Use worksheet method for #1

example is exhibit 12-15

1. Prepare a statement of cash flows for Gallagher, Inc., for the year ended December 31, 2017 using the indirect method in the Operating Activities section of the statement. Note. Use the T-account method (illustrated in class) or Work-sheet Approach (illustrated in the Appendix to Chapter Twelve, pages (586-588) to derive the solution, including a legend at the bottom of the T-accounts / Work Sheet cross-referenced to the numbers in the T-accounts / Worksheet to explain your solution. Show your work. 2. Gallagher's management is concerned with its short-term liquidity and its solvency over the long run. To help management evaluate these, compute the following ratios, rounding all answers to the nearest one-tenth of a percent. a. Current ratio b. Acid-test ratio c. Cash flow from operations to current liabilities ratio d. Accounts receivable turnover ratio e. Number of days' sales in receivables f. Inventory turnover ratio g. Number of days' sales in inventory h. Debt-to-equity ratio i. Debt service coverage ratio j. Cash flow from operations to capital expenditures ratio 3. Comment on Gallagher's liquidity and its solvency. What additional information do you need to fully evaluate the company? Gallagher, Inc. Statement of Income and Retained Earnings For the Year Ended December 31, 2017 (all amounts in thousands of dollars) Net sales $48,000 Cost of goods sold 35,000 Gross profit $12,000 Selling general and administrative expense 6,000 Operating income $ 6.000 Interest expense 280 Income before tax $ 5,720 Income tax expense 2,280 Net income $ 3,440 Preferred dividends Income available to common $ 3,340 Common dividends 500 To retained earnings $ 2,840 Retained earnings, 1/1 12,000 Retained earnings, 12/31 $14,840 100 Gallagher, Inc. Comparative Balance Sheets December 31, 2017 and 2016 (all amounts in thousands of dollars) December 31 2017 Cash- $ 840 Accounts receivable 12,500 Inventory 8,000 Prepaid insurance -100 Total current assets $21,440 Land $ 4,000 Buildings and equipment- 12,000 Accumulated depreciation (3,700 Total long-term assets $12,300 Total assets 533 740 Accounts payable $ 7,300 Taxes payable 4,600 Notes payable 2.400 Current portion of bonds Total current liabilities $14,500 Bonds payable - - 1,400 Total liabilities $15.900 Preferred stock. $5 par- $ 1,000 Common stock, $1 par 2,000 Retained earnings 14,840 Total stockholders' equity $17,840 Total liabilities and stockholders' equity $33.740 A Change 2016 $ 2,700 - (1860) 9,000 - 3500 5,500 2500d - 400 - Boo). $17.600 $ 4.000 -9.000 3,000 d (3.000) 700c $10,000 $27.600 $ 5,000 4.200 1,600 200 $11,000 1,600 $12.600 $ 1.000 2.000 12,000 $15,000 $27,600 2,300c 400 800 200 (zoold 2 rya EXHIBIT 12-15 Julian Corp. Statement of Cash Flows Work Sheet Julian Corp. Statement of Cash Flows Work Sheet (Indirect Method) (all amounts in thousands of dollars) Balances 12/31/17 12/31/16 Cash Inflows (Outflows) Operating Investing Financing Noncash Activities Changes (11) 60 (6) 811 Accounts Cash Accounts Receivable Inventory Prepaid Insurance Long-Term Investments Land Property and Equipment 18 62 12 120 (612 309 50- 759 (30) (36* Accumulated Depreciation 15 (40 (713 214 40% 315 Accounts Payable Salaries and Wages Payable Income Taxes Payablo Notes Payable Bonds Payable Capital Stock Retained Earnings (8) (85) (200) (100) (246) (5) (35) (200 (75) (193) 150R 160 125 (63) 25 (677 672 39 120 Totals Not decrease in cash lol 1