m. Decrease in accounts payable during the year.

E5.14 (LO 3) (Preparation of a Statement of Cash Flows) The comparative statements of

financial position of Lopez Inc. at the beginning and the end of the year 2022 appear as follows.
Lopez Inc.
Statements of Financial Position
Assets Dec. 31, 2022 Jan. 1, 2022 Inc./Dec.
Equipment $ 39,000 $ 22,000 $17,000 Inc.
Less: Accumulated depreciation—equipment (17,000) (11,000) 6,000 Inc.
Accounts receivable 91,000 88,000 3,000 Inc.
Cash 45,000 13,000 32,000 Inc.
Total $158,000 $112,000
Equity and Liabilities
Share capital—ordinary $100,000 $ 80,000 20,000 Inc.
Retained earnings 38,000 17,000 21,000 Inc.
Accounts payable 20,000 15,000 5,000 Inc.
Total $158,000 $112,000
Net income of $34,000 was reported, and dividends of $13,000 were paid in 2022. New equipment was
purchased and none was sold.
Instructions
Prepare a statement of cash flows for the year 2022.
E5.15 (LO 3) (Preparation of a Statement of Cash Flows) Presented below is a condensed
version of the comparative statements of financial position for Yoon Ltd. for the last 2 years at
December 31 (amounts in millions).
2022 2021
Investments ₩ 52,000 ₩ 74,000
Equipment 298,000 240,000
Less: Accumulated depreciation—equipment (106,000) (89,000)
Accounts receivable 180,000 185,000
Cash 157,000 78,000
Share capital—ordinary 160,000 160,000
Retained earnings 287,000 177,000
Current liabilities 134,000 151,000
Additional information:
Investments were sold at a loss of ₩ 7,000; no equipment was sold; cash dividends paid were ₩
50,000; and net income was ₩ 160,000.
Instructions

a. Prepare a statement of cash flows for 2022 for Yoon Ltd.

b. Determine Yoon’s free cash flow.

E5.16 (LO 3) (Preparation of a Statement of Cash Flows) A comparative statement of financial

position for Orozco AG is presented below.
 December 31
Assets 2022 2021
Land € 71,000 €110,000
Equipment 270,000 200,000
Accumulated depreciation—equipment (69,000) (42,000)
Inventory 180,000 189,000
Accounts receivable 82,000 66,000
Cash 63,000 22,000
Total €597,000 €545,000
Equity and Liabilities
Share capital—ordinary (€1 par) €214,000 €164,000
Retained earnings 199,000 134,000
Bonds payable 150,000 200,000
Accounts payable 34,000 47,000
Total €597,000 €545,000
Additional information:

1. Net income for 2022 was €105,000.

2. Cash dividends of €40,000 were declared and paid.
3. Bonds payable amounting to €50,000 were retired through issuance of ordinary shares.

Instructions

a. Prepare a statement of cash flows for 2022 for Orozco AG.

b. Determine Orozco’s current cash debt coverage, cash debt coverage, and free cash flow. Comment
on its liquidity and financial flexibility.

E5.17 (LO 1, 2, 3) (Preparation of a Statement of Cash Flows and a Statement of Financial

Position) Chekov Corporation’s statement of financial position at the end of 2021 included the
following items.
Land $ 30,000 Bonds payable $100,000
Buildings 120,000 Current liabilities 150,000
Equipment 90,000 Share capital—ordinary 180,000
Accum. depr.—buildings (30,000) Retained earnings 44,000
Accum. depr.—equipment (11,000) Total $474,000
Patents 40,000
Current assets 235,000
Total $474,000
The following information is available for 2022.

1. Net income was $55,000.

2. Equipment (cost $20,000 and accumulated depreciation $8,000) was sold for $9,000.
3. Depreciation expense was $4,000 on the building and $9,000 on equipment.
4. Patent amortization was $2,500.
 5. Current assets other than cash increased by $25,000. Current liabilities increased by $13,000.
6. An addition to the building was completed at a cost of $27,000.
7. A long-term investment in debt securities was purchased for $16,000.
8. Bonds payable of $50,000 were issued.
9. Cash dividends of $25,000 were declared and paid.
10. Treasury shares were purchased at a cost of $11,000.

Instructions
(Show only totals for current assets and current liabilities.)

a. Prepare a statement of cash flows for 2022.

b. Prepare a statement of financial position at December 31, 2022.

E5.18 (LO 3, 4) (Preparation of a Statement of Cash Flows, Analysis) The comparative

statements of financial position of Menachem NV at the beginning and end of the year 2022 appear
below.
Menachem NV
Statements of Financial Position
Assets Dec. 31, 2022 Jan. 1, 2022 Inc./Dec.
Equipment € 37,000 € 22,000 €15,000 Inc.
Less: Accumulated depreciation—equipment (17,000) (11,000) 6,000 Inc.
Accounts receivable 106,000 88,000 18,000 Inc.
Cash 22,000 13,000 9,000 Inc.
Total €148,000 €112,000
Equity and Liabilities
Share capital—ordinary €100,000 € 80,000 20,000 Inc.
Retained earnings 28,000 17,000 11,000 Inc.
Accounts payable 20,000 15,000 5,000 Inc.
Total €148,000 €112,000
Net income of €34,000 was reported, and dividends of €23,000 were paid in 2022. New equipment was
purchased and none was sold.
Instructions

a. Prepare a statement of cash flows for the year 2022.

b. Compute the current ratio (current assets ÷ current liabilities) as of January 1, 2022, and
December 31, 2022, and compute free cash flow for the year 2022.
c. In light of the analysis in (b), comment on Menachem’s liquidity and financial flexibility.

Problems

P5.1 (LO 2) (Preparation of a Classified Statement of Financial Position, Periodic

Inventory) Presented below is a list of accounts in alphabetical order.

Accounts Receivable
Accumulated Depreciation—Buildings