Problem #1:  10 points

 

 

 

The following information is available for Ness Company.

 

                                                               January 1, 2014             2014             December 31, 2014

 

Raw materials inventory                               $ 25,000                                               $31,000

 

Work in process inventory                              14,500                                                 20,200

 

Finished goods inventory                                32,000                                                 27,000

 

Materials purchased                                                                  $175,000

 

Direct labor                                                                                  230,000

 

Manufacturing overhead                                                              190,000

 

Sales                                                                                             840,000

 

 

 

Instructions

 

(a)  Compute cost of goods manufactured.

 

(b)Prepare an income statement through gross profit.

 

 

 

 

 

 

 

Problem #2: ( 15 points)

 

 

 

Planner Corporation’s comparative balance sheets are presented below.

 

PLANNER CORPORATION

 

Comparative Balance Sheets

 

December 31

 

                                                                                                               2014                           2013   

 

                        Cash                                                                            $ 21,570                      $ 10,700

 

                        Accounts receivable                                                       18,200                         23,400

 

                        Land                                                                               18,000                         26,000

 

                        Building                                                                          70,000                         70,000

 

                        Accumulated depreciation                                            (15,000)                     (10,000)

 

                             Total                                                                     $112,770                     $120,100

 

                        Accounts payable                                                      $  12,370                       $31,100

 

                        Common stock                                                               75,000                         69,000

 

                        Retained earnings                                                           25,400                         20,000

 

                            Total                                                                      $112,770                     $120,100

 

 

 

Additional information:

 

1.Net income was $27,900. Dividends declared and paid were $22,500.

 

2.All other changes in noncurrent account balances had a direct effect on cash flows, except          the change in accumulated depreciation. The land was sold for $5,900.

 

 

 

Instruction

 

(a)  Prepare a statement of cash flows for 2014 using the indirect method.

 

(b)  Compute free cash flow.