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Answer:
Lone Star Hat Company
Partial Statement of Cash Flows
For the Year Ended December 31, 2018
Cash Flows from Operating Activities
Receipts
Collections from Customers $308,100
Payments
To Suppliers (270,140)
Total Cash Payments (270,140)
Net Cash Provided by Operating Activities $37,960
Explanation:
Accounts Receivable, beginning balance 15,600
Add: Sales Revenue 312,000
Less: Accounts Receivable ending balance (19,500)
Collection from Customers $308,100
Merchandise Inventory, ending balance 23,400
Add: Cost of Goods Sold 247,000
Less: Merchandise Inventory, beginning balance (28,600)
Purchases $241,800
Add: Accounts Payable, beginning balance 9,100
Less: Accounts Payable, ending balance (15,600)
Cash Paid for Merchandise Inventory $235,300
Accrued Liabilities, beginning balance 3,900
Add: Operating Expenses 32,500
Less: Accrued Liabilities, ending balance (1,560)
Cash Paid for Operating Expenses $34,840
Diff: 3
LO: 14-4
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2: Cash Flows From Operating Activities
100
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Learning Objective 14-5
1) In practice, most companies face complex situations. In these cases, a spreadsheet can help in
preparing the statement of cash flows.
2) The spreadsheet starts with the beginning statement of cash flows and concludes with the ending
statement of cash flows.
3) Accountants can prepare the statement of cash flows directly from the lower part of the spreadsheet.
4) Regarding the use of a spreadsheet for the preparation of the statement of cash flows, which of the
following statements is true?
A) The T-account approach works well for all companies.
B) The statement of cash flows cannot be prepared directly from the spreadsheet because additional
information is needed.
C) The spreadsheet is needed when companies face complex situations.
D) The spreadsheet can only be used if the indirect method for operating activities is also used.
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5) Regarding the use of a spreadsheet for the preparation of the statement of cash flows, which of the
following statements is incorrect?
A) The spreadsheet starts with the beginning balance sheet and concludes with the ending balance sheet.
B) When companies face complex situations, a spreadsheet can help in preparing the statement of cash
flows.
C) The spreadsheet cannot be used for the direct method.
D) Accountants can prepare the statement of cash flows directly from the lower part of the spreadsheet.
6) Redbird Company uses the indirect method to prepare its statement of cash flows. Using the following
information, complete the worksheet for the year ended December 31, 2018.
– Net Income for the year ended December 31, 2018 was $49,000
– Depreciation expense for 2018 was $12,000
– During 2018, plant assets with a book value of $10,000 (cost $10,000 and accumulated depreciation $0)
were sold for $14,000
– Plant assets were acquired for $52,000 cash
– Issued common stock for $28,000
– Issued long-term notes payable for $34,000
– Repaid long-term notes payable for $40,000
– Purchased treasury stock for 3,000
– Paid dividends of $10,000
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Redbird Company
Spreadsheet for Statement of Cash Flows
Year Ended December 31, 2018
Balance
12/31/17
Transaction
Analysis
Debit
Transaction
Analysis
Credit
Balance
12/31/18
Panel A—Balance Sheet:
Cash
$18,000
$21,000
Accounts Receivable
35,000
31,000
Merchandise Inventory
25,000
53,000
Plant Assets
70,000
112,000
Accumulated Depreciation—Plant Assets
(20,000)
(32,000)
Total Assets
$128,000
$185,000
Accounts Payable
6,000
4,000
Accrued Liabilities
1,000
2,000
Long-term Notes Payable
50,000
44,000
Common Stock
2,000
30,000
Retained Earnings
74,000
113,000
Treasury Stock
(5,000)
(8,000)
Total Liabilities and Stockholders’ Equity
$128,000
$185,000
Panel B—Statement of Cash Flows:
Cash Flows from Operating Activities:
Net Income
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation Expense—Plant Assets
Gain on Disposal of Plant Assets
Increase/Decrease in Accounts Receivable
Increase/Decrease in Merchandise Inventory
Increase/Decrease in Accounts Payable
Increase/Decrease in Accrued Liabilities
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Cash Payment for Acquisition of Plant Assets
Cash Receipt from Disposal of Plant Assets
Net Cash Used for Investing Activities
Cash Flows from Financing Activities:
Cash Receipt from Issuance of Notes Payable
Cash Payment of Notes Payable
Cash Receipt from Issuance of Common Stock
Cash Payment for Purchase of Treasury Stock
Cash Payment of Dividends
Net Cash Provided by Financing Activities
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Net Increase (Decrease) in Cash
Total
Answer: Redbird Company
Spreadsheet for Statement of Cash Flows
Year Ended December 31, 2018
Transaction
Analysis
Debit
Transaction
Analysis
Credit
Balance
12/31/18
Panel A—Balance Sheet:
Cash
3,000
$21,000
Accounts Receivable
4,000
31,000
Merchandise Inventory
28,000
53,000
Plant Assets
52,000
10,000
112,000
Accumulated Depreciation—Plant Assets
12,000
(32,000)
Total Assets
$185,000
Accounts Payable
2,000
4,000
Accrued Liabilities
1,000
2,000
Long-term Notes Payable
40,000
34,000
44,000
Common Stock
28,000
30,000
Retained Earnings
10,000
49,000
113,000
Treasury Stock
3,000
_____
(8,000)
Total Liabilities and Stockholders’ Equity
138,000
138,000
$185,000
Panel B—Statement of Cash Flows:
Cash Flows from Operating Activities:
Net Income
49,000
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation Expense—Plant Assets
12,000
Gain on Disposal of Plant Assets
4,000
Decrease in Accounts Receivable
4,000
Increase in Merchandise Inventory
28,000
Decrease in Accounts Payable
2,000
Increase in Accrued Liabilities
1,000
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Cash Payment for Acquisition of Plant
Assets
52,000
Cash Receipt from Disposal of Plant Assets
14,000
Net Cash Used for Investing Activities
Cash Flows from Financing Activities:
Cash Receipt from Issuance of Notes
Payable
34,000
Cash Payment of Notes Payable
40,000
Cash Receipt from Issuance of Common
Stock
28,000
Cash Payment for Purchase of Treasury
3,000
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Stock
Cash Payment of Dividends
10,000
Net Cash Provided by Financing Activities
Net Increase in Cash
______
3,000
Total
142,000
142,000
Diff: 3
LO: 14-5
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2: How Is the Statement of Cash Flows Prepared Using the Indirect Method and a Spreadsheet? (H1)