81
Use the information below to answer the following question(s).
In its 2018 Annual Report to Shareholders, Kinney Inc. reported the following Consolidated
Statement of Cash Flows:
For the years ended December 31,
2018
2017
Cash flow from operating activities:
Cash received from customers
$197,942,040
$211,773,952
Cash paid to suppliers and employees
(191,276,791)
(200,474,336)
Interest paid, net
(1,563,990)
(2,098,523)
Income taxes paid
(406,650)
(542,250)
Cash provided by operations
4,694,609
8,658,843
Cash flow from investing activities:
Capital expenditures and acquisitions
(3,003,579)
(1,667,382)
Expenditures for other assets
(43,560)
(137,420)
Cash used in investing activities
(3,047,139)
(1,804,802)
Cash flow from financing activities:
Principal payments of long-term debt and lease
agreements
(2,062,485)
(6,370,175)
Addition to long-term debt and lease liability
3,068,378
1,434,847
Purchase of common stock and other capital
transactions
(1,605,906)
(908,231)
Payment of dividends
(855,558)
(1,021,968)
Cash provided by (used in) financing activities
(1,455,571)
(6,865,527)
Net increase (decrease) in cash
191,899
(11,486)
Cash at beginning of year
192,615
204,101
Cash at end of year
$384,514
$192,615
2018
2017
Reconciliation of net income to net cash provided
by operations:
Net income
$1,747,833
$2,382,027
Depreciation and amortization
3,505,504
3,525,087
Deferred income taxes
205,000
344,766
Changes in assets and liabilities, net of
acquisitions:
Decrease (increase) in receivables
(2,897,353)
4,120,668
Decrease (increase) in inventories
(355,508)
6,041,490
Increase (decrease) in prepaid expenses
361,648
(94,350)
Increase (decrease) in controlled disbursements
373,394
83,718
Increase (decrease) in accounts payable
1,768,676
(8,164,148)
Increase (decrease) in accrued expenses
(14,585)
417,616
Other, net
1,969
Cash provided by operations
$4,694,609
$8,658,843
158) Assuming the decrease in accrued expenses during fiscal year 2018 included a $20,000
reduction due to taxes, compute the income tax expense for Kinney in that year.
159) Kinney reported cost of goods sold of $168,114,150 in its fiscal 2018 income statement.
Compute Kinney’s net inventory purchases during the year.
160) Assuming the decrease in accrued expenses during fiscal year 2018 included a $14,000
reduction due to interest on debt, compute the interest expense (net) for Kinney in that year.
161) Kinney reported cost of goods sold of $168,114,150 in its fiscal 2018 income statement
Assuming that Kinney uses accounts payable strictly for inventory purchases and that all such
purchases are on credit, how much cash did Kinney pay during the year for inventories:
(a) To inventory suppliers?
(b) To employees?
84
162) Determine the amount of cash received from customers for each of the two independent
situations below.
Situation
Sales
revenue
Accounts
receivable
incr. (decr.)
Cash
received
from
customers
1
$300,000
$10,000
?
2
300,000
(10,000)
?
163) Following are the income statement and some additional information for Carolina
Consulting Company.
Carolina Consulting Company
Income Statement
For the Year Ended December 31, 2018
$10,000
(1,500)
8,500
$2,000
900
(2,900)
5,600
(1,600)
$4,000
All sales were on credit and accounts receivable decreased by $900 in 2018 compared to 2017.
Merchandise purchases were on credit with a decrease in accounts payable of $700 during the
year. Ending inventory was $500 larger than beginning inventory. Income taxes payable
increased $300 during the year. All operating expenses were paid for in cash.
Required:
Prepare the cash flows from operating activities section of the statement of cash flows using the
direct method.
Cash flows from operating activities:
Cash received from customers ($10,000 + $900)
$10,900
Cash paid to suppliers ($1,500 + $500 + $700)
(2,700)
Cash paid for operating expenses
(2,000)
Cash paid for taxes ($1,600 — $300)
(1,300)
Net cash flows from operating activities
$4,900
164) Partial balance sheets and additional information are listed below for Sowell Company.
Sowell Company
Partial Balance Sheets
as of December 31
Assets
2018
2017
Cash
$40,000
$20,000
Accounts receivable
70,000
85,000
Inventory
40,000
35,000
Liabilities
Accounts payable
$54,000
$62,000
Additional information for 2018:
Net income was $88,000.
Depreciation expense was $19,000.
Required:
Prepare the operating activities section of the statement of cash flows for 2018 using the indirect
method.
activities:
Adjustment for noncash effects:
Depreciation expense
19,000
liabilities:
Decrease in accounts receivable
15,000
Increase in inventory
(5,000)
Decrease in accounts payable
(8,000)
activities
$109,000
165) Partial balance sheets and additional information are listed below for Rickey Company.
Rickey Company
Partial Balance Sheets
as of December 31
Assets
2018
2017
Cash
$20,000
$40,000
Accounts receivable
85,000
70,000
Inventory
35,000
40,000
Liabilities
Accounts payable
$62,000
$80,000
Additional information for 2018:
Net income was $160,000.
Depreciation expense was $20,000.
Required:
Prepare the operating activities section of the statement of cash flows for 2018 using the indirect
method.
Cash flows from operating activities:
Net income
$160,000
Depreciation expense
20,000
liabilities:
Increase in accounts receivable
(15,000)
Decrease in inventory
5,000
Decrease in accounts payable
(18,000)
activities
$152,000
166) The accounting records of Eastlake Industries provided the data below.
Net income
$300,000
Depreciation expense
15,000
Increase in inventory
2,000
Increase in accounts receivable
1,400
Decrease in interest payable
1,600
Amortization of bond premium
3,000
Increase in accounts payable
7,000
Cash dividends paid
20,000
Required:
Prepare a reconciliation of net income to net cash flows from operating activities.
Net income
$300,000
Adjustments for noncash effects:
Depreciation expense
15,000
Amortization of bond premium
(3,000)
Changes in operating assets and liabilities:
Increase in inventory
(2,000)
Decrease in interest payable
(1,600)
Increase in accounts payable
7,000
Net cash flows from operating activities
$314,000
167) The accounting records of Westlake Industries provided the data below.
Net income
$200,000
Depreciation expense
15,000
Decrease in inventory
12,000
Increase in accounts receivable
1,400
Increase in interest payable
1,600
Amortization of bond discount
3,000
Increase in accounts payable
7,000
Cash dividends paid
20,000
Required:
Prepare a reconciliation of net income to net cash flows from operating activities.
Net income
$200,000
Adjustments for noncash effects:
Depreciation expense
15,000
Amortization of bond discount
3,000
Changes in operating assets and liabilities:
Decrease in inventory
12,000
Increase in accounts receivable
(1,400)
Increase in interest payable
1,600
Increase in accounts payable
7,000
Net cash flows from operating activities
$237,200
168) Following are the income statement and some additional information for Parson
Corporation for 2018.
Parson Corporation
Income Statement
For the Year Ended December 31, 2018
Net sales
$10,000
Cost of goods sold
(1,500)
Gross margin
8,500
Operating expenses
$2,000
Depreciation expense
900
(2,900)
Income before taxes
5,600
Income taxes
(1,600)
Net income
$4,000
All sales were on credit and accounts receivable increased by $600 in 2018 compared to 2017.
Merchandise purchases were on credit with an increase in accounts payable of $400 during the
year. Ending inventory was $500 larger than beginning inventory. Income taxes payable
increased $300 during the year. All operating expenses were paid for in cash.
Required:
Prepare the cash flows from operating activities section of the statement of cash flows using the
indirect method.
Cash flows from operating activities:
Net income
$4,000
Adjustment for noncash effects:
Depreciation expense
900
Changes in operating assets and liabilities:
Increase in accounts receivable
(600)
Increase in inventory
(500)
Increase in accounts payable
400
Net cash flows from operating activities
$4,500
169) The accounting records of Harrison Company provided the data below.
Net loss
$10,000
Depreciation expense
12,000
Increase in salaries payable
1,000
Decrease in accounts receivable
4,000
Increase in inventory
4,800
Amortization of patent
700
Decrease in discount on bonds
500
Required:
Prepare a reconciliation of net income to net cash flows from operating activities.
Net loss
($10,000)
Adjustments for noncash effects:
Depreciation expense
12,000
Amortization of patent
700
Reduction in discount on bonds
500
Changes in operating assets and liabilities:
Increase in salaries payable
1,000
Decrease in accounts receivable
4,000
Increase in inventory
(4,800)
Net cash flows from operating activities
$3,400
170) The accounting records of Unlucky Company provided the data below.
Net loss
$40,000
Depreciation expense
12,000
Increase in salaries payable
11,000
Increase in accounts receivable
4,000
Decrease in inventory
4,800
Amortization of patent
700
Decrease in premium on bonds
500
Required:
Prepare a reconciliation of net income to net cash flows from operating activities.
Net loss
($40,000)
Adjustments for noncash effects:
Depreciation expense
12,000
Amortization expense
700
Decrease in premium on bonds
(500)
Changes in operating assets and liabilities:
Increase in salaries payable
11,000
Increase in accounts receivable
(4,000)
Decrease in inventory
4,800
Net cash flows from operating activities
($16,000)
171) Partial balance sheets for Yarborough Company and additional information are found
below.
Yarborough Company
Partial Balance Sheets
as of December 31
Assets
2018
2017
Equipment
$100,000
$75,000
Accumulated
depreciation
(25,000)
(20,000)
Shareholders’ equity
Common stock, $5 par
$150,000
$100,000
Paid-in capital–excess of
par
20,000
0
Retained earnings
40,000
30,000
Additional information for 2018:
July 1:
Issued 10,000 shares of common stock for cash.
July 1:
Purchased new equipment for cash.
Dec. 31
Paid cash dividends of $30,000.
Required:
Prepare the investing activities section of the statement of cash flows for 2018.
Cash flows from investing
activities:
Purchase of equipment
($25,000)
Net cash flows from investing
activities
($25,000)
172) In preparation for developing its statement of cash flows for the year just ended, D-Rose
Distributors collected the following information:
($ in
millions)
Purchase of treasury bills (considered a cash equivalent)
6
Sale of preferred stock
150
Gain on sale of land
4
Proceeds from sale of land
25
Issuance of bonds payable for cash
140
Purchase of equipment for cash
30
Purchase of GE stock
35
Declaration of cash dividends
134
Payment of cash dividends declared in previous year
130
Purchase of treasury stock
120
Payment for the early extinguishment of long-term notes (carrying (book)
value: $100 million)
110
Required:
1. Prepare the investing activities section of D-Rose’s statement of cash flows.
2. Prepare the financing activities section of D-Rose’s statement of cash flows.
Cash Flows from Investing Activities:
Proceeds from sale of land
$25
Purchase of equipment for cash
(30)
Purchase of GE stock
(35)
Net cash inflows from investing activities
($40)
Cash Flows from Financing Activities:
Sale of preferred shares
150
Issuance of bonds payable for cash
140
Distribution of cash dividends declared in
prior year
(130)
Purchase of treasury stock
(120)
long-term notes (book value: $100 million)
(110)
Net cash outflows from financing activities
($70)