Question

The comparative balance sheets for Hinckley Corporation show the following information. Cash Accounts receivable Inventory Investments Buildings Equipment Patents December 31 2014 2013 $39,610 $14,200 18,460 11,900 17,110 9,750 -0 3,760 -O- 30,380 51,050 22,500 5,440 $131,670 $99,160 6,670 Allowance for doubtful accounts Accumulated depreciation equipment Accumulated depreciation-building Accounts payable Dividends payable Notes payable, short-term (nontrade) Long-term notes payable Common stock Retained earnings $3,170 2,410 -0- 5,440 -0- 2,940 32,860 43,230 41,620 $131,670 $5,290 5,220 6,480 3,760 4,030 3,950 25,850 33,190 11,390 $99,160 Additional data related to 2014 are as follows. 1. Equipment that had cost $10,930 and was 40% depreciated at time of disposal was sold for $3,840. 2. $10,040 of the long-term note payable was paid by issuing common stock. 3. Cash dividends paid were $4,030. 4. On January 1, 2014, the building was completely destroyed by a flood. Insurance proceeds on the building were $32,060 (net of $2,580 taxes). 5. Investments (available-for-sale) were sold at $1,680 above their cost. The company has made similar sales and investments in the past. 6. Cash was paid for the acquisition of equipment. 7. A long-term note for $17,050 was issued for the acquisition of equipment. 8. Interest of $2,630 and income taxes of $7,300 were paid in cash.

Answer 1

a) Net Income=Ending Retained Earnings-Beginning Retained Earnings=($20750-$6000)	$                                                           30,230.00
b) Cost of Equipment	$                                                           10,930.00
Less: Accumulated Depreciation=($10930*40%)	$                                                             4,372.00
Written down value	$                                                             6,558.00
Sales Value	$                                                             3,840.00
Loss on disposal	$                                                             2,718.00
Depreciation Expense
Accumulated Depreciation on Equipment sold	$                                                             4,372.00
Less: Decrease in Accumulated Depreciation	$                                                            -2,810.00
Depreciation Expense	$                                                             1,562.00
Equipment Purchase
Particular	Amount	Particular	Amount
To balance b/d	$                                                           22,500.00	By Bank	$                 3,840.00
To Long Term Note	$                                                           17,050.00	By Loss	$                 2,718.00
To Bank	$                                                           22,430.00	By Accumulated Depreciation	$                 4,372.00
		By Balance C/d	$               51,050.00
Total	$                                                           61,980.00	Total	$               61,980.00
Statement of Cash Flow
For the Year Ended December 31,2014
	Cash Flow from Operating Activities
	Net Income		$               30,230.00
	Operating Activities
	Depreciation Expense	$                              1,562.00
	Loss on sale of Equipment	$                              2,718.00
*	Flood damage	$                           -10,740.00
	Patent Amortization($6670-5440)	$                              1,230.00
	Gain on sale of Investment(given)	$                             -1,680.00
	Increase in Accounts Receivable($18460-$11900)	$                             -8,680.00
	Increase in Inventory($17110-$9750)	$                             -7,360.00
	Increase in Accounts Payable($5440-$3760)	$                              1,680.00	$              -21,270.00
	Net Cash Provided by Operating Activity=(A)		$               8,960.00
	Cash Flow from Investing Activities
	Sale of Investment($3760+$1680)	$                              5,440.00
	Sale of Equipment	$                              3,840.00
	Purchase of Equipment	$                           -22,430.00
	Proceeds from Flood damage of building($32060+$2580)	$                            34,640.00
	Net Cash from Investing Activities=(B)		$               21,490.00
	Cash Flow fom Financing Activities
	Payment of Dividends(given)	$                             -4,030.00
	Payment of short term note payable($3950-$2940)	$                             -1,010.00
	Net Cash used by Financing Activities=(C )		$                -5,040.00
	Net Increase in cash=(A)+(B)+(C )		$               25,410.00
	Cash at the beginning of the period		$               14,200.00
	Cash at the end of the period		$             39,610.00
*	Insurance Claim including tax	$                            34,640.00
	Less: Building net of accumulated Depreciation	$                            23,900.00
	Gain on Flood damage	$                            10,740.00