Chapter 13 – Statement of Cash Flows
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DATE MODIFIED:
10/16/2017 6:30 PM
166. On the basis of the details of the common stock account presented below, calculate the total amount to be recorded in
financing section of the statement of cash flows. Assume any stock issues were at par.
Indicate whether the amount results in an increase or decrease in cash.
Common Stock, $10 Par
Balance
Date
Item
Debit
Credit
Debit
Credit
Jan. 1
Balance, 50,000 shares
—
—
—
$500,000
Mar. 7
5,000 shares issued at
par for cash
—
—
$50,000
550,000
Sept. 20
2,500-share stock
dividend
—
—
25,000
575,000
Dec. 10
2,000 shares issued at
$20 for cash
—
—
40,000
615,000
ANSWER:
Cash flows from financing activities:
Cash received from sale of common stock
$90,000
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
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:
7/22/2017 6:33 PM
DATE MODIFIED:
10/16/2017 6:30 PM
167. The net income reported on an income statement for the current year was $63,000. Depreciation recorded on fixed
assets for the year was $24,000. Balances of the current asset and current liability accounts at the end and beginning of
the year are listed below. Prepare the Cash Flows from Operating Activities section of the statement of cash flows using
the indirect method.
End
Beginning
Cash
$65,000
$ 70,000
Accounts receivable (net)
70,000
57,000
Inventories
86,000
102,000
Prepaid expenses
4,000
4,500
Accounts payable (merchandise creditors)
51,000
58,000
Cash dividends payable
4,500
6,500
Salaries payable
6,000
7,500
ANSWER:
Cash flows from operating activities:
Net income
$63,000
Adjustments to reconcile net income to net
cash flow from operating activities:
Depreciation
24,000
liabilities:
Increase in accounts receivable (net)
(13,000)
Chapter 13 – Statement of Cash Flows
Cash from sale of investments
Cash paid for purchase of equipment
Net cash flow used for investing activities
Cash flows from financing activities:
Cash from sale of common stock
Net cash flow used for financing activities
Change in cash
Cash at the beginning of the year
Cash at the end of the year
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.
Prepare a statement of cash flow, using the indirect method of reporting cash flows from operating activities.
ANSWER:
Posner Company
Statement of Cash Flows
For the Year Ended December 31, Year 2
Cash flows from operating activities:
Net income
$ 129,000
Adjustments to reconcile net income to net cash flow
from operating activities:
Depreciation
26,000
Gain on sale of investments
(4,000)
Changes in current operating assets and liabilities:
Decrease in accounts receivable
11,000
Increase in inventories
(8,500)
Increase in accounts payable
18,700
Net cash flow from operating activities
$ 172,200
Cash flows from investing activities:
