Operating Activities Analysis Exercises and Problems

Using the Balance Sheet and Income Statement data below, analyze the transactions for Tolito Treats, Inc. for $2013$ and $2014.$

Tolito Treats, Inc.

Balance Sheets as of December $31,2013$ and $2014$

$20132014$

Cash $$34,000\mathrm{.}00$ $$34,500\mathrm{.}00$

Accounts Receivable, Net $$12,000\mathrm{.}00$ $$17,000\mathrm{.}00$

Inventory $$16,000\mathrm{.}00$ $$14,000\mathrm{.}00$

Investments $($Long Term$)$ $$6,000\mathrm{.}00\_\_$

Fixed Assets $$80,000\mathrm{.}00$ $$93,000\mathrm{.}00$

Accumulated Depreciation $-48,000-$$$39,000\mathrm{.}00$

Total Assets $$100,000\mathrm{.}00$ $$119,500\mathrm{.}00$

Accounts Payable $$19,000\mathrm{.}00$ $$12,000\mathrm{.}00$

Bonds Payable $$10,000\mathrm{.}00$ $$30,000\mathrm{.}00$

Common Stock $$50,000\mathrm{.}00$ $$61,000\mathrm{.}00$

Retained Earnings $$21,000\mathrm{.}00$ $$28,000\mathrm{.}00$

Treasury Stock $\_\_-$$$11,500\mathrm{.}00$

Total Liabilities and Equity $$100,000\mathrm{.}00$ $$119,500\mathrm{.}00$

Additional data for the period January $1,2014$ through December $31,2014$ are:

$1.$ Sales on account, $$70,000.$

$2.$ Purchases on account, $$40,000.$

$3.$ Depreciation, $$5,000.$

$4.$ Expenses paid in cash, $$18,000($including $$4,000$ of interest and $$6,000$ in taxes$).$

$5.$ Decrease in inventory, $$2,000.$

$6.$ Sales of fixed assets for $$6,000$ cash; cost $$21,000$ and two$-$thirds depreciated $($loss or gain is included in income$).$

$7.$ Purchase of fixed assets for cash, $$4,000.$

$8.$ Fixed assets are exchanged for bonds payable of $$30,000.$

$9.$ Sale of investments for $$9,000$ cash.

$10.$ Purchase of treasury stock for cash, $$11,500.$

$11.$ Retire bonds payable by issuing common stock, $$10,000.$

$12.$ Collections on accounts receivable, $$65,000.$

$13.$ Sold unissued common stock for cash, $$1,000.$

Required:

$1.$ In Excel, prepare a statement of cash flows $($indirect method$)$ for the year ended December $31,2014.$

$2.$ In Excel, prepare a side$-$by$-$side comparative statement contrasting two bases of reporting: $(1)$ net income and $(2)$ cash flows from operations.

$3.$ Which of the two financial reports in $($b$)$ better reflects profitability? Explain in one paragraph in Word or using a comment box in Excel.