Chapter 13 – Statement of Cash Flows
equipment
Free cash flow
Cash payments for operating expenses
$ 77,870
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.13–APP2 – LO: 13–APP2
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.24 – Statement of Cash Flows
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:33 PM
DATE MODIFIED:
10/16/2017 6:30 PM
188. The cash flows from operating activities are reported by the direct method on the statement of cash flows. Determine
the following:
(a)
(b)
ANSWER:
(a)
Sales
$695,000
Decrease in accounts receivable balance
43,500
Cash received from customers
$738,500
(b)
Income tax expense
$ 56,000
Decrease in income tax payable
5,200
Cash payments for income tax
$ 61,200
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.13–APP2 – LO: 13–APP2
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.24 – Statement of Cash Flows
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:33 PM
DATE MODIFIED:
10/16/2017 6:30 PM
189. Connor Designs Company has cash flows for operating activities of $425,000. Cash flows used for investments in
property, plant, and equipment totaled $65,000, of which 70% of this investment was used to replace machinery to
maintain its current operations.
What is the free cash flow for Connor Designs?
ANSWER:
Cash flows from operating activities
$425,000
Cash paid to maintain current operating levels of property, plant, and
Chapter 13 – Statement of Cash Flows
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Accounts payable
$62,500
$43,800
Bonds payable, due Year 2
—
100,000
Common stock, $10 par
325,000
285,000
Paid-in capital in excess of par—common stock
80,000
55,000
Retained earnings
162,200
58,200
$629,700
$542,000
The income statement for the current year is as follows:
Sales
$625,700
Cost of goods sold
340,000
Gross profit
$285,700
Operating expenses:
Depreciation expense
$26,000
Other operating expenses
68,000
Total operating expenses
94,000
Income from operations
$191,700
Other income:
Gain on sale of investment
$4,000
Other expense:
Interest expense
6,000
(2,000)
Income before income tax
$189,700
Income tax
60,700
Net income
$129,000
Additional data for the current year are as follows:
(a)
Fully depreciated equipment costing $60,000 was scrapped, no salvage, and
new equipment was purchased for $183,200.
(b)
Bonds payable for $100,000 were retired by payment at their face amount.
(c)
5,000 shares of common stock were issued at $13 for cash.
(d)
Cash dividends declared and paid, $25,000.
What are the net cash flows from operating, investing, and financing activities for Year 2?
a.
operating: $108,000; investing: ($105,200); financing: ($60,000)
b.
operating: $151,800; investing: ($84,200); financing: ($64,600)
c.
operating: $122,200; investing: ($84,200); financing: ($35,000)
d.
operating: $172,200; investing: ($109,200); financing: ($60,000)
ANSWER:
d
RATIONALE:
The net cash flows for each activity are:
Net income
$129,000
Depreciation
26,000
Gain on sale of investments
(4,000)
Decrease in accounts receivable
11,000
Increase in inventories
(8,500)
Increase in accounts payable
18,700
Chapter 13 – Statement of Cash Flows
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Page 95
(d)
(e)
(f)
(g)
What are the net cash flows from operating, investing, and financing activities for Year 2?
a.
operating: $94,500; investing: ($25,000); financing: ($40,000)
b.
operating: $54,500; investing: ($25,000); financing: $0
c.
operating: $94,500; investing: ($150,000); financing: $85,000
d.
operating: $134,200; investing: ($63,000); financing: ($40,000)
ANSWER:
a
RATIONALE:
Net cash flows from each activity are
as follows:
Net income, per income statement
$75,800
Depreciation
38,000
Gain on sale of investments
(25,000)
Decrease in accounts receivable
9,200
Increase in inventories
(16,000)
Increase in accounts payable
12,500
Net cash flow from operating activities
$ 94,500
Cash from sale of investments
$125,000
Cash paid for purchase of equipment
(150,000)
Net cash flow used for investing
activities
(25,000)
Cash from sale of common stock
$ 75,000
Cash paid to retire bonds payable
(75,000)
Cash paid for dividends
(40,000)
Net cash flow used for financing
activities
(40,000)
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.13–02 – LO: 13–02
FNMN.WAJO.19.13–03 – LO: 13–03
FNMN.WAJO.19.13–04 – LO: 13–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.24 – Statement of Cash Flows
ACCT.AICPA.FN.03 – Measurement
BUSPROG – Analytic
DATE CREATED:
9/27/2017 3:20 PM
DATE MODIFIED:
10/16/2017 6:30 PM
193. The comparative balance sheet of ConnieJo Company, for December 31, Years 1 and 2 ended December 31 appears
below in condensed form:
Chapter 13 – Statement of Cash Flows
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Page 96
Year 2
Year 1
Cash
$45,000
$53,500
Accounts receivable (net)
51,300
58,000
Inventories
147,200
135,000
Investments
0
60,000
Equipment
493,000
375,000
Accumulated depreciation—equipment
(113,700)
(128,000)
$622,800
$553,500
Accounts payable
$61,500
$42,600
Bonds payable, due Year 4
0
100,000
Common stock, $10 par
250,000
200,000
Paid-in capital in excess of par—common stock
75,000
50,000
Retained earnings
236,300
160,900
$622,800
$553,500
The income statement for the current year is as follows:
Sales
$629,700
Cost of goods sold
341,800
Gross profit
$287,900
Operating expenses:
Depreciation expense
$24,700
Other operating expenses
75,300
Total operating expenses
100,000
Income from operations
$187,900
Other income:
Gain on sale of investment
$5,000
Other expense:
Interest expense
12,000
(7,000)
Income before income tax
$180,900
Income tax
64,100
Net income
$116,800
Additional data for the current year are as follows:
(a)
Fully depreciated equipment costing $39,000 was scrapped, no salvage, and
equipment was purchased for $157,000.
(b)
Bonds payable for $100,000 were retired by payment at their face amount.
(c)
5,000 shares of common stock were issued at $15 for cash.
(d)
Cash dividends declared were paid $41,400.
(e)
All sales are on account.
Prepare a statement of cash flows, using the indirect method of reporting cash flows from operating activities.
Chapter 13 – Statement of Cash Flows
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Page 97
ANSWER:
ConnieJo Company
Statement of Cash Flows
For the Year Ended December 31, Year 2
Cash flows from operating activities:
Net income
$116,800
Adjustments to reconcile net income to net cash
flow from operating activities:
Depreciation
24,700
Gain on sale of investments
(5,000)
Decrease in accounts receivable
6,700
Increase in inventories
(12,200)
Increase in accounts payable
18,900
Net cash flow from operating activities
$149,900
Cash flows from investing activities:
Cash received from sale of investments
$65,000
Cash paid for purchase of equipment
(157,000)
Net cash flow used for investing activities
(92,000)
Cash flows from financing activities:
Cash received from sale of common stock
$75,000
Cash paid for dividends
(41,400)
Cash paid to retire bonds payable
(100,000)
Net cash flow used for financing activities
(66,400)
Change in cash
$(8,500)
Cash at the beginning of the year
53,500
Cash at the end of the year
$45,000
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Challenging
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.13–APP2 – LO: 13–APP2
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.24 – Statement of Cash Flows
ACCT.AICPA.FN.03 – Measurement
BUSPROG – Analytic
DATE CREATED:
9/27/2017 3:35 PM
DATE MODIFIED:
1/3/2018 4:24 PM