12–261
12–262
118.
The most recent comparative balance sheet of Giacomelli Corporation appears below:
Ending Balance
Beginning Balance
Assets:
Current assets:
Cash and cash equivalents
$37,000
$29,000
Accounts receivable
20,000
24,000
Inventory
65,000
61,000
Prepaid expenses
5,000
7,000
Total current assets
127,000
121,000
Property, plant, and equipment
424,000
399,000
Less accumulated depreciation
231,000
200,000
Net property, plant, and equipment
193,000
199,000
Total assets
$320,000
$320,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$19,000
$17,000
Accrued liabilities
58,000
51,000
Income taxes payable
47,000
42,000
Total current liabilities
124,000
110,000
Bonds payable
77,000
80,000
Total liabilities
201,000
190,000
Stockholders’ equity:
Common stock
31,000
30,000
Retained earnings
88,000
100,000
Total stockholders’ equity
119,000
130,000
Total liabilities and stockholders’ equity
$320,000
$320,000
The company uses the indirect method to construct the operating activities section of its
statements of cash flows.
Which of the following is correct regarding the operating activities section of the
statement of cash flows?
12–263
12–264
119.
The most recent comparative balance sheet of Giacomelli Corporation appears below:
Ending Balance
Beginning Balance
Assets:
Current assets:
Cash and cash equivalents
$37,000
$29,000
Accounts receivable
20,000
24,000
Inventory
65,000
61,000
Prepaid expenses
5,000
7,000
Total current assets
127,000
121,000
Property, plant, and equipment
424,000
399,000
Less accumulated depreciation
231,000
200,000
Net property, plant, and equipment
193,000
199,000
Total assets
$320,000
$320,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$19,000
$17,000
Accrued liabilities
58,000
51,000
Income taxes payable
47,000
42,000
Total current liabilities
124,000
110,000
Bonds payable
77,000
80,000
Total liabilities
201,000
190,000
Stockholders’ equity:
Common stock
31,000
30,000
Retained earnings
88,000
100,000
Total stockholders’ equity
119,000
130,000
Total liabilities and stockholders’ equity
$320,000
$320,000
The company uses the indirect method to construct the operating activities section of its
statements of cash flows.
Which of the following is correct regarding the operating activities section of the
statement of cash flows?
12–265
Essay Questions
12–266
120.
Manila Corporation’s comparative balance sheet appears below:
Ending
Balance
Beginning
Balance
Assets:
Current assets:
Cash and cash equivalents
$42,000
$26,000
Accounts receivable*
22,000
26,000
Inventory*
77,000
75,000
Total current assets
141,000
127,000
Property, plant, and equipment*
340,000
315,000
Less accumulated depreciation*
218,000
187,000
Net property, plant, and equipment
122,000
128,000
Total assets
$263,000
$255,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable*
$13,000
$14,000
Accrued liabilities*
32,000
33,000
Income taxes payable*
63,000
54,000
Total current liabilities
108,000
101,000
Bonds payable*
93,000
94,000
Total liabilities
201,000
195,000
Stockholders’ equity:
Common stock*
28,000
24,000
Retained earnings
34,000
36,000
Total stockholders’ equity
62,000
60,000
Total liabilities and stockholders’ equity
$263,000
$255,000
The company’s net income (loss) for the year was $0 and its cash dividends were $2,000.
It did not dispose of any property, plant, and equipment, issue any bonds payable, or
repurchase any of its own common stock during the year.
Required:
Compute the change in each balance sheet account denoted with an asterisk (*). Indicate
whether the change in each balance will be recorded in the operating, investing, or
12–267
financing activities section of the statement of cash flows. For items recorded in the
operating activities section, also indicate whether the change will be added to or
subtracted from net income. For all other items, indicate whether the change will be added
as a cash inflow or subtracted as a cash outflow. The first entry has been filled in as an
example.
Ending
Balance
Beginning
Balance
Change
Section
Add or
Subtract
Accounts receivable
22,000
26,000
−4,000
Operating
Add
Inventory
77,000
75,000
Property, plant, and
equipment
340,000
315,000
Accumulated
depreciation
218,000
187,000
Accounts payable
13,000
14,000
Accrued liabilities
32,000
33,000
Income taxes payable
63,000
54,000
Bonds payable
93,000
94,000
Common stock
28,000
24,000
Inventory
77,000
75,000
Operating
Property, plant,
12–269
121.
The ending and beginning balances of Farmer Corporation’s balance sheet accounts for
the most recent year are listed below:
Ending
Balance
Beginning
Balance
Assets & Contra-Assets:
Cash and cash equivalents
$40,000
$28,000
Accounts receivable
$17,000
$14,000
Inventory
$60,000
$62,000
Property, plant, and equipment
$406,000
$383,000
Accumulated depreciation
$234,000
$205,000
Liabilities and Stockholders’ Equity:
Accounts payable
$15,000
$12,000
Accrued liabilities
$35,000
$38,000
Income taxes payable
$49,000
$42,000
Bonds payable
$110,000
$109,000
Common stock
$39,000
$36,000
Retained earnings
$41,000
$45,000
The company’s net income (loss) for the year was $0 and its cash dividends were $4,000.
It did not dispose of any property, plant, and equipment, retire any bonds payable, or
repurchase any of its own common stock during the year.
Required:
Compute the change in each balance sheet account in the below table. Indicate whether
the change in each balance will be recorded in the operating, investing, or financing
activities section of the statement of cash flows. For items recorded in the operating
activities section, also indicate whether the change will be added to or subtracted from net
income. For all other items, indicate whether the change will be added as a cash inflow or
subtracted as a cash outflow. The first entry has been filled in as an example.
12–270
Ending
Balance
Beginning
Balance
Change
Section
Add or
Subtract
Accounts receivable
17,000
14,000
+3,000
Operating
Subtrac
Inventory
60,000
62,000
Property, plant, and equipment
406,000
383,000
Accumulated depreciation
234,000
205,000
Accounts payable
15,000
12,000
Accrued liabilities
35,000
38,000
Income taxes payable
49,000
42,000
Bonds payable
110,000
109,000
Common stock
39,000
36,000
Bonds payable
12–271
12–272
122.
Belk Corporation’s balance sheet appears below:
Comparative Balance Sheet
Ending Balance
Beginning Balance
Assets:
Cash and cash equivalents
$27
$29
Accounts receivable
30
26
Inventory
65
61
Property, plant and equipment
500
390
Less accumulated depreciation
178
160
Total assets
$444
$346
Liabilities and stockholders’ equity:
Accounts payable
$46
$43
Accrued liabilities
23
24
Income taxes payable
46
47
Bonds payable
78
90
Common stock
34
30
Retained earnings
217
112
Total liabilities and stockholders‘ equity
$444
$346
The net income for the year was $126. Cash dividends were $21. The company did not
dispose of any property, plant, and equipment, issue any bonds payable, or repurchase any
of its own common stock during the year.
Required:
Prepare a statement of cash flows in good form using the indirect method.
12–274
12–275
123.
Vandy Corporation’s balance sheet and income statement appear below:
Comparative Balance Sheet
Ending Balance
Beginning Balance
Assets:
Cash and cash equivalents
$31
$29
Accounts receivable
61
73
Inventory
59
61
Property, plant and equipment
684
550
Less accumulated depreciation
349
319
Total assets
$486
$394
Liabilities and stockholders’ equity:
Accounts payable
$53
$54
Accrued liabilities
20
21
Income taxes payable
52
48
Bonds payable
203
190
Common stock
61
60
Retained earnings
97
21
Total liabilities and stockholders’ equity
$486
$394
Income Statement
Sales
$807
Cost of goods sold
492
Gross margin
315
Selling and administrative expense
182
Net operating income
133
Gain on sale of equipment
16
Income before taxes
149
Income taxes
45
12–276
Net income
$104
The company sold equipment for $18 that was originally purchased for $14 and that had
accumulated depreciation of $12. It paid a cash dividend of $28 during the year and did
not retire any bonds payable or repurchase any of its own common stock.
Required:
Prepare a statement of cash flows for the year using the indirect method.
12–278
124.
Alden Corporation’s most recent comparative Balance Sheet is as follows:
Ending Balance
Beginning Balance
Assets
Cash
$7,000
$12,000
Accounts receivable
11,000
2,000
Inventory
39,000
24,000
Long-term investments
23,000
9,000
Property, plant, and equipment
83,000
100,000
Less accumulated depreciation
66,000
62,000
Total assets
$97,000
$85,000
Liabilities and Stockholders’ Equity
Accounts payable
$9,000
$28,000
Income taxes payable
1,000
2,000
Bonds payable
16,000
10,000
Common stock
42,000
30,000
Retained earnings
29,000
15,000
Total liabilities and stockholders’ equity
$97,000
$85,000
Alden’s net income was $34,000. No equipment was purchased and no long-term
investments were sold. There was a gain of $3,000 when equipment was sold. The
accumulated depreciation on the equipment that was sold was $12,000. Cash dividends of
$20,000 were declared and paid during the year.
Required:
Prepare Alden’s statement of cash flows using the indirect method.
12–279
12–280