Problem NO: 8

Comparative balance sheet accounts of Sharpe Company are presented below.\nSHARPE COMPANY\nCOMPARATIVE BALANCE SHEET ACCOUNTS\nAS OF DECEMBER 31\nDebit Ba

Comparative balance sheet accounts of Sharpe Company are presented below.

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SHARPE COMPANY

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COMPARATIVE BALANCE SHEET ACCOUNTS

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AS OF DECEMBER 31

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Debit Balances 2014 2013

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Cash $ 70,000 $ 51,000

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Accounts Receivable 155,000 130,000

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Inventory 75,000 61,000

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Investments (available-for-sale) 55,000 85,000

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Equipment 70,000 48,000

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Buildings 145,000 145,000

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Land 40,000 25,000

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Totals $610,000 $545,000

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Credit Balances

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Allowance for Doubtful Accounts $ 10,000 $ 8,000

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Accumulated Depreciation—Equipment 21,000 14,000

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Accumulated Depreciation—Buildings 37,000 28,000

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Accounts Payable 66,000 60,000

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Income Taxes Payable 12,000 10,000

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Long-Term Notes Payable 62,000 70,000

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Common Stock 310,000 260,000

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Retained Earnings 92,000 95,000

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Totals $610,000 $545,000

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Additional data:

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1. Equipment that cost $10,000 and was 60% depreciated was sold in 2014.

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2. Cash dividends were declared and paid during the year.

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3. Common stock was issued in exchange for land.

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4. Investments that cost $35,000 were sold during the year.

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5. There were no write-offs of uncollectible accounts during the year.

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Sharpe’s 2014 income statement is as follows.

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Sales revenue $950,000

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Less: Cost of goods sold 600,000

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Gross profi t 350,000

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Less: Operating expenses (includes depreciation expense and bad debt expense) 250,000

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Income from operations 100,000

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Other revenues and expenses

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Gain on sale of investments $15,000

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Loss on sale of equipment (3,000) 12,000

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Income before taxes 112,000

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Income taxes 45,000

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Net income $ 67,000

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Instructions

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(a) Compute net cash provided by operating activities under the direct method.

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

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