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.
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