Question

Stonewall Company was organized on January 1, 2015. During the year ended December 31, 2015, the company provided the following data:
Analysis of selected accounts and transactions follows:
a. Issued 3,000 shares for cash, at $ 18 per share.
b. Borrowed $ 15,000 on a one- year, 8 percent interest- bearing note; the note was dated June 1, 2015.
c. Paid $ 29,000 to purchase machinery.
d. Purchased merchandise for resale at a cost of $ 50,000; paid $ 40,000 cash and the balance on account.
e. Exchanged plant machinery with a carrying amount of $ 2,000 for office machines with a market value of $ 2,000.
f. Declared a cash dividend of $ 5,000 on December 15, 2015, payable to shareholders on January 15, 2016.
g. Because this is the first year of operations, all account balances are zero at the beginning of the year; therefore, the changes in the account balances are equal to the ending balances.
Required:
1. Prepare a statement of cash flows for the year ended December 31, 2015. Use the indirect method to report cash flows from operating activities.
2. Compute and explain the quality of earnings ratio and the capital expenditures ratio.


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  • CreatedAugust 04, 2015
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