Chapter 13 – Statement of Cash Flows
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Increase in inventories
(16,500)
Decrease in accounts payable
(1,500)
Net cash flow from operating activities
$107,000
Cash flows from investing activities:
Cash received from sale of land
$ 15,000
Cash paid for purchase of equipment
(125,000)
Net cash flow used for investing activities
(110,000)
Cash flows from financing activities:
Cash received from sale of common stock
$ 32,000
Cash paid for dividends
18,000
Net cash flow from financing activities
14,000
Change in cash
$ 11,000
Cash at the beginning of the year
54,000
Cash at the end of the year
$ 65,000
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Subjective Short Answer
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
FNMN.WAJO.19.13–05 – LO: 13–05
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
177. On the basis of the following data for Breach Co. for the current and preceding years ended December 31, prepare a
statement of cash flows for the current year using the indirect method.
Assume that equipment costing $25,000 was purchased for cash and no long term assets were sold during the period.
Stock was issued for cash—3,200 shares at par.
Net income for the current year was $76,000.
Cash dividends declared and paid were $13,000.
Cash
Accounts receivable (net)
Inventories
Equipment
Accumulated depreciation
Accounts payable (merchandise creditors)
Taxes payable
Common stock, $10 par
Retained earnings
ANSWER:
Breach Co.
Chapter 13 – Statement of Cash Flows
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Page 83
Issuance of common stock for
$35,000
Increase in accounts payable of
$7,000
Retirement of bonds at face value of
$100,000
Purchase of long-term investments for
$94,500
Dividends declared and paid of
$8,300
Increase in prepaid rent of $4,500
Decrease in Inventory of $5,300
Purchase of equipment for $17,600
cash
Sale of land originally costing
$134,000 for $130,000
Decrease in taxes payable of $2,100
ANSWER:
Item
Statement
Section
Amount
to
Report
+/–
Effect
on Cash
Depreciation of $15,000 for the period
Operating
$15,000
Increase
Issuance of common stock for $35,000
Financing
35,000
Increase
Increase in accounts payable of $7,000
Operating
7,000
Increase
Retirement of bonds at face value of
$100,000
Financing
100,000
Decrease
Purchase of long-term investments for
$94,500
Investing
94,500
Decrease
Dividends declared and paid of $8,300
Financing
8,300
Decrease
Increase in prepaid rent of $4,500
Operating
4,500
Decrease
Decrease in Inventory of $5,300
Operating
5,300
Increase
Purchase of equipment for $17,600
cash
Sale of land originally costing
$134,000 for $130,000
Operating
Investing
4,000
130,000
Increase
Increase
Decrease in taxes payable of $2,100
Operating
2,100
Decrease
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Moderate
QUESTION TYPE:
Subjective Short Answer
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
FNMN.WAJO.19.13–05 – LO: 13–05
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.24 – Statement of Cash Flows
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
Chapter 13 – Statement of Cash Flows
Copyright Cengage Learning. Powered by Cognero.
Page 85
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 direct method of reporting cash flows from operating activities.
ANSWER:
ConnieJo Company
Statement of Cash Flows
For the Year Ended December 31, Year 2
Cash flows from operating activities:
Cash received from customers
$ 636,400
Cash payments for merchandise
(335,100)
Cash payments for operating expenses
(75,300)
Cash payments for interest
(12,000)
Cash payments for income taxes
(64,100)
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:
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182. Selected data for the current year ended December 31 are as follows:
Balance
January 1
Accrued expenses (operating expenses)
$ 22,000
Accounts payable (merchandise creditors)
135,000
Inventories
68,000
Prepaid expenses
20,000
During the current year, the cost of goods sold was $620,000 and the operating expenses other than depreciation were
$142,000. The direct method is used for presenting the cash flows from operating activities on the statement of cash
flows.
Determine the amount reported on the statement of cash flows for (a) cash payments for merchandise and (b) cash
payments for operating expenses.
ANSWER:
(a)
Cost of goods sold
$620,000
Decrease in accounts payable
45,000
$665,000
Decrease in inventories
(25,500)
Cash payments for merchandise
$639,500
(b)
Operating expenses other than depreciation
$142,000
Increase in accrued expenses
(7,500)
$134,500
Increase in prepaid expenses
3,000
Cash payments for operating expenses
$137,500
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
183. Based on the following, what is free cash flow?
Net cash flow from operating activities
$318,000
Net cash flow used for investing activities
(30,000)
Net cash flow from financing activities
30,000
Cash flows from investing include the purchase of a replacement asset for $100,000 and the sale of the one used in
production, which is now obsolete, for $70,000. Cash flows from financing include $70,000 of borrowing.
ANSWER:
$318,000 – $100,000 = $218,000
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy