CHAPTER 17 Statement of Cash Flows
[QUESTION]
87. Autumn Company uses IFRS to prepare its external financial reporting. During 2018,
Autumn Company had the following transactions related to cash flows:
Dividends paid
16,000
Interest paid
20,000
Interest received
42,000
With regard to the above information, which of the following is acceptable as part of preparation
of the statement of cash flows?
Cash from Cash from/(used by)
operating activities financing activities
a. $0 ($42,000)
b. $26,000 ($20,000)
c. $(20,000) $26,000
d. $0 ($46,000)
88. For nonfinancial firms reporting using IFRS rules, which of the following is correct?
a. In most cases, cash flows from income taxes must be reported separately as an operating
activity.
b. Interest and dividends paid may be reported as either operating or investing activities.
c. Bank overdrafts repayable on demand used as part of normal cash management activities
must include those overdrafts as part of financing activities.
d. Firms using the direct method must provide a schedule reconciling net income to cash
flows from operating activities..
89. Firms reporting using IFRS may present which of the following as either operating or
investing cash flows?
CHAPTER 17 Statement of Cash Flows
a. Dividends paid
b. Interest paid
c. Interest and Dividends received
d. Income taxes
90. Firms reporting using IFRS may present which of the following as financing cash flows?
a. Interest and Dividends paid
b. Dividends received
c. Interest received
d. Income taxes
91. Which of the following properly represents the preparation of the statement of cash flows
prepared using IFRS rules?
a. Firms using the direct method are not required to provide a reconciliation of net income to
cash flows from operations.
b. The presentation of the statement of cash flows differs to those following U.S. GAAP as a
result of prescribed classification differences under IFRS.
c. The presentation of the statement of cash flows is the same for all companies preparing
statements under IFRS.
d. The flexibility provided under IFRS guidance for the preparation of the statement of cash
flows increases the comparability of results between companies.
Problems
92. The Black Corporation has provided the following information:
Net income
$560,000
Increase in prepaid expenses
14,000
Amortization of discount on bonds
payable
10,000
Decrease in accounts payable
20,000
Increase in inventory
21,000
Dividends declared
39,000
Dividends paid
36,000
Increase in accounts receivable
30,000
Increase in wages payable
16,000
Increase in deferred tax liability
41,000
Required:
Determine the cash flow from operating activities using the indirect method of cash flow
statement presentation.
93. The Bears Corporation has provided you the following information:
Increase in accounts receivable balance
50,000
Net sales
500,000
Gross profit as a percentage of net sales
40%
Increase in the inventory account
45,000
Accounts payable balance decreased
17,000
Accounts receivable writeoffs
7,500
Bad debt expense
10,000
Required:
1. Determine the cash collected from customers.
2. Determine the cash paid to suppliers.
Answer:
94. The Gopher Company’s transactions during 2018 included the following:
Paid cash dividends of $1,200,000
Paid cash toward reducing a long-term note payable $900,000
Issued common stock in exchange for a building $750,000
Paid cash for bond interest $50,000
ond discount amortization was recorded for $2,250
Issued preferred stock for cash $250,000
Sold a long-term stock investment with a book value of $79,000 for $123,000 cash
Sold equipment with a book value of $90,000 for cash. The sale resulted in a $15,000
loss.
Issued bonds with a maturity value of $2,000,000 in exchange for $1,950,000 cash
Required:
1. Determine the net cash flow from investing activities for 2018.
2. Determine the net cash flow from financing activities for 2018.
95. The Hurricane Company provided the following information for the year ended December
31, 2018:
January 1, 2018 December 31, 2018
Interest payable $15,500 $12,250
Discount on bonds payable $79,900 $77,200
Income taxes payable $97,300 $99,900
CHAPTER 17 Statement of Cash Flows
Deferred income taxes payable$17,400 $11,150
Income tax expense $157,250
Interest expense $57,770
Required:
1. Determine the cash paid for interest during 2018.
2. Determine the cash paid for income taxes during 2018.
96. The Capitals Company has provided you the following information pertaining to the year
ending December 31, 2018:
January 1, 2018 December 31, 2018
Equipment $575,000 $729,000
Accumulated depreciation $165,000 $120,500
• Equipment costing $25,000 was acquired in exchange for common stock.
• Equipment with an original cost of $57,500 and a book value of $5,000 was
scrapped.
• Equipment was purchased in exchange for cash.
• Equipment with a book value of $39,000 was sold resulting in a $14,000 gain.
The accumulated depreciation at the time of the sale was $67,000.
Required:
1. Determine the cash paid for equipment purchases during 2018.
2. Determine the depreciation expense for 2018.
97. The following information was obtained from the Warrior Corporation’s financial statements
for the year ending December 31, 2018:
• Bonds with a maturity value of $600,000 were issued for cash.
• The premium on bonds payable account increased $12,500 during the year.
• Bond interest expense was $30,500.
• There was $500 of amortization of premium on newly issued bonds payable.
• Retained earnings increased $119,300 during the year.
• A 5% common stock dividend resulted in 5,000 shares of $5 par value common
stock being issued at a time when the market price per share was $17.
• Common stock was sold in exchange for cash.
• The common stock account increased $70,000 during the year.
• The additional paid-in capital account increased $210,000 during the year.
• Net income for the year was $217,400.
Required:
Determine the cash flow from financing activities for the year ending December 31,
2018.
98. The following information and financial statements excerpts pertain to Liquidity, Inc.
a. All short term investments (securities available for sale) were purchased on
12/31/18 and sold during 2019.
b. The company entered a lease agreement on 12/31/19.
c. Fixed assets with a net book value of $15 were sold during the year.
d. The company repaid the current portion of long-term debt during the year.
e. Dividend was declared and partially paid.
2018 2019
Assets
CHAPTER 17 Statement of Cash Flows
Cash 54 45
Short term investments 95 0
Accounts receivable 45 85
Inventory 52 75
Prepaid general expenses 11 15
Fixed assets under capital lease, net 0 50
Fixed assets, net 165 228
422 498
Liabilities and stockowners’ equity
Accounts payable 38 48
Wages payable 12 6
Tax payable 3 5
Dividend payable 0 4
Current portion of long term debt 10 12
Obligations under capital leases 0 50
Long term debt 183 180
Common stock 150 163
Retained earnings 26 30
422 498
2018 2019
Revenues, net 426
Cost of goods sold 310
Gross margin 116
General expenses 30
Wages expenses 42
Depreciation expense 24
Interest expense 11
Loss on sale of fixed assets 3
Gain on sale of securities available for sale (12)
Tax expenses 8
106
Net income 10
Required:
1. Prepare the statement of cash flows for the year 2019 using the direct method.
2. Reconcile net income and net cash flows from operating activities for the year 2019.
CHAPTER 17 Statement of Cash Flows
99. The following Income Statement and Operating Cash Flow information pertain to
Receivership Inc.’s operations for the year ended December 31, 2018.
Income statement for the year ended December 31, 2018
Revenues 1,328
Cost of goods sold 587
Rent expenses 152
Wages expenses 136
Insurance expenses 53
Other SG&A (includes depreciation expenses) 198
Interest expenses 30
Gain on sale of asset (5)
1,151
Income before tax 177
Tax 62
Net income 115
Cash flow provided by operating activities (indirect method), for the
year ended December 31, 2018
CHAPTER 17 Statement of Cash Flows
Net income 115
Depreciation 32
Gain on sale of asset (5)
142
Increases/decreases in
Accounts receivable 26
Inventories (35)
Prepaid rent 13
Accounts payable 28
Wages payable (20)
Tax payable 5
Interest payable (2)
Advances from customers (3)
Other accrued SG&A 5
17
Net cash provided by operating activities 159
Required:
1. Prepare the net cash flow from operating activities section of the cash flow statement
using the direct method.
100. Cannon Company has the following information for the year ending December 31, 2018:
• Long-term debt of $18,000 was issued for cash.
• Cash paid for labor during 2018 amounted to $489,500.
• During the year, Cannon paid a pension liability in the amount of $14,000.
• Dividends of $34,000 were received.
• Cannon’s cash balance at the beginning of 2018 was $975,000; at the end of
2018 the cash balance was $839,500.
• The company made an investment of $310,000 in an affiliate company.
• A lease payment of $110,000 was made on November 1, 2018. There is no
asset recorded in connection with the lease.
• During the year, Cannon collected $780,000 cash from customers.
• Cash paid for income taxes amounted to $56,000 for all of 2018.
• During 2018, Cannon discontinued its consumer electronics division. The
business was sold resulting in a $12,000 net cash inflow.
Required:
Prepare Cannon Company’s statement of cash flows for the year ending December 31,
2018.
