Accounting:
Using the given information, prepare a complete statement of cash flows for calendar-year 2005 using the indirect method.
SEE ATTACHED WORD DOCUMENT
Please see the attached document. Thank you.
EXERCISE 13-3 Net Cash Provided by Operating Activities (Indirect Method) (LO3)
For the year just completed, Strident Corporation, an office equipment wholesaler, had net income of $84,000. Balances in the company’s current asset and current liabilities accounts at the beginning and end of the year were as follows:
End of Year Beginning of Year
Current Assets:
Cash $60,000 $80,000
Accounts receivable $250,000 $190,000
Inventory $437,000 $360,000
Prepaid expenses $12,000 $14,000
Current liabilities:
Accounts payable $420,000 $390,000
Accrued liabilities $8,000 $12,000
The Deferred Income Taxes liability account on the balance sheet increased by $6,000 during the year, and depreciation charges were $50,000.
Required:
Using the indirect method, determine the net cash provided by operating activities for the year.
EXERCISE 13-8 Prepare a Statement of Cash Flows (indirect Method) (LO2, LO3)
Comparative financial statement data for the Holly Company follow:
December 31
2007 2006
Cash $4 $7
Accounts receivable 36 29
Inventory 75 61
Plant and equipment 210 180
Accumulated depreciation (40) (30)
Total assets $258 $247
Accounts payable $45 $39
Common stock 90 70
Retained earnings 150 138
Total liabilities and shareholders’ equity $285 $247
For 2007, the company reported net income as follows:
Sales $500
Cost of goods sold 300
Gross margin 200
Selling and administrative expenses 180
Net income 20
Dividends of $8 were declared and paid during 2007.
Required:
Using the indirect method, prepare a statement of cash flows for 2007.
ANALYTICAL THINKING (LO2, LO3)
Listed below are the changes that have taken place in Luang Corporation’s balance sheet accounts as a result of the past year’s activities:
Debit Balance Accounts Net Increase (Decrease)
Cash $(30,000)
Accounts Receivable 20,000
Inventory (60,000)
Prepaid Expenses 10,000
Long-Term Investments 50,000
Plant and Equipment 120,000
Net Increase $110,000
Credit Balance Accounts Net Increase (Decrease)
Accumulated Depreciation $40,000
Accounts Payable 30,000
Accrued Liabilities 10,000
Taxes Payable 10,000
Bonds Payable (40,000)
Deferred Income Taxes (5,000)
Common Stock 20,000
Retained Earnings 45,000
Net Increase $110,000
The following additional information is available about last year’s activities:
a. The company sold equipment during the year for $40,000. The equipment originally cost the company $120,000, and it had $70,000 in accumulated depreciation at the time of sale.
b. Net income for the years was $_____?_____.
c. The balance in the Cash account at the beginning of the year was $100,000; the balance at the end of the year was $_____?_____.
d. The company declared and paid $35,000 in cash dividends during the year.
e. Long-term investments that had cost $60,000 were sold during the year for $80,000.
f. The beginning and ending balances in the Plant and Equipment and Accumulated Depreciation accounts for the past year are given below:
Ending Beginning
Plant and Equipment $620,000 $500,000
Accumulated Depreciation $240,000 $200,000
g. If data are not given explaining the account, make the most reasonable assumption as to the cause of the change.
Required:
Using the indirect method, prepare a statement of cash flows for the past year.
Using given information in attachment (sheet 1) prepare a statement of cash flows using direct method.
See the attached file.
21st CENTURY TECHNOLOGIES
Income Statement
For the Year Ended December 31, 2005
Revenue:
Net sales $3,200,000
Interest revenue 40,000
Gain on sales of marketable securities 34,000
Total revenue and gains $3,274,000
Costs and expenses:
Cost of goods sold $1,620,000
Operating expenses (including $150,000 depreciation) 1,240,000
Interest expense 42,000
Income taxes 100,000
Loss on sales of plant assets 12,000
Total costs, expense, and losses 3,014,000
Net income $260,000
Changes in balance sheet accounts:
1. Increase in accounts receivable $60,000
2. Decrease in accrued interest receivable 2,000
3. Decrease in inventory 60,000
Decrease in accounts payable to merchandise suppliers 16,000
4. Increase in short-term prepayments of operating expenses 6,000
Decrease in accrued operating expenses 8,000
5. Increase in accrued interest payable 4,000
6. Decrease in accrued income taxes payable 14,000
7. Debit and credit entries in selected balance sheet accounts:
Debit Credit
Marketable Securities $60,000 $38,000
Notes Receivable (cash loans made to borrowers) 44,000 28,000
Plant Assets (see paragraph 8) 500,000 36,000
Notes Payable (short term borrowing) 92,000 82,000
Capital Stock 20,000
Additional Paid-in Capital – Capital Stock 160,000
Retained Earnings (see paragraph 9) 120,000 260,000
8. Plant assets account credit represents all plant assets sold
or retired during year
9. Retained earnings debit represents dividends declared and paid
Retained earnings credit represents net income
10. All investing and financing activities were cash transactions
11. Cash and cash equivalents, beginning of year 244,000
Cash and cash equivalents, end of year 164,000
Additional data:
1. Dividends declared and paid were $25,000
2. During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had a book value of $8,500 at the time of sale.
3. All depreciation expense is in the selling expense category.
4. All sales and purchases are on account.
Instructions:
a. Prepare a statement of cash flows using the indirect method.
b. Compute these cash-basis measures:
1. Current cash debt coverage ratio.
2. Cash debt coverage ratio.
3. Free cash flow.
Notes in the margin:
a. Cash from operations $33,500
Please follow the questions, and balance sheet and Income statement are attached.
Additional Information
1. There was no gain or loss on the sales of the long-term investments, nor on the bonds retired.
2. Old machinery with an original cost of $45,060 was sold for $2,520 cash.
3. New machinery was purchased for $81,060 cash.
4. Cash dividends of $ 40,320 were paid.
5. Additional shares of stock were issued for cash
Prepare a complete statement of cash flows for calendar-year 2009 using the indirect method.
Classify the following cash flows as operating, investing, or financing activities.
1: Sold Long-term investments for cash
2: Received cash payments from customers.
3: Paid cash for wages and salaries.
4: purchased inventories for cash.
5: Paid cash dividends.
6: Issued common stock for cash.
7: Received cash interest on a note.
8: Paid cash interest on outstanding notes.
9: Received cash from sale of land at a loss.
10: Paid cash for property taxes on building.
(Cash Provided by Operating, Investing, and Financing Activities)
The balance sheet data of Brown Company at the end of 2007 and 2006 follow.
2007 2006
Cash $30,000 $35,000
Accounts receivable (net) 55,000 45,000
Merchandise inventory 65,000 45,000
Prepaid expenses 15,000 25,000
Equipment 90,000 75,000
Accumulated depreciation-equipment (18,000) (8,000)
Land 70,000 40,000
$307,000 $257,000
Accounts payable $65,000 $52,000
Accrued expenses 15,000 18,000
Notes payable-bank, long term -0- 23,000
Bonds payable 30,000 -0-
Common stock, $10 par 189,000 159,000
Retained Earnings 8,000 5,000
$307,000 $257,000
Land was acquired for $30,000 in exchange for common stock, par $30,000, during the year; all equipment purchased was for cash. Equipment costing $10,000 was sold for $3,000; book value of the equipment was $6,000. Cash dividends of $10,000 were declared and paid during the year.
Instructions
Compute net cash provided or used (Enter negative number in parenthesis for cash used, for example (20,000).) by:
(a) operating activities. $
(b) investing activities. $
(c) financing activities. $
1. When accrued liability increase from the beginning to the end of the year, it means cash was not expended for some of the company’s operating expenses so the increase would be added to net income to convert to cash flow from operating activities under the indirect method.
True or False
2. A transaction that does not cause an inflow of cash should be reported on the statement of cash inflows only if it is an adjustment to convert net income on an accrual basis to cash basis?
True or False
Refer to the attached financial statement information for Catalina Inc. for fiscal year ended 12/31/2003. Assume the following:
Notes payable are not related to amounts owed to regular suppliers due to regular operations.
Changes in Property, Plant and Equipment accounts did involve cash.
The only changes in accumulated Deprecation were due to Deprecation Expense.
Changes in Stockholders Equity accounts involved cash.
The dividends were cash dividends declared and paid during the year.
* Prepare a schedule for the calculation of cash generated from operating activities under the direct method
* Prepare a complete statement of cash flows by the direct method
* Prepare the Operating Activities section of the statement of the Statement of Cash Flows by the indirect method
I am having problems with the numbers adding up correctly. Please see attached. Thanks,
ABC Inc., rents equipment to customers ranging from
homeowners to large construction companies. The financial information
shown below was gathered from its accounting records for 2006. Assume
any increase or decrease in the balances from 1/1/06 to 12/31/06 resulted
from either receiving or paying cash in the transaction. For example, during
2006 the balance on loans for land holdings increased $150,000 because the
company received $150,000 in cash by taking out an additional loan on the
land.
Balance as of Balance as of
Items 1/1/06 12/31/06
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,000 $ 50,000
Cash receipts from customers . . . . . . . . . . ? 600,000
Loans on land holdings . . . . . . . . . . . . . . 100,000 250,000
Cash distributions to owners . . . . . . . . . . . .? 150,000
Loan on building . . . . . . . . . . . . . . . . . . . .100,000 70,000
Investments in securities . . . . . . . . . . . . . 850,000 1,050,000
Cash payments for other expenses . . . . . . .? 50,000
Cash payments for taxes . . . . . . . . . . . . . . .? 55,000
Cash payments for operating expenses . . . ? 135,000
Cash payments for wages and salaries . . . ? 100,000
a. Prepare a statement of cash flows for ABC Inc., for the year ended December 31, 2006.
b. Does ABC Inc., appear to be in good shape from a
cash flow standpoint? What other information would help you analyze the situation?
The statement of cash flows is one of the four primary financial statements.
1. Describe the content and layout of a statement of cash flows, including it three sections.
2. List at least three transactions classified as investing activities in a statement of cash flows.
3. List at least three transactions classified as financing activities in a statement of cash flows.
4. List at least three transactions clssified as significant noncash financing and investing activities in the statement of cash flows.
Please help with attached problem.
Kazaam Company, a merchandiser, recently completed its calendar-year 2005 operations. For the year,
(1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers,
(3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash
payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid
Expenses. Kazaam’s balance sheets and income statement follow:AAce Sheets
December 31, 2005
2005 2004
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,875 $ 76,625
Accounts receivable . . . . . . . . . . . . . . . . . 65,000 49,625
Merchandise inventory . . . . . . . . . . . . . . . 273,750 252,500
Prepaid expenses . . . . . . . . . . . . . . . . . . . 5,375 6,250
Equipment . . . . . . . . . . . . . . . . . . . . . . . . 159,500 110,000
Accum. depreciation?Equipment . . . . . . . . (34,625) (44,000)
Total assets . . . . . . . . . . . . . . . . . . . . . . . $522,875 $451,000
Liabilities and Equity
Accounts payable . . . . . . . . . . . . . . . . . . . $ 88,125 $116,625
Short-term notes payable . . . . . . . . . . . . . 10,000 6,250
Long-term notes payable . . . . . . . . . . . . . 93,750 53,750
Common stock, $5 par value . . . . . . . . . . 168,750 156,250
Contributed capital in excess
of par, common stock . . . . . . . . . . . . . . 32,500 0
Retained earnings . . . . . . . . . . . . . . . . . . . 129,750 118,125
Total liabilities and equity . . . . . . . . . . . . . $522,875 $451,000
Kazaam Company Income Statement Four year ended 12/31/2005
Sales . . . . . . . . . . . . . . . . . . . . . . . . . $496,250
Cost of goods sold . . . . . . . . . . . . . . 250,000
Gross profit . . . . . . . . . . . . . . . . . . . . 246,250
Operating expenses
Depreciation expense . . . . . . . . . . . $ 18,750
Other expenses . . . . . . . . . . . . . . . 136,500 155,250
Other gains (losses)
Loss on sale of equipment . . . . . . . 5,125
Income before taxes . . . . . . . . . . . . . . $ 85,875
Income taxes expense . . . . . . . . . . . . 12,125
Net income . . . . . . . . . . . . . . . . . . . . $ 73,750
Additional Information on Year 2005 Transactions
a. The loss on the cash sale of equipment is $5,125 (details in b).
b. Sold equipment costing $46,875, with accumulated depreciation of $28,125, for $13,625 cash.
c. Purchased equipment costing $96,375 by paying $25,000 cash and signing a long-term note payable
for the balance.
d. Borrowed $3,750 cash by signing a short-term note payable.
e. Paid $31,375 cash to reduce the long-term notes payable.
f. Issued 2,500 shares of common stock for $18 cash per share.
g. Declared and paid cash dividends of $62,125.
Required
1. Prepare a complete statement of cash flows; report its operating activities using the indirect method.
Disclose any noncash investing and financing activities in a note.
Analysis Component
2. Analyze and discuss the statement of cash flows prepared in part 1, giving special attention to the
wisdom of the cash dividend payment.
You are provided with the following transactions that took place during a recent fiscal year.
Transaction Where Reported on Statement Cash Inflow, Outflow, or No Effect?
(a) Recorded depreciation expense on the plant assets.
(b) Recorded and paid interest expense.
(c) Recorded cash proceeds from a sale of plant assets.
(d) Acquired land by issuing common stock.
(e) Paid a cash dividend to preferred stockholders.
(f) Distributed a stock dividend to common stockholders.
(g) Recorded cash sales.
(h) Recorded sales on account.
(i) Purchased inventory for cash.
(j) Purchased inventory on account.
Hint:
Distinguish among operating, investing, and financing activities.
Instructions
Complete the table indicating whether each item (1) should be reported as an operating (O) activity, investing (I) activity, financing (F) activity, or as a noncash (NC) transaction reported in a separate schedule, and (2) represents a cash inflow or cash outflow or has no cash flow effect. Assume use of the indirect approach.
BYP12-6 Ron Nord and Lisa Smith are examining the following statement of cash flows for Carpino Company for the year ended January 31, 2007.
CARPINO COMPANY
Statement of Cash Flows
For the Year Ended January 31, 2007
Sources of cash
From sales of merchandise $380,000
From sale of capital stock 420,000
From sale of investment (purchased below) 80,000
From depreciation 55,000
From issuance of note for truck 20,000
From interest on investments 6,000
Total sources of cash 961,000
Uses of cash
For purchase of fixtures and equipment 330,000
For merchandise purchased for resale 258,000
For operating expenses (including depreciation) 160,000
For purchase of investment 75,000
For purchase of truck by issuance of note 20,000
For purchase of treasury stock 10,000
For interest on note payable 3,000
Total uses of cash 856,000
Net increase in cash $ 105,000
Ron claims that Carpino’s statement of cash flows is an excellent portrayal of a superb first year with cash increasing $105,000. Lisa replies that it was not a superb first year. Rather, she says, the year was an operating failure, that the statement is presented incorrectly, and that $105,000 is not the actual increase in cash. The cash balance at the beginning of the year was $140,000.
Instructions
With the class divided into groups, answer the following.
(a) Using the data provided, prepare a statement of cash flows in proper form using the indirect method. The only noncash items in the income statement are depreciation and the gain from the sale of the investment.
(b) With whom do you agree, Ron or Lisa? Explain your position.
When preparing a statement of cash flows, retained earnings adjustments are required so that which of the following are separated on the statement ____
revenue and cash, assets and laibilities, depreciation and purchases, or net profits and dividends
please advise answer & why – thanks!
Each attachment contains one problem. Thank you.
Attachment P5-5_Addl_Info_2 contains information needed for problem P5-5
Prepare a statement of cash flows using the indirect method. (List multiple entries with a positive cash flow first and then the negative cash flow. List multiple entries in descending order of amount. For negative cash flows, please put amounts in parenthesis.)
** See attachment **
(SCF-Direct and Indirect Methods from Comparative Financial Statements) George Winston Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company.
P23−7
The comparative statement of financial position and income statement for Winston as of May 31, 2008, are shown on the next page. The company is preparing its statement of cash flows.
GEORGE WINSTON COMPANY
COMPARATIVE STATEMENT OF FINANCIAL POSITION
AS OF MAY 31
2008 2007
Current assets
Cash $ 33,250 $ 20,000
Accounts receivable 80,000 58,000
Merchandise inventory 210,000 250,000
Prepaid expenses 9,000 7,000
Total current assets 332,250 335,000
Plant assets
Plant assets 600,000 502,000
Less: Accumulated depreciation 150,000 125,000
Net plant assets 450,000 377,000
Total assets $782,250 $712,000
Current liabilities
Accounts payable $123,000 $115,000
Salaries payable 47,250 72,000
Interest payable 27,000 25,000
Total current liabilities 197,250 212,000
Long-term debt
Bonds payable 70,000 100,000
Total liabilities 267,250 312,000
Shareholders’ equity
Common stock, $10 par 370,000 280,000
Retained earnings 145,000 120,000
Total shareholders’ equity 515,000 400,000
GEORGE WINSTON COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED MAY 31, 2008
Sales $1,255,250
Cost of merchandise sold 722,000
Gross profit 533,250
Expenses
Salary expense 252,100
Interest expense 75,000
Other expenses 8,150
Depreciation expense 25,000
Total expenses 360,250
Operating income 173,000
Income tax expense 43,000
Net income $ 130,000
The following is additional information concerning Winston’s transactions during the year ended May 31, 2008.
1. All sales during the year were made on account.
2. All merchandise was purchased on account, comprising the total accounts payable account.
3. Plant assets costing $98,000 were purchased by paying $48,000 in cash and issuing 5,000 shares of stock.
4. The “other expenses” are related to prepaid items.
5. All income taxes incurred during the year were paid during the year.
6. In order to supplement its cash, Winston issued 4,000 shares of common stock at par value.
7. There were no penalties assessed for the retirement of bonds.
8. Cash dividends of $105,000 were declared and paid at the end of the fiscal year.
Instructions
A. Compare and contrast the direct method and the indirect method for reporting cash flows from operating activities.
B. Prepare a statement of cash flows for Winston Company for the year ended May 31, 2008, using the direct method. Be sure to support the statement with appropriate calculations. (A reconciliation of net income to net cash provided is not required.)
C. Using the indirect method, calculate only the net cash flow from operating activities for Winston Company for the year ended May 31, 2008.
abc company
Income Statement
For the Year ended 12/31/08
Sales 297,500
Gain on sale of plant assets 5,000
302,500
Less:
CGS 99,460
Operating expenses, excluding depreciation 14,670
Interest Expense 2,940
Depreciation Expense 35,500
Income Tax Expense 7,270 159,840
Net Income 142,660
abc company
Balance Sheet
December 31
2008 2007
Assets
Cash 92,700 33,400
Accounts Receivable 80,800 37,000
Inventory 121,900 102,650
Investments 84,500 107,000
Plant Assets 310,000 205,000
Accumulated Depreciation (49,500) (40,000)
Total Assets 640,400 445,050
Liabilities & Stockholder’s Equity
Accounts Payable 62,700 48,280
Accrued expenses payable 12,100 18,830
Bonds Payable 140,000 70,000
Common Stock 250,000 200,000
Retained Earnings 175,600 107,940
Total Liability & Stockholder’s Equity 640,400 445,050
Additional Information:
1. Cash Dividends declared and paid during the year $75,000
2. Plant assets costing $36,000 were sold for $15,000 resulting in a gain of $5000
3. Investments were sold at cost
4. New plant assets costing $141,000 were purchased for cash during the year.
REQUIRED:
Prepare a Statement of Cash Flows using the indirect method.
A2. (Statement of cash flows) Johnson’s accountant also presented all of the items in the statement
of cash flows in alphabetical order. Please put these items in the correct format for a
statement of cash flows for Johnson’s Scuba Co. for the year ending January 31. All data are
in thousands of dollars.
Accounts payable increase 100
Accounts receivable increase (50)
Cash dividends (common stock) (200)
Cash and equivalents at beginning of year 300
Cash and equivalents at end of year 150
Depreciation and amortization 200
Increase in other long-term liabilities 0
Inventories increase (200)
Issuance of long-term debt, net 100
Net cash provided by (used in) financing activities 0
Net cash provided by (used in) investing activities (700)
Net cash provided by (used in) operating activities 550
Net income 500
Net increase in cash and equivalents (150)
Notes payable increase 100
Purchase of plant and equipment (700
What information can a user of financial information obtain from the statement of cash flows and which method of reporting do you prefer? What are the three major activities presented in the statement? Provide examples of each of the activities.
Is it possible to have a positive net income and negative cash flow from operations? If your answer is no, explain fully. If your answer is yes, provide two examples when one might find this.
Is it possible to have a negative net income and positive cash flow from operations? If your answer is no, explain fully. If your answer is yes, provide two examples when one might find this.
The cash flow statement is an important, and often overlooked, financial statement. However, it can provide important data for use by internal organization management. By analyzing the balance sheet and income statement, the accountant can then prepare the statement and share the results with both internal and external users.
Use the Unit 3, Part 2 Template to determine the appropriate activity (operating, investing, or financing) for each transaction listed for Skylar Enterprises, Inc., and prepare the cash flow statement using the indirect method in good form for reporting. Data is provided in the Information worksheet in the template; complete the statement of cash flow in the Cash Flow Statement worksheet. Use the suggested materials in the Unit Resources if you need more information on preparing cash flow statements.
I do know that the change in cash is 51,000. And that the beginning period is suppose to be 12/21/12 with an ending period of 1/1/12.
Statement of Cash Flow. See attached file for full problem description.
The Four Star Café
Condensed Balance Sheets
December 31, 2001 and 2002
2001 2002
Cash $15,000 $70,000
Marketable Securities $5,000 10000
Accounts receivable 14000 10000
Inventory 20000 24000
Investment 10000 15000
Equipment 320000 415000
Accumulated depreciation -50000 -60000
Total Assets 334000 484000
Current Liabilities
Accounts payable 15000 17000
Dividends payable 23000 22000
mortgage payable(current) 20000 20000
Noncurrent Liabilities
mortgage payable(current) 160000 200000
Common stock 100000 110000
Retained earings 16000 115000
Total liabilities and Owner’s Equity 334000 484000
Additional information
1. Investments costing $15000 were sold for $20000.
2. Dividends declared during 2002 totaled $40000.
3. The Café’s van, which cost $20000, was sold at a loss of $5000. Its net book value on the date of sale was $10000.
4. Marketable securities that cost $10000 were sold for $5000.
5. Assume current liabilityes are paid on a timely basis.
Prepare the SCF for 2002.
Prepare the Spartan Inn’s SCF for 2002 using the indirect method.
See attached file for full problem description.
Spartan Inn
Condensed Balance Sheets
December 31, 2001 and 2002
Assets 2001 2002
Current Assets
Cash $30,000 $40,000
Marketable securities 50000 50000
Accounts receivable 100000 95000
Inventories 20000 25000
Total current assets 200000 210000
Investments 100000 60000
Property and Equipment
Land 500000 500000
Building 5000000 6000000
Equipment 1000000 1100000
Accumulated depreciation -1600000 -2000000
Net property and equipment 4900000 5600000
Total Assets $5,200,000 $5,870,000
Liabilities and Owners’ Equity
Current Liabilities
Accounts payable $60,000 $70,000
Dividends payable 30000 50000
Current portion of LTD 100000 130000
Total 190000 250000
Long-term debt 4000000 4370000
Capital stock 700000 700000
Retained earnings 310000 550000
Total Liabilities and Owners’ Equity $5,200,000 $5,870,000
Spartan Inn
Condensed Income Statement
For the year ended December 31,2002
Sales $6,000,000
Cost of sales 1000000
Gross profit 5000000
Depreciation 400000
Other expenses(except depreciation) 4500000
Net operating income 100000
Gain on sales of investments 300000
Income taxes 110000
Net income $290,000
Additional information:
1. Dividends declared during 2002 totaled $50000.
2. No investments were purchased during 2002.
3. The current portion of long-term debt at the end of 2002 was reclassified from noncurrent during 2002.
4. No equipment or building were sold during 2002.
5. Long-term debt was borrowed to partially finance the building purchase.
REQUIRED:
Prepare the Spartan Inn’s SCF for 2002 using the indirect method.
What three types of activities are summarized in the statement of cash flows?
** see Excel attachment **
—————-
Using financial statements to prepare a statement of cash flows -indirect method.
The comparative balance sheets and an income statement for Redwood corporation follow:
Balance sheet as of December 31
Assets 2010 2009
Cash $68,800 40,600
Accounts rec 30,000 22,000
Merch invent 160,000 176,000
Preaid rent 2,400 4,800
Equipment 256,000 288,000
Accum depr (146,800) (236,000)
Land 192,000 80,000
Total assets 562,400 375,400
Liabilities
Accts pay inven $67,000 $76,000
Salaries pay 28,000 24,000
Stockholders eq
Common stock $25
Par value 250,000 200,000
Retained earnings 217,400 75,400
Tot liabilities are
Stockholder eq 562,400 375,400
Income statement for the year ended December 31, 2010
Sales $1500,000
Cost of goods sold (797,200)
Gross profit 702,800
Operating expenses
Depreciation expense (22,800)
Rent expense (24,000)
Salaries expense (256,000)
Other operating expenses (258,000)
Net income $142,000
Other Inventory
1. Purchased land for $112,000
2. Purchased new equipment for $100,000
3. Sold old equipment that cost $132,000 with accumulated depreciation of $112,000 for $20,000 cash.
4. Issued common stock for $50,000
Prepare the statement of cash flows for 2010 using the indirect method.
The balance sheets for 2004 and 2003 for Columbia Sportswear are attached. In addition, Columbia reported the following information:
? 2004 net income was $138,624. Tax expense was $76,297.
? Columbia did not pay dividends in 2004.
? Columbia sold property, plant and equipment for $40 cash and recognized a loss of $541 on this sale.
? Columbia sold investments for cash at original cost (i.e., there was no gain or loss).
? Depreciation of plant, property and equipment totaled $18,544 in 2004. Amortization of intangible assets totaled $84.
? Assume all capital expenditures and purchases of other long-term assets were paid in cash.
? Other liabilities consist of various long-term operating liabilities.
Note you will have to determine the effect on the cash flow statement of any other event(s) by analyzing the given information.
1) Prepare the cash flow statement for 2004 using the indirect method.
2) Suppose you are an investor. Evaluate Columbia’s policy of not paying you a dividend. Why may Columbia not pay a dividend? Does the company have sufficient cash flow to pay a dividend? Explain.
See attached file please.
Statement of Cash Flows
(1) Prepare the operating activities section of the statement of cash flows based
on the following information for A Company:
Net Income
$195,000
Depreciation Expense
$45,000
Loss on Sale Of Equipment
$5,000
Decrease in Accounts Receivable Compared to Prior Year
$15,000
Increase in Accounts Payable Compared to Prior Year
$17,000
Decrease in Prepaid Expenses Compared to Prior Year
$4,000
Use the Indirect Method.
(2) For each reconciliation item, explain why it has the specific effect (positive or
negative) on cash basis.
See attached problem.
DQ. 1 As an investor, does one section of the statement of cash flows interest you more than other sections? Why or why not?
DQ. 2 Does your answer to DQ 1 change if you are management? A creditor? Why or why not?
DQ. 3 Which method do you prefer, the direct or indirect? Why?
DQ. 4 In what ways does the statement of cash flows relate to the balance sheet?
DQ. 5 In what ways does the statement of cash flows relate to the income statement?
I can not get the cashflow statement to match the increase in cash from the balance sheet
(Preparation of a Statement of Cash Flows) Presented below is a condensed version of the comparative balance sheets for Zubin Mehta Corporation for the last two years at December 31.
2007 2006
Cash $177,000 $ 78,000
Accounts receivable 180,000 185,000
Investments 52,000 74,000
Equipment 298,000 240,000
Less: Accumulated depreciation (106,000) (89,000)
Current liabilities 134,000 151,000
Capital stock 160,000 160,000
Retained earnings 307,000 177,000
Additional information:
Investments were sold at a loss (not extraordinary) of $10,000; no equipment was sold; cash dividends paid were $30,000; and net income was $160,000.
Instructions
1. Prepare a statement of cash flows for 2007 for Zubin Mehta Corporation.
2. Determine Zubin Mehta Corporation’s free cash flow.
Managerial accounting-statement of cash flows
SHORES INC.
Comparative Balance Sheet
December 31, Year 2, and Year 1
Yr. 2 Yr. 1
Assets
Cash $8 $18
Accounts receivable 355 233
Inventory 120 168
Prepaid expenses 12 5
Plant and equipment 612 475
Less accumulated depreciation (97) (88)
Long-term investments 17 22
Total assets $1,027 $833
Liabilities and Stockholders’ Equity
Accounts payable $321 $225
Accrued liabilities 62 74
Bonds payable 288 174
Deferred income taxes 45 36
Common stock 205 254
Retained earnings 106 70
Total liabilities and stockholders’ equity $1,027 $833
SHORES INC.
Income Statement
For the Year Ended December 31, Year 2
Sales $805
Cost of goods sold 502
Gross margin 303
Selling and administrative expenses 215
Net operating income 88
Nonoperating items:
Gain on sale of investments $7
Loss on sale of equipment 4 3
Income before taxes 91
Less income taxes 24
Net income $67
Equipment cost $20
Equipment sale 10
Accumulated depreciation on equipment 6
Long-term investment purchase 5
Long-term investment sale 12
Cash dividends 31
Check figure:
(1) Net cash provided by operating
activities $91
I had incorrect info on the first problem…this one is now correct.
A Company’s net income last year was $119,000. Changes in the company’s balance sheet accounts for the year appear below:
Increases
(decreases)
Debit Balances:
Cash………………………………………..$29,000
Accounts receivable……………….$(21,000)
Inventory………………………………..$12,000
Prepaid expenses……………………$(8,000)
Long-term investments………….$80,000
Plant and equipment………………$10,000
Credit Balances:
Accumulated depreciation…….$26,000
Accounts Payable…………………..$23,000
Accrued liabilities…………………..$14,000
Taxes Payable………………………$(9,000)
Bonds Payable……………………..$(50,000)
Deferred taxes………………………$4,000
Common Stock……………………..$20,000
Retained earnings…………………$74,000
The company declared and paid cash dividends of $45,000 last year.
Required:
a. Construct in good form the operating activities section of the company’s statement of cash flows for the year. (Use the indirect method.)
b. Construct in good form the investing activities section of the company’s statement of cash flows for the year.
c. Construct in good form the financing activities section of the company’s statement of cash flows for the year.
Dear Brainmass,
I am having some difficulty in understanding this problem on Statement of Cash Flows. Please see the attached file for further details. I would really appreciate the assistance when you get the time. Thank you in advance for reviewing my post.
Statement of Cash Flows
The condensed financial statements of Danielle Manufacturing Company for the years ended December 31, 2006 and December 31, 2005 are as follows:
Danielle Manufacturing Company
Comparative Balance Sheet
December 31, 2006 and 2005
2006 2005 Difference
Cash and short term investments $321,600 $76,800 $244,800
Accounts receivables (net) $246,400 $98,000 $148,400
Inventories (LIFO – lower of cost or market) $225,000 $115,800 $109,200
Investments – Available for sale $180,000 $202,000 ($22,000)
Plant Assets $480,000 $425,000 $55,000
Accumulated Depreciation ($60,000) ($104,000) ($44,000)
_______________________________
Total Assets $1,393,000 $813,600 $579,400
Accounts Payable and accrued expenses $200,000 $130,400 $69,600
Mortgage Payable $100,000 $154,000 ($54,000)
Common stock and paid in capital $350,000 $262,200 $87,800
Retained Earnings $743,000 $267,000 $476,000
_______________________________
Total Liabilities and stockholder’s equity $1,393,000 $813,600 $579,400
Danielle Manufacturing Company
Income Statement
For the Year Ended December 31, 2006
Net Sales $880,000
Cost of goods manufactured $260,000
Depreciation of plant assets $84,000 $344,000
_______ _______
Gross profit on sales $536,000
Selling and administrative expenses $20,000
Other (income) and expenses:
Interest and other revenue ($30,000)
Gain on sale of investments ($10,000)
Interest expense $6,000
Loss on sale of assets $24,000 ($10,000)
______ _______
Income before tax expense $526,000
Income taxes $10,000
_______
Net Income $516,000
Cash dividends paid $40,000
_______
Income retained in the business $476,000
Additional Information:
1. No unrealized gains or losses have occurred on the available for sale securities.
2. Investments were sold during the year.
3. Plant assets in the amount of $210,000 were purchased during the year: $170,000 for cash and $40,000 in exchange for the company’s common stock.
Required:
Prepare a statement of cash flows using the indirect method. Show all calculations.
Please see attached.
Presented below is information related to the operations of Bryers Corporation.
December
2006 2005 2006_
Cash $ 63,000 $ 40,000 Sales $420,000
Accounts receivable 58,000 48,000 Cost of goods sold 190,000
Inventory 37,000 22,000 Gross profit 230,000
Prepaid expenses 16,000 20,000 Depreciation expense 14,000
Land 36,000 20,000 Other operating expenses 141,000
Building 100,000 100,000 Income from operations 75,000
Accumulated depreciation? Loss on equipment sale 2,000
building (17,000) (8,000) Income before income taxes 73,000
Equipment 58,000 80,000 Income tax expense 23,000
Accumulated depreciation? Net income $ 50,000
equipment (15,000) (20,000)
Total $336,000 $302,000
Accounts payable $ 35,000 $ 39,000
Bonds payable 0 100,000
Common stock 200,000 100,000
Retained earnings 101,000 63,000
Total $336,000 $302,000
Additional information:
In 2006,
(a) Bryers declared and paid a cash dividend of $12,000.
(b) The company converted $100,000 of bonds into common stock.
(c) Equipment with a cost of $22,000 and a book value of $12,000 was sold for $10,000. Land was acquired for cash.
(d) Prepaid expenses pertain to operating expenses; accounts payable pertains to merchan-dise purchases.
Instructions
Prepare a statement of cash flows in proper form for 2006, using the indirect method.
1. Indicate whether the transaction is an operating activity, a financing activity, or an investing activity. Assume all purchase and sale transactions are for cash unless otherwise stated.
Depreciation expense
operating activity
financing activity
investing activity
2. Dairy Delights reported the following information for its most recent fiscal year. Accounts payable increased $3,900; inventory decreased $2,700; net income was $6,600; and depreciation expense was $1,500. On the statement of cash flows, net cash flow from operating activities should be reported as
$1,500
$6,900
$9,300
$14,700
3. Under which format(s) of the statement of cash flows would you expect to find a line titled “Net Cash Flow from Operating Activities?”
Indirect Method Format Direct Method Format
Yes Yes
Yes No
No Yes
No No
4. Sonny’s Liquors, Inc. had the following cash flows during March:
Paid for inventory
$ 20,000
Paid wages to employees
40,000
Received from cash sales
100,000
Paid for equipment
60,000
Received a loan
70,000
What was the cash flow from financing activities?
$70,000 inflow
$80,000 outflow
$120,000 outflow
$60,000 outflow
5. The indirect format of the cash flow statement reconciles
assets to liabilities and owners’ equity
accrual basis net income to cash from operations
accrual basis net income to change in cash balance
sales revenues to accrual basis net income
6. Which of the following is a false statement?
a company can have a net income for the period but have a net decrease in cash from operations
a company that consistently reports net cash inflow from investing activities has many growth opportunities
a company that reports a net loss for the period may not necessarily report a net cash outflow from operating activities
depreciation expense is added back to net income to arrive at cash from operations
7. The primary difference between the cash flows statement and all other primary external financial statements is that the cash flows statement is
not an accrual based statement and all others are
not prepared unless the firm is a manufacturer
an optional statement in the external reporting package
prepared before the end of the year and not after
8. The following information is available to prepare a statement of cash flows:
Cash paid to owners for dividends
$1,000
Cash received from customers from prior credit sales
8,600
Cash paid for long-term assets
3,300
Cash paid for income taxes
2,700
What are the cash flows from operations under the direct method?
$11,300
$ 5,900
$ 5,300
$ 2,600
9. Indicate whether the transaction is an operating activity, a financing activity, or an investing activity. Assume all purchase and sale transactions are for cash unless otherwise stated.
Payment of a cash dividend
operating activity
financing activity
investing activity
10. Which of the following is a cash flow from an investing activity?
payment for advertising
cash receipt from a customer for a previous credit sale
cash received from sale of equipment
payment of dividends
11. Indicate whether the transaction is an operating activity, a financing activity, or an investing activity. Assume all purchase and sale transactions are for cash unless otherwise stated.
Collection of principal from a note receivable
operating activity
financing activity
investing activity
12. Which of the following is a TRUE statement regarding the operating activities section of the statement of cash flows when the indirect format is used?
it explains the relationship between cash flows for a period and the results of operations reported on the income statement
it is designed to report to the reader what events caused cash to increase during the period and what events caused cash to decrease during the period
it results in a slightly higher amount of cash from operations being reported because depreciation expense is included
it is easier to understand and interpret correctly than when it is prepared using the direct method
13. Indicate whether the transaction is an operating activity, a financing activity, or an investing activity. Assume all purchase and sale transactions are for cash unless otherwise stated.
Borrow cash on a long-term note
operating activity
financing activity
investing activity
14. The direct and indirect formats are methods of preparing the
operating activities section of a statement of cash flows
investing activities section of a statement of cash flows
income statement
balance sheet
15. A statement of cash flows has been prepared. The sum of the three major components (operating activities, investing activities, financing activities) will add up to an amount equal to
the ending cash balance reported on the balance sheet
net income for the period on the accrual basis
the ending amount of working capital
the net change in the cash account during the year
16. When determining cash flows from operating activities using the indirect format, depreciation expense is subtracted from netincome.
True
False
17. Red River Manufacturing reported a substantial net loss for the most recent accounting period. Its net cash flows for the same period
must have been negative
must have been positive
could have been either negative or positive
cannot be measured
18. The sale of equipment is a financing activity.
True
False
19. Indicate whether the transaction is an operating activity, a financing activity, or an investing activity. Assume all purchase and sale transactions are for cash unless otherwise stated.
Collection of interest revenue on note receivable in the collection of principal from a note receivable
operating activity
financing activity
investing activity
20. A firm that has negative cash flows from operating activities and positive cash flows from investing and financing activities is experiencing prosperous growth.
True
False
What is the purpose of the statement of cash flows? Why are statements of cash flow important when assessing the financial strenght of an organization?
See attached Excel format of problem.
Please prepare a cashflow statement based upon the following information.
Assets
Cash $ 30,000 $15,000
Accounts receivable 18,000 14,000
Prepaid expenses 6,000 9,000
Inventory 35,000 15,000
Long-term investments-0- 18,000
Equipment 60,000 30,000
Accumulated depreciation – equipment (18,000) (14,000)
Total assets $120,000 $85,000
Liabilities and Stockholders’ Equity
Accounts payable $ 28,000 $ 7,000
Bonds payable 37,000 45,000
Common stock 40,000 23,000
Retained earnings 18,000 10,000
Total liabilities and stockholders’ equity $120,000 $85,000
Additional information:
1. Net income for the year ending December 31, 2009, was $35,000.
2. Cash dividends of $23,500 were declared and paid during the year.
3. Long-term investments that had a book value of $18,000 were sold for $16,000.
4. Sales for 2009 are $124,000.
Please provide assistance in recording land and stock activity on the statement of cashflows using the indirect method.
Statement of Cash Flows, Indirect Method
Following are an income statement for Boulder Hill, Inc., for the year ended December
31, 2004, and the company’s balance sheets as of December 31, 2003 and 2004.
Boulder Hill, Inc.
Balance Sheets
December 31, 2003 and 2004
2003 2004
ASSETS
Cash $ 12,100 $ 36,500
Accounts Receivable 10,600 12,700
Inventory 14,700 13,000
Prepaid Expenses 1,300 700
Total Current Assets $ 38,700 $ 62,900
Equipment $ 52,000 $ 52,000
Less: Acc. Depreciation (16,300) 35,700 (22,000) 30,000
Investment in Land 5,100 ______
Total Assets $ 79,500 $ 92,900
LIABILITIES
Accounts Payable $ 7,100 $ 5,200
Accrued Liabilities 3,300 3,700
Total Current Liab. $ 10,400 $ 8,900
STOCKHOLDERS’ EQUITY
Common Stock $ 4,500 $ 4,800
Additional PIC 18,200 20,300
Retained Earnings 46,400 58,900
Total SE 69,100 84,000
Total Liabilities and SE $ 79,500 $ 92,900
Boulder Hill, Inc.
Income Statement
For the Year Ended December 31, 2004
Sales $ 92,900
Cost of Goods Sold (36,800)
Gross Profit $ 56,100
Operating Expenses:
Selling & General Expenses $14,600
Depreciation Expense 5,700 (20,300)
Operating Income $ 35,800
Loss on Sale of Land (2,500)
Income before Income Tax $ 33,300
Income Tax Expense (13,300)
Net Income $ 20,000
192 SECTION THREE STATEMENT OF CASH FLOWS AND FINANCIAL STATEMENT ANALYSIS
The prepaid expenses and accrued liabilities included in Boulder Hill’s balance
sheets involve selling or administrative (operating) expenses. All of Boulder Hill’s
sales and merchandise purchases are made on credit. Following is additional financial
information obtained from Boulder Hill’s accounting records for 2004.
(a) Collections of accounts receivable $90,800
(b) Purchases of merchandise 35,100
(c) Payments of accrued (operating) liabilities 3,300
(d) Payments of operating expenses 9,600
(e) Prepayments of operating expenses 700
(f) Expiration of prepaid (operating) expenses 1,300
(g) Payments to suppliers 37,000
(h) Proceeds from sale of land 2,600
(i) Sale of 300 shares of $1 par value common
stock for $8 per share 2,400
(j) Declaration and payment of cash dividends
on common stock 7,500
(k) Payment of 2004 income taxes 13,300
(l) Accrual of unpaid operating expenses at year-end 3,700
(m) Year-end adjusting entry to record depreciation
expense on equipment 5,700
Required:
Prepare a statement of cash flows for Boulder Hill for the year ended December 31,
2004, using the indirect method.
Please see file attach.
Financial Statement: SCF
Preparing an SCF is an important step in budget development because it helps managers to forecast the future budget on basis of operating, investing, and financing activities. Use the information given in the table below to prepare an SCF for The Green Restaurant for the current year. When preparing the SCF Be sure to determine whether the amounts are a source or uses of cash; and the appropriate section of the SCF the amount belongs to either: operating, investing, or financing.
Net Income $116,300
Depreciation $15,000
Decrease in Accounts Receivables $10,000
Increase in Inventory $3,000
Decrease in Accounts Payable $16,500
Purchased Equipment $35,000
Payment of Long-Term Debt $25,000
Purchase of Investments $60,000
Download the Cash Flow, to compute and save your SCF
This has to be done on the excel sheet.
(See attached file for full problem description)
—
EXERCISE 13-6 Net Cash Provided by Operating Activities (Indirect Method) (LO5)
Changes in various accounts and gains and loses on sales of assets during the year for Weston Company, an industrial air conditioning sales and installation company, are given below:
Item Amount
Accounting Receivable…………..
Accrued Interest receivables…….
Inventory………………………..
Prepaid Expenses……………….
Accounts Payable ………………
Accrued Liabilities………………
Deferred Income taxes Liability….
Sales of equipment………………
Sale of long-term investments……
$70, 000 decrease
$6,000 increase
$110,000 increase
$3,000 decrease
$40,000 Decrease
$9,000 increase
$15,000 increase
$8,000 gain
$12,000 loss
Required:
For each item, place an X in the Add or Deduct column to indicate whether the dollar amount should be added to or deducted from net income under the indirect method when computing the cash provided by operating activities for the year. Use the following column headings in preparing your answers:
Item Amount Add Deduct
EXERCISE 13-9 Prepare a statement of Cash Flows (Indirect Method0 (LO2,LO3)
The following changes took place last year in Herald Company’s balance sheet accounts:
Debit Balance Accounts Credit Balance Accounts
Cash ……………………… $20 I
Accounts Recieveable……. $10 D
Inventory………………….. $30 I
Prepaid Expenses………… $5 D
Long-Term Investments. ….$30 D
Plant and Equipment………..150 I
Land ………………… …..30 D Accumulated Depreciation …..$40 I
Accounts Payable ……………$20 I
Accrued Liabilities……………$10D
Taxes Payable ………………$10 I
Bonds Payable ………………$20 D
Deferred Income taxes ……… $5 I
Common Stock …………….$40 I
Retained Earnings……………$40 I
Long-Term investments that had cost the company $50 were sold during the year for $45, and land that had cost $30 was sold for $70. In addition, the company declared and paid $35 in cash dividends during the year. No sales or retirements of plant and equipment took place during the year.
The company’s income for the last year follows:
Sales …………………………………………………….. $600
Less cost of goods sold ………………………………….. 250
Gross margin ……………………………………………. 350
Les operating expenses ………………………………….. 280
Net operating income ……………………………………. 70
Nonoperating items:
Loss on sale of investments ………………………………. $(5)
Gain on sale of land ……………………………………… 40 35
Income before taxes ……………………………………… 105
Less income taxes ……………………………………….. 30
Net income ……………………………………………… $ 75
The company’s cash balance at the beginning of the year ws $100, and its balance at the end of the year was $120.
Required
1. Use the indirect method to determine the cash provided by operating activities for the year.
2. Prepare a statement of cash flows for the year.
EXERCISE 13-10 (Appendix 13A) Adjust Net income to a Cash Basis (Direct Method) (LO4)
Refer to the data for Herald Company in Exercise 13-9.
Required:
Use the direct method to convert the company’s income statement to a cash basis.
PROBLEM 13-16 Prepare and Interpret a Statement of Cash Flows (Indirect Method) (LO2, LO3)
Marisa Thalmer, president of Becker Products, considers $14,000 to be the minimum cash balance for operating purposes. As can be seen from the statements below, only $3,000 in cash was available at the end of Year 2. Since the company reported a large net income for the year, and also issued both bonds and common stock, the sharp decline in cash is puzzling to Ms. Thalmer.
BECKER PRODUCTS
Comparative Balance Sheet
December 31, Year 2 and Year 1
Year 2 Year 1
Assets
Current assets:
Cash ………………………………………..
Accounts receivable …………………………
Inventory ……………………………………
Prepaid expenses ……………………………
Total Current assets………………………….
Long-term investments ………………………
Plant and equipment………………………….
Less accumulated depreciation……………….
Net plant and equipment …………………….
Total assets …………………………………
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable……………………………
Accrued liabilities……………………………
Total current liabilities………………………..
Bonds payable ………………………………
Deferred income taxes……………………….
Stockholders’equity:
Preferred stock………………………………
Common stock………………………………
Retained earnings…………………………….
Total stockholders’equity ……………………
Total liabilities and stockholders’s equity……..
$ 3,000
120,000
108,000
5,000
236,000
54,000
436,000
60,000
376,000
$666,000
$ 72,000
19,000
91,000
130,000
12,000
82,000
265,000
86,000
433,000
$666,000
$ 22,000
82,000
85,000
8,000
197,000
74,000
280,000
50,000
230,000
$501,000
$ 60,000
18,000
78,000
10,000
95,000
238,000
80,000
413,000
$501,000
BECKER PRODUCTS
Income Statement
For the Year Ended December 31, Year 2
Sales………………………………
Less Cost of goods sold……………
Gross Margin………………………
Less operating expenses……………
Net operating income………………
Nonoperating income:
Gain on sale of investments……….
Gain on sale equipment …………..
Income before taxes ………………
Less income taxes…………………
Net income ……………………….
$10,000
3,000 $502,000
310,000
192,000
156,000
36,000
13,000
49,000
18,000
$ 31,000
The following additional information is available for Year 2.
a. Dividends totaling $25,000 were declared and paid in cash.
b. Equipment was sold during the year for $10,000. the equipment had originally cost $25,000 and had accumulated depreciation of $18,000.
c. The decrease in the Preferred Stock account is the result of a conversation of preferred stock into an equal dollar amount of common stock into an equal dollar amount of common stock.
d. Long-term investments that had cost $20,000 were sold during the year for $30,000.
Required:
1. Using the direct method, compute the cash provided by operating activities for Year 2.
2. Using the data from (1) above, and other data from the problem as needed, prepare a statement of cash flows for Year 2.
3. Explain to the president the major reasons fro the decline in the company’s cash position.
PROBLEM 13-17 (Appendix 13A) Prepare and Interpret Statement of Cash Flows (Direct Method) (LO2, LO4)
Refer to the financial statements for Becker Products in Problem 13-16. Since the Cash account decreased so dramatically during Year 2, the company’s executive committee is anxious to see how the income statement would appear on a cash basis.
Required:
1. Using the direct method, adjust the company’s income statement for Year 2 to a cash basis.
2. Using the data from (1) above, and other data from the problem as needed, prepare a statement of cash flows for Year 2.
3. PREPARE a brief explanation for the executive committee setting forth the major reasons for the sharp decline in cash during the year.
Balance sheet for Douder Company appears below:
Comparative Balance Sheet
Dec. 31, 2006 Dec. 31, 2005
Assets
Cash $53,000 $12,000
Accounts receivable 6,000 8,000
Inventory 11,000 7,000
Prepaid expenses 2,000 3,000
Equipment 20,000 20,000
Accumulated depreciation?equipment (3,000) (2,000)
Total assets $89,000 $48,000
Liabilities and Stockholders’ Equity
Accounts payable $ 1,000 $ 4,000
Long-term note payable 13,000 14,000
Common stock 38,000 18,000
Retained earnings 37,000 12,000
Total liabilities and stockholders’ equity $89,000 $48,000
The income statement for the year is as follows:
DOUDER COMPANY
Income Statement
For the Year Ended December 31, 2006
Sales (all on credit) $280,000
Expenses and losses
Cost of goods sold $192,000
Operating expenses, exclusive of depreciation 42,300
Depreciation expense 1,000
Interest expense 1,200
Loss on sale of land 2,500
Income taxes 9,000
Total expenses and loss 248,000
Net income $ 32,000
Cash dividends of $7,000 were paid during the year. Land costing $20,000 was acquired by the issuance of common stock. The property was subsequently sold for $17,500 cash.
Instructions
Prepare a statement of cash flows for the year ended December 31, 2006, using the indirect method.
2. The comparative balance sheets for Gallup Company appear below:
GALLUP COMPANY
Comparative Balance Sheet
Dec. 31, 2010 Dec. 31, 2009
Assets
Cash $ 28,000 $13,000
Accounts receivable 18,000 14,000
Prepaid expenses 7,000 9,000
Inventory 25,000 15,000
Long-term investments -0- 18,000
Equipment 60,000 30,000
Accumulated depreciationâ?”equipment (18,000) (14,000)
Total assets $120,000 $85,000
Liabilities and Stockholders’ Equity
Accounts payable $ 25,000 $ 7,000
Bonds payable 37,000 45,000
Common stock 40,000 23,000
Retained earnings 18,000 10,000
Total liabilities and stockholders’ equity $120,000 $85,000
Additional information:
1. Net income for the year ending December 31, 2010, was $25,000.
2. Cash dividends of $17,000 were declared and paid during the year.
3. Long-term investments that had a book value of $18,000 were sold for $16,000.
4. Sales for 2010 are $120,000.
Instructions
1. Prepare a statement of cash flows for the year ended December 31, 2010, using the indirect method.
Can you help me get started with this assignment?
………………………..December 31
……………………2008…….2007
Cash………………..$90,000….$27,000
Accounts Receivable…..$92,000….80,000
Allowance for
Doubtful Accounts…….(4,500)….(3,100)
Inventory……………155,000….175,000
Prepaid Expenses……..7,500……6,800
Land………………..90,000…..60,000
Buildings ………….287,000…..244,000
Accumuladed Depreciation (32,000) (13,000)
paterns………………..20,000……35,000
Tatal assets…………..705,000…611,700
Accounts payable………..90,000….84,000
Accrued Liabilities……..54,000,,,,,63,000
Bonds payable…………..125,000,,,,,,60,000
Common Stock……………100,000……100.000
Retained Earnings………351,000……312,700
Treasury Stock, at cost…..(15,000)…(8,000)
Total Liabilities and Equity…705,000…611,700
………………………..for 2008 year
Net income………………….58,300
Depreciation Expense …………19,000
Amortization of Paterns………..5,000
Cash devedents declared and paid..20,000
Gain or Loss on sale of Patents .. none
Prepare a statement of cash flows for Reyser Corporation for the year 2008. Use the indirect method…
Please help complete using transaction data to prepare a statement of cash flows.
Store Company engaged in the following transactions during the 2007 accounting period. The beginning cash balance was $28,600.
Net Cash flow from Operating Activities ($110,775)
Investing Activities ($31,800)
Financing Activities ($120,000)
1. Credit sales were $250,000. The beginning receivables balance was $87,000 and the ending balance was $83,000.
2. Salaries expense for the period was $56,000. The beginning salaries payable balance was $3,500 and the ending balance was $2,000.
3. Other operating expenses for the period was $56,000. The beginning operating expense payable balance was $4,500 and the ending balance was $8,500.
4. Recorded $19,500 of depreciation expense. The beginning and ending balances in the accumulated depreciation account were $14,000 and $33,500 respectively.
5. The equipment account had beginning and ending balances of $210,000 and $240,000, respectively. The increase was caused by the cash purchase of equipment.
6. The beginning and ending balances in the notes payable account were $50,000 and $150,000, respectively. The increase was caused by additional cash borrowing.
7. There was $6,000 of interest expense reported on the income statement. The beginning and ending balances in the interest payable account were $1,500 and $1,000, respectively.
8. The beginning and ending merchandise inventory account balances were $90,000 and $108,000, respectively. The company sold merchandise with a cost of $156,000(cost of goods sold for the period was $156,000). The beginning and ending balances of accounts payable were $9,500 and $11,500 respectively.
9. The beginning and ending balances of notes receivable were $5,000 and $10,000, respectively. The increase resulted from a cash loan to one of the company’s employees.
10. The beginning and ending balances of the common stock account were $100,000 and $120,000, respectively. The increase was caused by the issue of common stock for cash.
11. Land had beginning and ending balances of $50,000 and $41,000, respectively. Land that cost $9,000 was sold for $12,200, resulting in a gain of $3,200.
12. The tax expense for the period was $7,000. The taxes payable account had a $950 beginning balance and an $875 ending balance.
13. The investments account had beginning and ending balances of $25,000 and $29,000, respectively. The company purchased investments for $18,000 cash during the period and investments that cost $14,000 were sold for $9,000 resulting in a $5,000 loss.
The cash account for Presley Corporation shows the following for the year ended December 31,2006.
Beginning cash balance . . . . . . . . . . $ ?
Cash receipts during year from:
Services . . . . . . . . . . . . . . . . . . . . . 2,214,000
Investments by owners . . . . . . . . . 93,000
Sale of land . . . . . . . . . . . . . . . . . . 194,000
Cash payments during year for:
Operating expenses . . . . . . . . . . . . 1,735,000
Taxes . . . . . . . . . . . . . . . . . . . . . . 207,000
Purchase of building . . . . . . . . . . . 352,000
Distributions to owners . . . . . . . . . 68,000
Ending cash balance . . . . . . . . . . . . . 815,000
Required:
Prepare a statement of cash flows for Presley Corporation for the year ended December 31,2006.
The statement of cash flows for Landsâ?? End is reproduced here: CASE 7â?” 1 LANDSâ?? END, INC. & SUBSIDIARIES Consolidated Statements of Cash Flows FOR PERIOD ENDED
($ in thousands) Year 9 Year 8 Year 7
Cash flows from operating activities
Net income……………………………………………………. $ 31,185 $ 64,150 $ 50,952
Adjustments to reconcile net income to net cash flows from operating activitiesâ?”
Pretax non- recurring charge…………………………………… 12,600 â?” â?”
Depreciation and amortization ……………………………….. 18,731 15,127 13,558
Deferred compensation expense……………………………653 323 317
Deferred income taxes…………………………………………..( 5,948) ( 1,158) 994
Pretax gain on sale of subsidiary…………………………….. â?” ( 7,805) â?”
Loss on disposal of fixed assets………………. 586 1,127 325
Changes in assets and liabilities excluding
Effects of divestures
Receivables (5,640) (7,019) (675)
Inventory 21,468 (104,545) 22,371
Prepaid Advertising (2,844) (7,447) 4,758
Other Prepaid expenses (2,504) (1,366) (145)
Accounts Payable 4,179 11,616 14,205
Reserve for returns 1,065 944 629
Accrued Liabilities 6,993 8,755 4,390
Accrued Profit Sharing (2,030) 1,349 1,454
Income Taxes Payable (5,899) ` (1,047) 8,268
Other 1,665 64 394
Net cash flows from (used for) operating activities 74,260 (26,932) 121,795
Cash Flows from (used for) investing activities
Cash paid for capital additions (46,750) (47,659) (18,481)
Proceeds from sale of subsidiary – 12,350 –
Net cash flows used for investing activities (46,750) (35,309) (18,481)
Cash flows from (used for) financing activities
Proceed s from short-term debt 6,505 21,242 1,876
Purchases of Treasury Stock (35,557) (45,899) (30,143)
Issuance of Treasury Stock 1,845 409 604
Net cash flows used for financing activities (27,207) (24,248) (27,663)
Net increase (decrease) in cash and cash equivalents 303 (86,489) 75,651
Beginning cash and cash equivalents 6,338 92,827 17,176
Ending cash and cash equivalents 6,641 6,338 92,827
a. Landsâ?? End recently implemented a strategy of filling nearly all orders when the order is placed. In what year do you believe the company implemented this strategy and how is the strategy reflected in the information con-tained in the statement of cash flows?
b. Explain how the following items reconcile net income to net cash flows from operating activities: ( 1) Depreciation ( 2) Receivables ( 3) Inventory ( 4) Reserve for returns
c. Calculate free cash flows for each year shown. CHECK ( c ) Yr 9, $ 27,510
d. How does Landsâ?? End use its free cash flow? Do you think its use of free cash flows reflects good financial strategy?
The net changes in the balance sheet accounts of Eusey, Inc. for the year 2011 are shown below:
Account Debit Credit
Cash $265,600.00
Accounts Receivable $64,000.00
Allowance for Doubtful Accounts $14,000.00
Inventory $287,200.00
Prepaid Expenses $40,000.00
Long-Term Investments $144,000.00
Land $300,000.00
Buildings $600,000.00
Machinery $100,000.00
Office Equipment $28,000.00
Accumulated Depreciation:
Buildings $24,000.00
Machinery $20,000.00
Office Equipment $12,000.00
Accounts payable $233,200.00
Accrued Liabilities $72,000.00
Dividends Payable $128,000.00
Bonds Payable $940,000.00
Preferred stock ($50 par) $60,000.00
Common Stock ($10 par) $156,000.00
Additional Paid in Capital-Common $247,200.00
Retained Earnings $60,800.00
$1,898,000.00 $1,898,000.00
Additional Information:
1. Unaudited Income Statement data for Year Ended December 31, 2011
Income before extraordinary items $420,000.00
Extraordinary losses: Condemnation of land $132,000.00
Loss from Redemption of Preferred Stock $20,000.00 $(152,000.00)
Net Income $268,000.00
2. Cash dividends of $128,000 were declared December 15, 2011, payable January 15, 2012. A 5% stock dividend was issued March 31, 2011, when the market value was $22.00 per share.
3. The long-term investments were sold at a $4,000 loss.
4. A building and lond which cost $480,000 and had a book value of $300,000 were sold for $400,000. The cost of the land, in cluded in the cost and book value above, was $20,000.
5. The following entry was made to record an exchange of an old machine for a new one:
Machinery $160,000.00
Accumulated Depreciation-Machinery $40,000.00
Machinery $60,000.00
Bonds Payable $140,000.00
6. A fully depreiated copier machine which cost $28,000 was written off.
7. Preferred stock of $60,000 par value was redeemed for $80,000; the loss was charged against earnings.
8. The company issued 12,000 shares of its common stock on June 15, 2011 for $27 a share. A $2 per share broker underwriting fee was recognized as part of Professional Fees Expense in the operating section of the income statement. There were 87,600 shares outstanding on December 31, 2011.
9. Bonds were issued at 104 on December 31, 2011. The premium was credited to Interest Revenue.
10. Land that was condemned had a book value of $240,000.
Requirements:
1. Prepare a properly formatted and complete statement of cash flows using the indirect method. Ignore tax effects.
The major difference between the indirect and the direct method of a statement of cash flows appears in which the following activities section(s)?
The investing activities and financing activities sections.
The investing activities section only.
The operating activities and financing activities sections.
The operating activities section only.
I am having problems doing practice statement of cash flows problems, I need help answering P18-1A and 3A in excel.
(See attached file for full problem description)
Quinn Development, Inc. constructs homes and offices and sells them to customers. The financial information shown below was gathered from its accounting records for 2009. Assume any increase or decrease in the balances from 1/1/09 to 12/31/09 resulted from either receiving or paying cash in the transaction. For example, during 2009 the balance on loans for land holdings increased $75,000 because the company received $75,000 in cash by taking out an additional loan on the land.
Balance as of Balance as of
Items 01/01/09 12/31/09
Cash $130,000 $175,000
Cash receipts from customers 0 750,000
Loans on land holdings 225,000 300,000
Cash distributions to owners 0 60,000
Loan on building 130,000 80,000
Investments in securities 600,000 845,000
Cash payments for other expenses 0 32,000
Cash payments for taxes 0 43,000
Cash payments for operating expenses 0 215,000
Cash payments for wages and salaries 0 135,000
1. Prepare a statement of cash flows for Quinn Development, Inc., for the year ended December 31, 2009.
2. Does Quinn Development, Inc., appear to be in good shape cash standpoint? What other information would help analyze situation?
The following income statement and balance sheet information are available for two firms. Prepare a statement of cash flows for each firm using the in-direct method. Analyze the difference in the two firms.
Attached is the financial statements as p140.doc.
What is the purpose of the statement of cash flows? What information does it provide? Be sure to explain why statements of cash flows are important when assessing the financial strength of an organization.
Bobbie Company’s balance sheet and income statement is attached.
Cash dividends were $62.
The company sold equipment for $19 that was originally purchased for $5, and had accumulated depreciation of $5.
The net cash provided by (used by) operations for the year was $_____________.
Why has the statement of cash flows become a more popular tool for financial analysis over the last few years? (300 words)
A work in process account for a company contained the following entries:
Work in process account
Debit of $40,000 for direct raw materials
Debit of $60,000 for direct labor
Debit of $30,000 for manufacturing overhead
Ending balance, $42,000, associated with job #2
The company uses a job-order cost system. Work was only performed on two jobs during the period. What was the cost of job #1, which was started and completed during the period??
1. Which of the following is a cash flow from an investing activity?
payment for advertising
cash receipt from a customer for a previous credit sale
cash received from sale of equipment
payment of dividends
2. Sonny’s Liquors, Inc. had the following cash flows during March: Paid for inventory $ 20,000
Paid wages to employees 40,000
Received from cash sales 100,000
Paid for equipment 60,000
Received a loan 70,000
What was the cash flow from financing activities? (Points: 2)
$70,000 inflow
$80,000 outflow
$120,000 outflow
$60,000 outflow
3. The primary difference between the cash flows statement and all other primary external financial statements is that the cash flows statement is
not an accrual based statement and all others are
not prepared unless the firm is a manufacturer
an optional statement in the external reporting package
prepared before the end of the year and not after
4. Which of the following best describes the purpose of the statement of cash flows?
identify the revenues and expenses of the accounting period
report the inflows and outflows of cash
balance current period revenues with those of the previous period
report assets, liabilities and owners’ equity as of a specific date
5. Activities that involve the production or delivery of goods for sale or the providing of services for sale should be listed under which classification on a statement of cash flows?
financing activities
operating activities
refunding activities
investing activities
6. What type of activity is the paying off of a bank loan?
operating
financing
investing
operating if it was a short-term loan; financing if it was a long-term loan
7. When preparing the operating activities section of the statement of cash flows under the indirect method, which of the following is an addition to net income?
Amortization Expense Increase in current asset accounts
Yes Yes
Amortization Expense Increase in current asset accounts
Yes No
Amortization Expense Increase in current asset accounts
No Yes
Amortization Expense Increase in current asset accounts
No No
8. Which of the following is a TRUE statement regarding the operating activities section of the statement of cash flows when the indirect format is used?
it explains the relationship between cash flows for a period and the results of operations reported on the income statement
it is designed to report to the reader what events caused cash to increase during the period and what events caused cash to decrease during the period
it results in a slightly higher amount of cash from operations being reported because depreciation expense is included
it is easier to understand and interpret correctly than when it is prepared using the direct method
9. Nearly all major corporations use which format for reporting the statement of cash flows?
accrual basis
reconciliation
indirect
direct
10. The Stable Company reports the following information: Accounts payable $ 600
Accounts receivable $ 8,200
Cash 5,000
Mortgage payable 4,400
Retained earnings 7,800
Inventory 9,200
Buildings 17,600
Office supplies 2,600
What is the amount of the firm’s current assets?
$13,200
$25,000
$22,400
$42,600
11. For each of the questions 11 through 20, indicate whether the transaction is an operating activity, a financing activity, or an investing activity. Assume all purchase and sale transactions are for cash unless otherwise stated.
Collection of principal from a note receivable
operating activity
financing activity
investing activity
12. Amortization of a patent
operating activity
financing activity
investing activity
13. Purchase of an asset used in the company’s daily operations
operating activity
financing activity
investing activity
14. Sale of treasury stock
operating activity
financing activity
investing activity
15. Write-off of a bad debt
operating activity
financing activity
investing activity
16. Depreciation expense
operating activity
financing activity
investing activity
17. Sale of obsolete equipment no longer used in company operations
operating activity
financing activity
investing activity
18. Collection of interest revenue on note receivable in the collection of principal from a note receivable (Points: 2)
operating activity
financing activity
investing activity
19. Borrow cash on a long-term note
operating activity
financing activity
investing activity
20. Payment of a cash dividend
operating activity
financing activity
investing activity
Attached is the Statement of Cash Flows I am working with, which is for Harley Davidson. Assistance is need with the financing activities. I need to prepare an interpretation of their cash flow for the last three years, but only the financing activities section. I need to identify the basic cash position and primary sources and uses of cash for the company, including any trends.
I am having trouble getting started. Please help!
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