UMUC ACCT301 homework 5

| March 30, 2017

Question
“Ozark Corporation reported net income of $100,000 for 20X5. The income statement revealed sales of $1,000,000; gross profit of $520,000; selling and administrative costs of $340,000; interest expense of $20,000; and income taxes of $60,000.

The selling and administrative expenses included $25,000 for depreciation. No equipment was sold during the year. Equipment purchases were made with cash. Prepaid insurance included in the balance sheet related to administrative costs. All accounts payable included in the balance sheet relate to inventory purchases. The change in retained earnings is attributable to net income and dividends. The increase in common stock and additional paid-in capital is due to issuing additional shares for cash.

Using the indirect approach, prepare a statement of cash flows for Ozark for the year ending December 31, 20X5. Comparative balance sheets for Ozark follow.

OZARK CORPORATION

Balance Sheet

December 31, 20X4 and 20X5

Assets 20X5 20X4

Cash $458,700 $471,450

Accounts receivable 199,250 171,500

Inventories 248,600 278,800

Prepaid insurance 13,000 11,000

Land 250,000 250,000

Building and equipment 1,500,000 1,300,000

Less: Accumulated depreciation (205,000) (180,000)

Total assets $2,464,550 $2,302,750

Liabilities

Accounts payable $85,700 $93,400

Interest payable 10,500 15,000

Income taxes payable 22,000 8,000

Stockholders’ equity

Common stock 710,000 700,000

Paid in capital in excess of par 990,000 900,000

Retained earnings 646,350 586,350

Total liabilities and equity $2,464,550 $2,302,750

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