Preparing complete cash flow statement using indirect method

Question1. Listed below are account balances taken from the adjusted trial balance of Alpha Inc. as of December 31, 2012.

                                                                Debit               Credit
Accounts receivable                                  1,090,500   
Building                                                     610,000   
Cash                                                         105,000   
Accrued payroll expense                                                   125,000
Bad debt                                                     10,000   
Financing receivables                                   250,000   
Interest receivable                                        25,000   
Amortization                                                 55,000   
Franchise                                                    150,000   
Bonds payable                                                                  375,000
Inventory                                                     106,000   
Gain on discontinued operations, net of tax                            400,000
Salaries and benefits                                       400,000   
Accumulated other comprehensive loss                30,000     
Land                                                             280,000   
Impairment                                                      65,000   
Patent                                                            25,000   
Notes receivable                                              360,000   
Accrued income taxes                                                          295,000
Cost of goods sold                                         2,750,000   
Property loss                                                   100,000   
Oil Wells                                                         548,000    
Machinery                                                       100,000   
Deferred taxes                                                                    100,000
Treasury bills                                                     45,000   
Pension payable                                                                   455,000
Prepaid rent                                                       60,000   
Inventory loss                                                    20,000   
Investments                                                     440,000   
Building loss                                                       30,000   
Revolving credit line                                                              60,000
Furniture and fixtures                                          200,000   
Interest payable                                                                   30,000
Bond sinking fund                                                150,000   
Research and development                                     15,000   
Supplies                                                              24,000   
Gain on sale of investments                                                     42,000
Trademark                                                           30,000   
Accounts payable                                                                  620,000
Restructuring                                                      135,000   
Preferred stock                                                                      300,000
General and administrative                                     210,000   
Copyrights                                                           50,000   
Accumulated depreciation                                                        120,000
Allowance for uncollectible accounts                                            50,000
Marketing and selling                                            150,000   
Leasehold improvement                                          50,000   
Allowance for obsolete inventory                                                 26,000
Income tax                                                          600,000   
Available for sale equity securities                             35,000   
Dividends payable                                                                      68,000
Goodwill                                                                50,000   
Common stock                                                                          400,000
Interest income                                                                          15,000
Depreciation                                                          10,000   
Capital lease                                                                             140,000
Loss on abandoned assets                                        50,000   
Notes payable                                                                           500,000
Retained earnings                                                   152,000   
Unearned revenue                                                                      120,000
Treasury stock                                                        50,000   
Sales                                                                                      5,460,000
Dividend income                                                       14,500
Commercial paper                                                    100,000   
                                                                         9,715,500        9,715,500

The following is additional information with regards to amounts appearing in the trial balance above:

Accounts receivable relate to sales in the normal course of business and are due within 90 days of the related sale.  There is a $125,000 note receivable included in the accounts receivable balance that has a due date of November 30, 2013.

Financing receivable relate to sales in the normal course of business on a revolving credit arrangement.  Installment receivables are non-interest bearing and are expected to be collected at a rate of $8,000 per month.

Interest receivable is related to Company cash and other investments as is expected to be collected in February 2013.

Cash includes $55,000 of highly liquid equity securities designated by the Company board of directors for future building replacement and $20,000 of treasury notes maturing on January 15, 2013.

Investments include $100,000 of trading securities, $200,000 of debt securities with a maturity date of January 15, 2014, and $140,000 of money market funds.

Prepaid rent relates to an advance payment for the period from January 1, 2013 – August 31, 2014.

Notes receivable relate to a loan made to a Company affiliate.  The note requires the affiliate to make payments on the last day of each month beginning on July 31, 2013 equal to principle of $10,000 plus interest at 4%.

Land includes a $140,000 property on which the Company has a factory, $50,000 of land which the Company has a sales office that they believe they will have a gain on but they plan to relocate and sell in 2015, $50,000 of land that is being held for future expansion, and $40,000 of land adjacent to the land held for future expansion that the Company believes it can profit from as its value increases.

Capital lease includes an equipment lease, which requires principal payments of $1,000 per month, beginning on July 1, 2013.

Note payable includes a $200,000 note due December 31, 2013 and a $300,000 note, which requires payments of $20,000 plus 3% interest on the last day of each month beginning on April 1, 2013.

Bonds payable include on $75,000 bond maturing on March 30, 2014 and a $200,000 bond, which requires quarterly payments of $5,000 plus interest on March 31, June 30, September 30 and December 31 of each year and a $100,000 bond due on June 30, 2013.

The Company can borrow in aggregate up to $100,000 on its revolving line of credit.  The Company is required to sign individual notes with a 90 day maturity period each time it borrows.  The notes related to the amounts currently borrowed mature on March 15, 2013.  Payments of interest only on the outstanding balance are due each December 31.  The revolving credit line agreement expires on December 31, 2014.

Common Stock includes the proceeds 100,000 shares of $1 par value stock issued to investors at $4 per share.  The Company charter authorizes the issue of 500,000 shares of common stock.  Preferred stock includes 3000 shares of 5% stock issued at $100 per share.

Unearned revenue includes rent collected in advance at $10,000 per month for a portion of the company plant rented to another business.

Interest payable is due on January 3, 2013

One half of the bond sinking fund balance is related to the $75,000 bond, one quarter of the balance is related to the $100,000 bond and the remaining balance is related to the $200,000 bond.

Property loss arose from hurricane damage at a facility in Miami

Inventory loss relates to a write down of the inventory carrying value because cost exceeded market value at December 31, 2012

Building loss relates to the destruction of a facility by invaders from outerspace.  The amount included in the trial balance is net of any related income tax impact

REQUIRED:  Using all the information provided above prepare:

(1) A balance sheet for Alpha, Inc. as of December 31, 2012.  The balance sheet should be prepared in proper form and format including all relevant headings, sections, captions, titles, totals, subtotals and disclosures one would expect to see on the balance sheet.

(2) A multiple step income statement for Alpha for the year ending December 31, 2012.  The income statement must be prepared in proper form and format including all relevant headings, sections, captions, titles, totals, subtotals, and disclosures one would normally expect on the face of the income statement. 

(3) Solutions must be prepare using either excel or word (excel is best).

Question2. Listed below are some balances of Omega, Inc for the year ending December 31, 2013 and as of December 31, 2012 and 2013

Year ending                             12/31/13   
Revenue                                3,000,000   
Cost of goods sold                  1,600,000   
Rent expense                            115,000   
Insurance expense                      80,000   
Interest expense                          5,000   
Income tax expense                   100,000   
Payroll and benefit expense         225,000   
Depreciation cost                        70,000   
Dividend income                          30,000   
Gain on sale of investments          45,000   
Loss on building fire                     35,000   
Interest income                          25,000   
General and administrative cost    155,000   
Impairment                                 20,000   
As of                                       12/31/12         12/31/13
Cash                                         100,000         1,595,000
Accounts receivable                     325,000           350,000
Interest receivable                        12,000             10,000
Inventory                                   400,000            375,000
Accrued payroll and benefits            75,000              88,000
Accrued rent                                 50,000              50,000
Prepaid insurance                            80,000             60,000
Accrued general and administrative    55,000              50,000
Accrued income tax                        20,000               65,000

The following is additional information with regards Omega during the year ending December 31, 2013:

Purchased $200,000 of machinery with a note payable
Paid a dividend on preferred stock of $100,000
Made capital lease payments of $80,000
Issued a $200,000 bond
Purchased Delta Stock for $225,000
Borrowed $700,000 under its line of credit
Purchased land for $50,000
Sold a building for $100,000 for $20,000 cash and $80,000 mortgage
Loaned $125,000 to the CEO
Sold a franchise for $130,000
Proceeds from sale of UAL stock $100,000
Made mortgage payments of $30,000
Repurchased Omega stock for $15,000
Received insurance proceeds of $125,000 related to building fire
Issued $150,000 of Omega common stock

Requirements:  Using the information above for Omega Inc

(1) Prepare a complete cash flow statement for the year ending December 31, 2013 using the indirect method.  The statement must include all titles, headings, captions, sections, totals, subtotals and disclosures one would normally expect on the face of the cash flow statement.

(2) Prepare the operating section of the cash flow statement for the year ending December 31, 2013 using the direct method.

(3) The cash flow statements should be prepared in proper form and format including all relevant headings, sections, captions, titles, totals and subtotals.

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Financial Accounting: Preparing complete cash flow statement using indirect method
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