Page 669 - Accounting Principles (A Business Perspective)

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c. How is the company expanding its asset base?
d. How much greater is the total market value of the company's outstanding shares of common stock than the
book equity (stockholders; equity)?

e. What is the likelihood that the company will be able to pay at least the current level of dividends in the future?
f. Do you expect to see purchases of treasury stock increase or decrease in the future?
g. Given the following data, calculate the cash flow per share of common stock ratio, the cash flow margin ratio,
and the cash flow liquidity ratio. (Round the net cash provided by operating activities to the nearest million before
you calculate the ratios.) How do the ratios compare with the ones for companies illustrated in the chapter?
(in millions)
Average number of shares of common stock 1,059
outstanding
Net sales 9,295
Cash and marketable securities 62
Current liabilities 5,471
Alternate problem E The following information is from the accounting records of Wescott Office Supplies,
Inc., for the fiscal years 2011 and 2010:

2011 2010
Assets
Cash $ 66,250 $ 61,000
Accounts receivable, net 84,000 42,000
Merchandise inventory 42,000 48,250
Prepaid expenses 7,875 12,125
Land 94,500 78,750
Buildings 199,500 147,000
Accumulated depreciation – buildings (31,500) (26,250)
Equipment 257,250 210,000
Accumulated depreciation- equipment (78,750) (63,000)
Total assets $641,125 $509,875
Liabilities and stockholders' equity
Accounts payable $73,500 $ 47,250
Accrued liabilities payable 50,500 55,750
Five-year note payable 52,500 -0-
Capital stock -$50 par 420,000 367,500
Retained earnings 39,375
Total liabilities and stockholders' equity $641,125 $509,875
Net income for year ended 2011 June 30, was USD 56,250.
Additional land was acquired for cash, USD 15,750.
No equipment or building retirements occurred during the year.

Equipment was purchased for cash, USD 47,250.
The five-year note for USD 52,500 was issued to pay for a building erected on land leased by the company.
Stock was issued at par for cash, USD 52,500.
Dividends declared and paid were USD 51,000.
The company paid interest of USD 10,000 and income taxes of USD 40,000.
a. Prepare a working paper for a statement of cash flows.
b. Prepare a statement of cash flows under the indirect method. Also prepare any necessary supplemental
schedule(s).

Beyond the numbers—Critical thinking
Business decision A National Sports, Inc., is a sports equipment sales company. During 2011, the company
replaced USD 18,000 of its fully depreciated equipment with new equipment costing USD 23,000. Although a

Accounting Principles: A Business Perspective 670 A Global Text