Student Name: InstructorClass: McGraw-Hill/Irwin

Problem 12-8A

1. and 2.

Calculation of depreciation to add back to net income:Accumulated Depreciation, beginning balance $ 70 Correct!Accumulated Depreciation, ending balance $ 85 Correct!Debits to Accumulated Depreciation $ 10 Correct!Credits to Accumulated Depreciation $ 25 Correct!

Changes in noncash balance sheet accounts that impact net income:

Increase in Decrease inAccount Account

Current Assets Balance BalanceAccounts receivable (80) Correct!Inventory 35 Correct!Prepaid expenses (2) Correct!

Current LiabilitiesAccounts Payable 75 Correct!Accrued liabilities (10) Correct!Income taxes payable 8 Correct!

Changes in noncash balance sheet accounts that impact investing and financing:

Increase in Decrease inAccount Account

Noncurrent Assets Balance BalanceProperty, plant, and equipment (80) Correct!Long-term investments 7 Correct!

Liabilities and Stockholders' equityBonds payable 25 Correct!Common stock (40) Correct!

Property, Plant and EquipmentProperty, Plant and Equipment, beginning balance $ 420 Correct!Property, Plant and Equipment, ending balance $ 500 Correct!Debits to Property, Plant and Equipment $ 110 Correct!Credits to Property, Plant and Equipment $ 30 Correct!

Retained EarningsRetained Earnings, beginning balance $ 92 Correct!Retained Earnings, ending balance $ 132 Correct!Debits to Retained Earnings $ 16 Correct!Credits to Retained Earnings $ 56 Correct!

Student Name: InstructorClass: McGraw-Hill/Irwin

Problem 12-8A

EATON COMPANYStatement of Cash Flows

For the Year Ended December 31, 2011

Operating activities:Net income $ 56 Adjustments needed to convert net income to cash basis: Depreciation $ 25 Increase in accounts receivable (80) Decrease in inventory 35 Increase in prepaid expenses (2) Increase in accounts payable 75 Decrease in accrued liabilities (10) Increase in income taxes payable 8 Gain on sale of investments (5) Loss on sale of equipment 2 48 Net cash provided by operating activities 104 Correct!

Investing activities:Proceeds from sale of long-term investments $ 12 Proceeds from sale of equipment 18 Additions to plant and equipment (110)Net cash used for investing activities (80) Correct!

Financing activities:Issuance of bonds payable 25 Decrease in common stock (40)Cash dividends (16)Net cash used in financing activities $ (31) Correct!Net decrease in cash (7)Cash balance, January 1, 2011 11 Cash balance, December 31, 2011 4

Correct!

Given Data P12-8A:

EATON COMPANYComparative Balance Sheet

December 31, 2011, and 2010

2011 2010AssetsCash $ 4 $ 11 Accounts receivable 310 230 Inventory 160 195 Prepaid expenses 8 6 Total current assets 482 442 Property, Plant, and equipment 500 420 Less accumulated depreciation 85 70 Net property, plant, and equipment 415 350 Long-term investments 31 38 Total assets $ 928 $ 830

Liabilities and Stockholders' EquityAccounts payable $ 300 $ 225 Accrued liabilities 70 80 Income taxes payable 71 63 Total current liabilities 441 368 Bonds payable 195 170 Total liabilities 636 538 Common stock 160 200 Retained earnings 132 92 Total stockholders' equity 292 292 Total liabilities and stockholders' equity $ 928 $ 830

EATON COMPANYIncome Statement

For the Year Ended December 31, 2011

Sales $ 750 Cost of goods sold 450 Gross margin 300 Selling and administrative expenses 223 Net operating income 77 Nonoperating items: Gain on sale of investments $ 5 Loss on sale of equipment (2) 3 Income before taxes 80 Income taxes 24 Net income $ 56

Equipment cost $ 30 Equipment selling price $ 18 Accumulated depreciation of equipment $ 10 Long-term investment purchase $ 7 Long-term investment sale $ 12 Paid cash dividend ?

Stock repurchase $ 40

Student Name: InstructorClass: McGraw-Hill/Irwin

Problem 12-14A

1. and 2.

Calculation of depreciation to add back to net income:Accumulated Depreciation, beginning balance $ 190,000 Correct!Accumulated Depreciation, ending balance $ 210,000 Correct!Debits to Accumulated Depreciation $ 40,000 Correct!Credits to Accumulated Depreciation $ 60,000 Correct!

Calculation of depreciation to add back to net income:

Increase in Decrease inAccount Account

Current Assets Balance BalanceAccounts receivable 10,000 Correct!Inventory (54,000) Correct!Prepaid expenses 8,000 Correct!

Current LiabilitiesAccounts Payable (55,000) Correct!Accrued liabilities (7,000) Correct!Income taxes payable 3,000 Correct!

Calculation of depreciation to add back to net income:

Increase in Decrease inAccount Account

Noncurrent Assets Balance BalanceProperty, plant, and equipment (110,000) Correct!Long-term investments 30,000 Correct!

Liabilities and Stockholders' equityBonds payable 100,000 Correct!Common stock (5,000) Correct!

Property, Plant and EquipmentProperty, Plant and Equipment, beginning balance $ 750,000 Correct!Property, Plant and Equipment, ending balance $ 860,000 Correct!Debits to Property, Plant and Equipment $ 200,000 Correct!Credits to Property, Plant and Equipment $ 90,000 Correct!

Retained EarningsRetained Earnings, beginning balance $ 150,000 Correct!Retained Earnings, ending balance $ 192,000 Correct!Debits to Retained Earnings $ 28,000 Correct!Credits to Retained Earnings $ 70,000 Correct!

Student Name: InstructorClass: McGraw-Hill/Irwin

Problem 12-14A

ALLIED COMPANYStatement of Cash Flows

For the Year Ended December 31, 2011

Operating activities:Net income $ 70,000 Adjustments needed to convert net income to a cash basis: Depreciation $ 60,000 Decrease in accounts receivable 10,000 Increase in inventory (54,000) Decrease in prepaid expenses 8,000 Decrease in accounts payable (55,000) Decrease in accrued liabilities (7,000) Increase in income taxes payable 3,000 Loss on sale of equipment 6,000 Gain on sale of investments (20,000) (49,000)Net cash provided by operating activities 21,000 Correct!

Investing activities:Proceeds from sale of long-term investments 50,000 Proceeds from sale of equipment 44,000 Additions to plant and equipment (200,000)Net cash used for investing activities (106,000) Correct!

Financing activities:Issuance of bonds payable 100,000 Decrease in common stock (5,000)Cash dividends (28,000)Net cash provided by financing activities 67,000 Correct!Net decrease in cash (18,000)Cash balance, beginning of year 33,000 Cash balance, end of year $ 15,000

Correct!

3. Free cash flow computationNet cash provided by operating activities $ 21,000 Capital expenditures $ 200,000 Dividends 28,000 228,000 Free cash flow $ (207,000)

Correct!

Given Data P12-14A:

Minimum cash balance $ 20,000

ALLIED COMPANYComparative Balance Sheet

December 31, 2011, and 2010

2011 2010AssetsCurrent assets: Cash $ 15,000 $ 33,000 Accounts receivable 200,000 210,000 Inventory 250,000 196,000 Prepaid expenses 7,000 15,000 Total current assets 472,000 454,000 Long-term investments 90,000 120,000 Plant and equipment 860,000 750,000 Less accumulated depreciation 210,000 190,000 Net plant and equipment 650,000 560,000 Total assets $ 1,212,000 $ 1,134,000

Liabilities and Stockholders' EquityCurrent liabilities: Accounts payable $ 175,000 $ 230,000 Accrued liabilities 8,000 15,000 Income taxes payable 42,000 39,000 Total current liabilities 225,000 284,000 Bonds payable 200,000 100,000 Total liabilities 425,000 384,000 Stockholders' equity: Common stock 595,000 600,000 Retained earnings 192,000 150,000 Total stockholders' equity 787,000 750,000 Total liabilities and stockholders' equity $ 1,212,000 $ 1,134,000

Given Data P12-14A:

ALLIED COMPANYIncome Statement

For the Year Ended December 31, 2011

Sales $ 800,000 Cost of goods sold 500,000 Gross margin 300,000 Selling and administrative expenses 214,000 Net operating income 86,000 Nonoperating items: Gain on sale of investments $ 20,000 Loss on sales of equipment (6,000) 14,000 Income before taxes 100,000 Income taxes 30,000 Net income $ 70,000

Additional information:

Long-term investment cost $ 30,000 Long-term investment sale $ 50,000 Equipment cost $ 90,000 Equipment accumulated depreciation $ 40,000 Equipment selling price $ 44,000 Dividends declared and paid ? Stock was repurchased for cash ?

Student Name: InstructorClass: McGraw-Hill/Irwin

Problem 12A-5A

EATON COMPANYAdjusted Income Statement

For the Year Ended December 31, 2011

Sales $ 750 Adjustments to a cash basis: Increase in accounts receivable (80) 670 «- Correct!

Cost of goods sold 450 Adjustments to a cash basis: Decrease in inventory (35) Increase in accounts payable (75) 340 «- Correct!

Selling and administrative expenses 223 Adjustments to a cash basis: Increase in prepaid expenses 2 Decrease in accrued liabilities 10 Depreciation (25) 210 «- Correct!

Income taxes 24 Adjustments to a cash basis: Increase in income taxes payable (8) 16 «- Correct!

Net cash provided by operating activities $ 104 Correct!

EATON COMPANYStatement of Cash Flows

For the Year Ended December 31, 2011

Operating activities:Cash received from customers $ 670 Less cash disbursements for: Cost of merchandise sold $ 340 Selling and administrative expenses 210 Income taxes 16 Total cash disbursements 566 Net cash provided by operating activities 104 Correct!

Investing activities:Proceeds from sale of long-term investments 12 Proceeds from sale of equipment 18 Additions to plant and equipment (110)Net cash used in investing activities (80) Correct!

Financing activities:Issuance of bonds payable 25 Decrease in common stock (40)Cash dividends (16)Net cash used in financing activities (31) Correct!Net decrease in cash (7)Cash balance, beginning 11

Cash balance, ending $ 4 Correct!

Given Data P12A-5A:

EATON COMPANYComparative Balance Sheet

December 31, 2011, and 2010

2011 2010AssetsCash $ 4 $ 11 Accounts receivable 310 230 Inventory 160 195 Prepaid expenses 8 6 Total current assets 482 442 Property, Plant, and equipment 500 420 Less accumulated depreciation 85 70 Net property, plant, and equipment 415 350 Long-term investments 31 38 Total assets $ 928 $ 830

Liabilities and Stockholders' EquityAccounts payable $ 300 $ 225 Accrued liabilities 70 80 Income taxes payable 71 63 Total current liabilities 441 368 Bonds payable 195 170 Total liabilities 636 538 Common stock 160 200 Retained earnings 132 92 Total stockholders' equity 292 292 Total liabilities and stockholders' equity $ 928 $ 830

EATON COMPANYIncome Statement

For the Year Ended December 31, 2011

Sales $ 750 Cost of goods sold 450 Gross margin 300 Selling and administrative expenses 223 Net operating income 77 Nonoperating items: Gain on sale of investments $ 5 Loss on sale of equipment (2) 3 Income before taxes 80 Income taxes 24 Net income $ 56

Equipment cost $ 30 Equipment selling price $ 18 Accumulated depreciation of equipment $ 10 Long-term investment purchase $ 7 Long-term investment sale $ 12 Paid cash dividend ?

Stock repurchase $ 40