activities.
103.
State the three cash flow classifications that are reported within a statement of cash flows
and describe the primary activities included in each.
104.
Use the following information to prepare a statement of cash flows for Stable Equipment
Company for the year ended December 31, 2016. Use the indirect method for the operating
activities section of the statement.
Information:
Net income for the year 2016 was $5,000. Accounts receivable decreased $2,000, while
inventories increased $4,000, and accounts payable decreased $7,000. Depreciation expense
included in net income was $8,000.
During the year, a piece of land held for future expansion was sold for its book value of
$8,000 and a new service truck was purchased for $14,000.
The company borrowed $18,000 on a two-year note from the bank. Dividends of $6,000 were
paid in cash. Preferred stock was issued to retire $7,000 of long-term notes payable.
The beginning cash balance was $22,000 and the ending balance was $32,000.
105.
Marissa Company is preparing a statement of cash flows using the indirect method for the
year ended December 31, 2017. The following data are available:
Net income
Depreciation expense
Inventory increase
Wages payable decrease
Accounts receivable decrease
Accounts payable decrease
Required:
Prepare the operating activities section of the statement of cash flows using the indirect
method for the year ended December 31, 2017.
Cash flows from operating activities:
Net income
Depreciation expense
Inventory increase
Wages payable decrease
Accounts receivable decrease
Accounts payable decrease
Net cash provided by operating activities
106.
Hill Company reported net income of $10,000 for the year ended December 31, 2016.
Additional 2016 information is as follows:
Expenditures for productive assets
$6,000
Depreciation expense on productive assets
2,000
Dividends paid on common stock
900
Increase in accounts payable
400
Decrease in inventory
200
Amortization of patent
100
Decrease in accounts receivable
300
Required:
Prepare the operating activities section of the statement of cash flows using the indirect
method for the year ended December 31, 2016.
Cash flows from operating activities:
Net income
Depreciation expense
Patent amortization
Increase in accounts payable
Decrease in inventory
Decrease in accounts receivable
Net cash provided by operating activities
107.
Brooks Company reported net income of $40,000, which included depreciation expense and
amortization expense of $21,000 and $18,000, respectively. The following changes also
occurred during the year ended December 31, 2016:
Inventory
$10,000
decrease
Accounts payable
5,000
increase
Notes payable (long-term)
15,000
decrease
Income tax payable
7,000
increase
Accounts receivable
10,000
increase
Cash flows from operating activities:
Net income
Required:
Prepare the operating activities section of the statement of cash flows using the indirect
method for the year ended December 31, 2016.
108.
Sagaworth Inc. reported the following information:
2017 Income Statement:
Net loss
$380,000
Depreciation expense
150,000
Amortization expense
25,000
Balance Sheet:
2017
2016
Accounts receivable
$200,000
$230,000
Inventory
140,000
160,000
Prepaid expenses
40,000
30,000
Accounts payable
190,000
180,000
Accrued liabilities
50,000
45,000
Taxes payable
10,000
20,000
Required:
Prepare the operating activities section of the statement of cash flows for the year ended
December 31, 2017 using the indirect method.
Cash flows from operating activities:
Net loss
Depreciation expense
Amortization expense
Decrease in accounts receivable
Decrease in inventory
Increase in prepaid expenses
109.
Below is the 2017 income statement for the Critters Corporation.
Critters Corporation
Income Statement
For the Year Ended December 31, 2017
Net sales
$100,000
Cost of goods sold
(40,000)
Gross profit on sales
$60,000
Various operating expenses
$25,000
Depreciation expense
5,000
Interest expense
2,000
Income tax expense
4,000
(36,000)
Net income
$24,000
Additional Information:
Accounts receivable increased by $8,000.
Merchandise inventory increased by $4,000.
Accounts payable increased by $6,000.
Prepaid expenses decreased by $2,000.
Accrued liabilities decreased by $5,000.
Interest payable increased by $1,000.
Required:
Prepare the operating activities section of the statement of cash flows using the indirect
method for the year ended December 31, 2017.
Critters Corporation
For the Year Ended December 31, 2017
Cash flows from operating activities:
Net Income
110.
The following information was reported from the statement of cash flows for Landlover’s
Restaurants for the years 2015 through 2017 (in millions of dollars):
2017
2016
2015
Net income
$45
$42
$27
Cash
provided/(used) by
operations
122
112
89
Cash
provided/(used) by
investments
(190)
(275)
(105)
Cash
provided/(used) by
financing
90
146
21
Required:
A. Calculate the quality of income ratio for the years 2015 through 2017. Round your answers
to two decimal places.
B. Interpret the quality of income ratio for Landlover’s for the three year period.
111.
During the year ended December 31, 2017, Blythe Company paid $2.2 million to purchase
stock in another company, $1.0 million to purchase its common stock for treasury shares, $.5
million to buy short-term investments, sold used equipment for $.8 million when its book value
was $.6 million, and purchased new equipment for $3.4 million.
Required:
A. Prepare the investing activities section of Blythe’s cash flow statement for the year ended
December 31, 2017.
B. Is the net cash flow for investing activities a net cash inflow, or a net cash outflow? Briefly
describe the reason for your answer.
112.
The following information was available from the financial statements of Collateral, Inc. for
the years 2016 and 2015 (in millions of dollars):
2016
2015
Cash flow from operating
activities
$5,968
$5,456
Cash paid for purchases of
property, plant, and
equipment
755
812
Property, plant, and
equipment, net
6,091
6,097
Dividends paid
300
300
Required:
A. Calculate the capital acquisitions ratio for each of the two years. Round your answers to
two decimal places.
B. Calculate the free cash flow for each of the two years.
C. Comment on the sufficiency of the capital acquisitions ratio and free cash flow for the two
years and implications for future corporate strategy.