid expenses are raised by $150,000.c.) Accounts payable to suppliers of materials declined by $350,000.d.) Accrued expenses payable declined by $100,000.e.) Administrative expenses involbes depreciation expense of $110,000.Mazor CompanyStatement of Cash Flows (Indirect Method)For the Year Ended November 30, 2012Net Income $1,750,000Adjustments to Reconcile Net Income to Cash from Continuing OperationsDecrease in Accounts Receivable $380,000Decrease in Inventory $300,000Increase in Prepaid Expenses ($150,000)Decrease in Accounts Payable ($350,000)Decrease in Accrued Expenses ($100,000)Increase in Depreciation Expense $110,000Net Cash Inflows from Operating Activities $1,940,000P12-4AMazor CompanyStatement of Cash Flows (Direct Method)For the Year Ended November 30, 2012Cash Inflows from Revenue $790,000Cash Outflows for Expenses $600,000Income Before Income Taxes $1,750,000Net Cash Inflows from Operating Activities $1,940,000P12-5AThe income statement of Retzlaff Company is contained in the following information:RETZLAFF COMPANYIncome Statement For the Year Ended December 31, 2012Revenues 4 $970,000Operating expenses, excluding depreciation $614,000 4Depreciation expense 55,000 4Loss on sale of equipment 16,000 685,000Income before income taxes 4 285,000Income tax expense 4 56,000Net income 4 $229,000Retzlaff’s balance sheet contained the comparative data at December 31.4 2012 2011Accounts receivable $70,000 $60,000Accounts payable 41,000 32,000Income taxes payable 13,000 7,000Retzlaff CompanyStatement of Cash Flows (Indirect Method)For the Year Ended December 31, 2012Net Income $300,000Adjustments to Reconcile Net Income to Cash from Continuing OperationsIncrease in Accounts Receivable ($10,000)Increase in Accounts Payable $9,000Increase in Income Taxes Payable $6,000Net Cash Inflows from Operating Activities $305,000P12-6AMazor CompanyStatement of Cash Flows (Direct Method)For the Year Ended December 31, 2012Cash Inflows from Revenue $15,000Cash Outflows for Expenses $10,000Income Before Income Taxes $300,000Net Cash Inflows from Operating Activities $305,000P12-7AThe following are the financial records of Helwany Company.HELWANY COMPANYComparative Balance SheetsDecember 31Assets 2012 2011Cash $35,000 $20,000Accounts receivable $20,000 $14,000Inventory $28,000 $20,000Property, plant, and equipment $60,000 $78,000Accumulated depreciation ($32,000) ($24,000)Total $111,000 $108,000Liabilities and Stockholders’ Equity 4 4Accounts payable $19,000 $15,000Income taxes payable $7,000 $8,000Bonds payable $17,000 $33,000Common stock $18,000 $14,000Retained earnings $50,000 $38,000Total $111,000 $108,000HELWANY COMPANYIncome StatementFor the Year Ended December 31, 2012Sales 4 $242,000Cost of goods sold 4 $175,000Gross profit 4 $67,000Selling expenses $18,000 4Administrative expenses $6,000 $24,000Income from operations 4 $43,000Interest expense 4 $43,000Income before income taxes 4 $40,000Income tax expense 4 $8,000Net income 4 $ 32,000Additional data:Depreciation expenses amounts to $17,500.Dividends declared and paid amounts to $20,000.In the year, the apparatus was sold for $8,500. This apparatus principally costs $18,000 and had accumulated depreciation of $9,500 at the period of purchase.Helwany CompanyStatement of Cash Flows (Indirect Method)For the Year Ended December 31, 2012Net Income $32,000Adjustments to Reconcile Net Income to Cash from