acct DQ 3

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When forming a company, the options are sole proprietor, partnership, and corporation. Most choose corporation. Why is the corporate form seen to be best? What rights do the stockholders have? 


When raising capital sometimes the decision is to sell stock. What are the pros and cons of selling stock? Is it better to sell common or preferred stock? Why?





Please attempt this exercise on cash flows.


E12-20A   The income statement and additional data of Bolton Travel Products, Inc., follow:

Bolton Travel Products, Inc.

Income Statement

Year Ended December 31, 2012


  Service revenue                     $237,000

  Dividend revenue                        8,700         $245,700


  Cost of goods sold                  100,000

  Salary expense                          59,000

  Depreciation expense                28,000

  Advertising expense                    2,900

  Interest expense                           2,100

  Income tax expense                   14,000         206,000

            Net income                                          $39,700

Additional data:

a.Acquisition of plant assets was $130,000. Of this amount, $75,000 was paid in cash and $55,000 by signing a note payable.

b.Proceeds from sale of land totaled $25,000.

c.            Proceeds from issuance of common stock totaled $50,000.

d.Payment of long-term note payable was $16,000.

e.            Payment of dividends was $11,000.

f. From the balance sheets:

                                                12/31/2012      12/31/2011

Current assets:

  Cash                                      $125,000         $50,800

  Accounts receivable                  41,000           57,000

  Inventory                                  94,000           73,000

  Prepaid expenses                         9,200            8,700

Current liabilities:

  Accounts payable                    $32,000         $18,000

  Accrued liabilities                      82,000           57,000


â–¸ Prepare the operating section of Bolton’s statement of cash flows for the year ended   December 31, 2012, using the indirect method.

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