12–175
Gross margin
160,000
Selling and
administrative expense
158,000
Net income
$2,000
Sales (as
Adjustments to
The company did not dispose of any property, plant, and equipment, buy any long-term
investments, issue any bonds payable, or repurchase any of its own common stock during
the year. Carver Corporation uses the direct method to construct its statement of cash
flows.
Required:
a. Determine the sales adjusted to the cash basis.
b. Determine the cost of goods sold adjusted to the cash basis.
c. Determine the selling and administrative expenses adjusted to a cash basis.
d. Determine the net cash provided (used) by operating activities.
e. Determine the net cash provided (used) by investing activities.
f. Determine the net cash provided (used) by financing activities.
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54.
Carr Corporation’s comparative balance sheet and income statement for last year appear
below:
Comparative Balance Sheet
Ending
Balance
Beginning
Balance
Cash
$3,000
$23,000
Accounts
receivable
83,000
71,000
Inventory
39,000
47,000
Prepaid
expenses
9,000
15,000
Long-term
investments
240,000
200,000
Property,
plant and
equipment
515,000
480,000
Less
accumulated
depreciation
320,000
295,000
Total assets
$569,000
$541,000
Accounts
payable
$9,000
$25,000
Accrued
liabilities
24,000
17,000
Income
taxes
payable
49,000
46,000
Bonds
payable
160,000
200,000
Common
stock
170,000
140,000
Retained
earnings
157,000
113,000
Total
liabilities
$569,000
$541,000
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and
stockholders’
equity
Income Statement
Sales
$850,000
Cost of goods
sold
450,000
Gross margin
400,000
Selling and
administrative
expense
270,000
Net operating
income
130,000
Income taxes
39,000
Net income
$91,000
The company declared and paid $47,000 in cash dividends during the year. It did not
dispose of any property, plant, and equipment during the year.
Required:
Construct in good form the operating activities section of the company’s statement of
cash flows for the year using the direct method.
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55.
Digby Corporation’s balance sheet and income statement appear below:
Comparative Balance Sheet
Ending Balance
Beginning
Balance
Assets:
Cash and cash equivalents
$34
$28
Accounts receivable
76
65
Inventory
34
38
Property, plant and
equipment
607
490
Less accumulated
depreciation
350
328
Total assets
$401
$293
Liabilities and
stockholders’ equity:
Accounts payable
$30
$36
Bonds payable
265
290
Common stock
43
40
Retained earnings
63
(73)
Total liabilities and
stockholders’ equity
$401
$293
Income Statement
Sales
$1,075
Cost of goods sold
654
Gross margin
421
Selling and administrative
expense
185
Net operating income
236
Income taxes
71
Net income
$165
Sales (as reported)
Adjustments to a cash basis:
Cost of goods sold (as reported)
Adjustments to a cash basis:
Selling and administrative expense (as reported)
Adjustments to a cash basis:
Income taxes
71
Net cash provided by operating activities
Cash dividends were $29. The company did not dispose of any property, plant, and
equipment during the year.
Required:
Prepare the operating activities section of the statement of cash flows in good form using
the direct method.
56.
Freeport Corporation’s income statement for last year appears below:
Income Statement
Sales
$300,000
Cost of goods
sold
200,000
Gross margin
100,000
Selling and
administrative
expense
60,000
Income
before
income taxes
40,000
Income taxes
16,000
Net income
$24,000
Accounts
receivable
Inventory
Prepaid
Accumulated
Accounts
payable
12–186
liabilities
Income
taxes
payable
$2,000
$5,000
Adjustments
to a cash
basis:
receivable
($32,000 –
$40,000)
Cost of goods
Adjustments
to a cash
basis:
Required:
Using the direct method, prepare in good form the operating activities section of the
statement of cash flows.
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