Chapter 14
142. Black Company’s net income last year was $84,000. Changes in the company’s balance sheet accounts for the year
appear below:
Increases
(Decreases)
Debit balances:
Cash $(12,000)
Accounts receivable 13,000
Inventory (15,000)
Prepaid expenses (9,000)
Long-term investments 20,000
Plant and equipment 60,000
Credit balances:
Accumulated depreciation 26,000
Accounts payable (15,000)
Accrued liabilities (8,000)
Taxes payable 19,000
Bonds payable (30,000)
Common stock 40,000
Retained earnings 25,000
The company declared and paid cash dividends of $59,000 last year.
Required:
A. Prepare the operating activities section of the company’s statement of cash flows for the year. (Use the indirect
method.)
B. Prepare the investing activities section of the company’s statement of cash flows for the year.
C. Prepare the financing activities section of the company’s statement of cash flows for the year.
Chapter 14
143. Daniels Company’s comparative balance sheet and income statement for last year appear below:
Balance Sheet
Ending Beginning
Balance Balance
Cash $ 62,000 $ 38,000
Accounts receivable 85,000 66,000
Inventory 31,000 44,000
Prepaid expenses 0 4,000
Long-term investments 260,000 210,000
Plant and equipment 450,000 450,000
Accumulated depreciation (255,000) (219,000)
Total assets $633,000 $593,000
Accounts payable $ 33,000 $ 45,000
Accrued liabilities 36,000 18,000
Taxes payable 17,000 24,000
Deferred taxes payable 41,000 24,000
Bonds payable 150,000 190,000
Common stock 130,000 100,000
Retained earnings 226,000 192,000
Total liabilities and stockholders’ equity $633,000 $593,000
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Income Statement
Sales $610,000
Less cost of goods sold 330,000
Gross margin 280,000
Less operating expenses 180,000
Net operating income 100,000
Less income taxes 30,000
Net income $ 70,000
The company declared and paid $36,000 in cash dividends during the year.
Required: Using the indirect method, prepare each of the following activities sections of the company’s statement of cash
flows for the year:
A. Operating activities section.
B. Investing activities section.
C. Financing activities section.
Chapter 14
144. Trueblood Company’s comparative balance sheet and income statement for last year appear below:
Balance Sheet
Ending Beginning
Balance Balance
Cash $ 60,000 $ 25,000
Accounts receivable 48,000 61,000
Inventory 56,000 48,000
Prepaid expenses 13,000 19,000
Long-term investments 300,000 210,000
Plant and equipment 470,000 470,000
Accumulated depreciation (222,000) (188,000)
Total assets $725,000 $645,000
Accounts payable $ 59,000 $ 36,000
Accrued liabilities 42,000 24,000
Taxes payable 7,000 14,000
Deferred taxes payable 38,000 23,000
Bonds payable 80,000 140,000
Common stock 110,000 70,000
Retained earnings 389,000 338,000
Total liabilities and stockholders’ equity $725,000 $645,000
Income Statement
Sales $540,000
Less cost of goods sold 300,000
Gross margin $240,000
Less operating expenses 150,000
Net operating income 90,000
Less income taxes 27,000
Net income $ 63,000
The company declared and paid $12,000 in cash dividends during the year.
Required: Using the indirect method, prepare each of the following activities sections of the company’s statement of cash
flows for the year:
A. Operating activities section.
B. Investing activities section.
C. Financing activities section.
Chapter 14
145. The comparative balance sheets for Bessler Company appear below:
Bessler Company
Comparative Balance Sheet
Year 2 Year 1
Assets
Cash $ 23,000 $15,000
Accounts receivable 18,000 14,000
Prepaid expenses 6,000 9,000
Inventory 27,000 15,000
Long-term investments -0- 18,000
Equipment 60,000 30,000
Accumulated depreciation—equipment (18,000) (14,000)
Total assets $116,000 $87,000
Liabilities and Stockholders’ Equity
Accounts payable $ 21,000 $ 9,000
Bonds payable 37,000 45,000
Common stock 40,000 23,000
Retained earnings 18,000 10,000
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Total liabilities and stockholders’ equity $116,000 $87,000
Additional information:
1. Net income for the year ending December 31, Year 2, was $20,000.
2. Cash dividends of $12,000 were declared and paid during the year.
3. Long-term investments that had a book value of $18,000 were sold for $16,000.
4. Sales for Year 2 are $120,000.
Required: Prepare a statement of cash flows for the year ended December 31, Year 2, using the indirect method.
Chapter 14
146. A comparative balance sheet for the Bright Corporation is presented below:
BRIGHT CORPORATION
Comparative Balance Sheet
Year 2 Year 1
Assets
Cash $ 39,000 $ 31,000
Accounts receivable (net) 80,000 60,000
Prepaid insurance 22,000 17,000
Land 18,000 40,000
Equipment 70,000 60,000
Accumulated depreciation (20,000) (13,000)
Total assets $209,000 $195,000
Liabilities and Stockholders’ Equity
Accounts payable $ 11,000 $ 6,000
Bonds payable 27,000 19,000
Common stock 140,000 115,000
Retained earnings 31,000 55,000
Total liabilities &stockholders’ equity $209,000 $195,000
Additional information:
1. Net loss for Year 2 is $20,000. Net sales for Year 2 are $250,000.
2. Cash dividends of $4,000 were declared and paid in Year 2.
3. Land was sold for cash at a loss of $10,000. This was the only land transaction during the year.
4. Equipment with a cost of $15,000 and accumulated depreciation of $10,000 was sold for $5,000 cash.
5. $12,000 of bonds were retired during the year at carrying (book) value.
6. Equipment was acquired for common stock. The fair market value of the stock at the time of the exchange was
$25,000.
Required: Prepare a statement of cash flows for the year ended Year 2 using the indirect method.
Chapter 14
147. The following information is available for the Benning Corporation for the year ended Dec. 31, Year 2:
Collection of principal on long-term loan to a supplier $35,000
Acquisition of equipment for cash 10,000
Proceeds from sale of long-term investment at book value 27,000
Issuance of common stock for cash 20,000
Depreciation expense 25,000
Redemption of bonds payable at carrying (book) value 24,000
Payment of cash dividends 9,000
Net income 35,000
Purchase of land by issuing bonds payable 40,000
In addition, the following information is available from the comparative balance sheet for Benning at the end of Year
2 and Year 1:
Year 2 Year 1
Cash $107,000 $14,000
Accounts receivable (net) 20,000 15,000
Prepaid insurance 17,000 13,000
Total current assets $144,000 $42,000
Accounts payable $ 25,000 $19,000
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Salaries payable 4,000 7,000
Total current liabilities $ 29,000 $26,000
Required: Prepare Benning’s statement of cash flows for the year ended Dec. 31, Year 2, using the indirect method.
Chapter 14
148. Assuming a statement of cash flows is prepared, indicate the reporting of the transactions and events listed below by
major categories on the statement. Use the following code letters to indicate the appropriate category under which the item
would appear on the statement of cash flows.
Code
Cash Flows From Operating Activities
Add to Net Income A
Deduct from Net Income D
Cash Flows From Investing Activities IA
Cash Flows From Financing Activities FA
Category
1. Common stock is issued for cash at an amount above par value. _____
2. Merchandise inventory increased during the period. _____
3. Depreciation expense recorded for the period. _____
4. Building was purchased for cash. _____
5. Bonds payable were acquired and retired at their carrying value. _____
6. Accounts payable decreased during the period. _____
7. Prepaid expenses decreased during the period. _____
8. Treasury stock was acquired for cash. _____
9. Land is sold for cash at an amount equal to book value. _____
10. Patent amortization expense recorded for a period. _____
Chapter 14
149. Playtown Company’s income statement for last year appears below:
Playtown Company
Income Statement
Sales $100,000
Less: Cost of goods sold 60,000
Gross margin $ 40,000
Less: Operating expenses 25,000
Income before income taxes $ 15,000
Less: Income taxes 6,000
Net income $ 9,000
The beginning and ending balances for last year are available for the following selected accounts:
Ending
balance Beginning
balance
Accounts receivable $15,000 $10,000
Inventory 29,000 25,000
Prepaid expenses 6,000 9,000
Accumulated depreciation (35,000) (30,000)
Accounts payable 27,000 20,000
Accrued liabilities 3,000 5,000
Income taxes payable 4,000 1,000
Required: Using the direct method, prepare the operating activities section of the statement of cash flows.
Chapter 14
150. Freeport Company’s income statement for last year appears below:
Income Statement
Sales $300,000
Less: Cost of goods sold 200,000
Gross margin 100,000
Less: Operating expenses 60,000
Income before income taxes 40,000
Less: Income taxes 16,000
Net income $ 24,000
The beginning and ending balances for last year are available for the following accounts:
Ending Beginning
balance balance
Accounts receivable $32,000 $40,000
Inventory 60,000 50,000
Prepaid expenses 12,000 8,000
Accumulated depreciation (40,000) (30,000)
Accounts payable 30,000 45,000
Accrued liabilities 16,000 10,000
Income taxes payable 2,000 5,000
Required: Using the direct method, prepare the operating activities section of the statement of cash flows.
Chapter 14
151. Gingerich Company’s comparative balance sheet and income statement for last year appear below:
Balance Sheet
Ending Beginning
Balance Balance
Cash $ 45,000 $ 27,000
Accounts receivable 39,000 30,000
Inventory 30,000 44,000
Prepaid expenses 14,000 19,000
Long-term investments 280,000 200,000
Plant and equipment 600,000 600,000
Accumulated depreciation (322,000) (291,000)
Total assets $686,000 $629,000
Accounts payable $ 19,000 $ 34,000
Accrued liabilities 37,000 25,000
Taxes payable 32,000 14,000
Deferred taxes payable 28,000 22,000
Bonds payable 100,000 150,000
Common stock 100,000 70,000
Retained earnings 370,000 314,000
Total liabilities and stockholders’ equity $686,000 $629,000
Income Statement
Sales $800,000
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Less: Cost of goods sold 430,000
Gross margin 370,000
Less: Operating expenses 230,000
Net operating income 140,000
Less: Income taxes 42,000
Net income $ 98,000
The company declared and paid $42,000 in cash dividends during the year.
Required: Using the direct method, prepare each of the following activities sections of the company’s statement of cash
flows for the year:
A. Operating activities section.
B. Investing activities section.
C. Financing activities section.