Chapter 12: The Statement of Cash Flows
Chapter 12: The Statement of Cash Flows
165. Selected data from the financial statements of Ames Corporation for the years ended December 31, 2015 and 2016
are presented below.
(In thousands)
2016
2015
Cash and cash equivalents
$ ?
$ 4,506
Total current assets (except cash)
149,978
132,335
Income taxes paid
2,142
767
Interest paid
5,073
5,597
Net cash provided by operating activities
3,103
5,221
Net cash used by investing activities
2,853
3,278
Net cash provided by financing activities
1,323
6,891
Depreciation and amortization
3,479
2,770
Total stockholders‘ equity
103,253
94,843
Net income
1,877
1,223
REQUIRED:
What is the amount of cash and cash equivalents at the end of 2016?
Chapter 12: The Statement of Cash Flows
166. Bradenton Corp. reported accounts receivable of $38,000 on its December 31, 2015, balance sheet. On December
31, 2016, accounts receivable had decreased to $29,000. Sales for the year amounted to $57,000. What is the
amount of cash collections that Bradenton will report in the Operating Activities section of its 2016 statement of
cash flows assuming that the direct method is used?
167. Columbus Company prepays the rent on various office facilities. The beginning balance in Prepaid Rent was
$9,500, and the ending balance was $7,200. The income statement reports Rent Expense of $45,800.
REQUIRED:
Under the direct method, what amount would appear for cash paid in rent in the Operating Activities section of the
statement of cash flows? Show your work.
Chapter 12: The Statement of Cash Flows
168. Springfield Company’s comparative balance sheets included inventory of $89,700 at December 31, 2015, and
$73,300 at December 31, 2016 Springfield’s comparative balance sheets also included accounts payable of $54,400
at December 31, 2015, and $38,100 at December 31, 2016. Springfield’s accounts payable balances are composed
solely of amounts due to suppliers for purchases of inventory on account. Cost of goods sold, as reported by
Springfield on its 2016 income statement, amounted to $750,800. What is the amount of cash payments for inventory
that Springfield will report in the Operating Activities section of its 2016 statement of cash flows assuming that the
direct method is used?
Chapter 12: The Statement of Cash Flows
Utah Corp.
Use the following selected data and additional information from the records of Utah Corp. to answer the
questions that follow.
Balance Sheet Data
2016
2015
Accounts receivable
$36,000
$42,000
Inventories
28,000
25,000
Accounts payable
31,000
35,000
Salaries payable
2,000
1,000
Equipment
60,000
40,000
Accumulated depreciation
12,000
16,000
Bonds payable
50,000
100,000
Common stock
150,000
100,000
Retained earnings
38,000
20,000
Income Statement Data
2016
Net sales
$420,00
Cost of goods sold
300,000
Operating expenses (excluding depreciation expense)
84,000
Net income
30,000
Gain on sale of equipment (included in net income above)
Additional information:
2,000
(1) Equipment with a cost of $15,000 and a book value of $3,000 was sold for $5,000 during 2016.
(2) Common stock was issued to retire bonds payable during 2016.
(3) The only items affecting retained earnings in 2016 were net income and dividends declared and paid.
Chapter 12: The Statement of Cash Flows
169. Review the data for Utah Corp.
REQUIRED:
(A) What amount of cash was collected from customers during 2016?
(B) What is the amount paid for purchases of merchandise during 2016?
(C) What is the amount paid for operating expenses during 2016?
170. Review the data for Utah Corp.
REQUIRED:
(A) What amount was paid to acquire equipment during 2016?
(B) What amount was recorded as depreciation expense during 2016?
(C) What amount was declared and paid for dividends during 2016?
Chapter 12: The Statement of Cash Flows
171. Review the data for Utah Corp.
REQUIRED:
(A) What amount was paid to retire bonds payable during 2016?
(B) How would the transaction to retire bonds by issuing common stock be reported on the statement of cash flows
for 2016 for Utah Corp.?
172. Review the data for Utah Corp.
REQUIRED:
Prepare the operating activities section of statement of cash flows for Utah Corp. for 2016 if the direct method is
used to determine net cash flow from operating activities.
173. Review the data for Utah Corp.
REQUIRED:
(A) Prepare the investing activities section of a statement of cash flows for 2016 for Utah Corp.
(B) Prepare the financing activities section of a statement of cash flows for 2016 for Utah Corp.
Chapter 12: The Statement of Cash Flows
174. Review the data for Utah Corp.
REQUIRED:
Prepare the operating activities section of a statement of cash flows for Utah Corp. for 2016 if the indirect
method is used to determine net cash flow from operating activities.
Chapter 12: The Statement of Cash Flows
Iowa Industries Inc.
Selected data from the financial statements of Iowa Industries Inc. for the years ended December 31, 2016 and
2015, are presented below. Also, certain assumptions are presented. Use these data and assumptions to answer
the questions that follow.
(In millions)
2016
2015
Property, plant and equipment
$11,142.3
$10,868.4
Accumulated depreciation
3,519.0
3,461.0
Investments
375.1
394.4
Long-term debt
1,440.2
1,242.6
Short-term debt
44.0
45.2
Common stock
594.5
567.2
Treasury – common stock
(20.6)
(20.6)
Reinvested income (retained earnings)
3,522.9
3,425.9
Net income
770.4
712.7
Assumptions
(1) Cash additions to property, plant, and equipment during 2016 were $550.0. An additional
$86.2 of plant assets were acquired through debt in a noncash transaction. Depreciation expense for 2016
was $343.3. Gains on disposals of property, plant and equipment during 2016 were $27.7.
(2) The cash proceeds from the sale of investments in 2016 were $82.7. There was a $17.8 gain on the sale of
the investments.
(3) Proceeds from long-term debt issued during 2016 were $167.7.
(4) The issuance of common stock totaled $28.6 in 2016.
(5) During 2016, $389.4 in cash was used to purchase and retire common stock. A total of
(6) Net income, dividends declared/paid, and the $365.4 amount in (5) were the only items that affected
reinvested income during 2016.
175. Review the data and assumptions for Iowa Industries Inc.
REQUIRED:
(A) What was the cost of the property, plant and equipment which was disposed of during 2016?
(B) What was the amount of accumulated depreciation on the property, plant and equipment disposed of during
2016?
(C) Assuming that the book value of the property, plant and equipment disposed of during 2016 was $76.9, what
were the cash proceeds from the disposal of property, plant and equipment for 2016?
Chapter 12: The Statement of Cash Flows
176. Review the data and assumptions for Iowa Industries Inc.
REQUIRED:
(A) What was the cost of the investments purchased during 2016?
(B) What was the amount paid to retire long-term debt during 2016?
177. Use the selected data from the consolidated statements of cash flows for Vancouver Corporation for the years
ended December 31, 2016 and 2015, to answer the questions that follow.
(in thousands)
2016
2015
Operating Activities:
Net income
$6,328
$6,093
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation
4,475
4,018
Amortization of software
517
983
Effect of restructuring charges
(355)
(445)
Deferred income taxes
(606)
358
Gain on the disposal of fixed assets and other assets
(261)
(273)
Changes in assets and liabilities (net of businesses acquired)
Accounts receivable
(2,736)
(3,727)
Inventories
73
432
Other assets
880
(1,087)
Accounts payable and accrued liabilities
362
699
Other liabilities
596
1,814
Net cash provided by operating activities
$9,273
$8,865
Net cash used by investing activities
($6,131)
($6,155)
Net cash provided by financing activities
($4,993)
($3,090)
Cash and cash equivalents at end of year
$5,375
$7,106
REQUIRED:
(A) What method does Vancouver use to calculate the net cash provided by operating activities?
(B) In 2016, why are depreciation and amortization expenses added back to net income in the operating activities
section of the statement of cash flows?
Chapter 12: The Statement of Cash Flows
178. Twilight Corp. began the year with a balance in its Income Taxes Payable account of $13,000. The year-end balance
in the account was $18,000. The company uses the indirect method in the Operating Activities section of the
statement of cash flows. Therefore, it presents the amount of income taxes paid at the bottom of the statement as a
supplemental disclosure. The amount of taxes paid during the year was $15,000.
REQUIRED:
What amount of income tax expense will appear on Twilight’s income statement?
179. A company generated $1,830,000 from its operating activities and spent $1,200,000 on additions to its plant and
equipment during the year. The total amount of debt that matures in the next five years is $900,000. Compute the
company’s cash flow adequacy ratio for the year.
Chapter 12: The Statement of Cash Flows
180. On its most recent statement of cash flows, a company reported net cash provided by operating activities of
$16,000,000. Its capital expenditures for the same year were $6,000,000. A note to the financial statements indicated
that the total amount of debt that would mature over the next five years was $24,000,000.
REQUIRED:
1. Compute the company’s cash flow adequacy ratio.
2. If you were a banker considering loaning money to this company, why would you be interested in knowing its cash
flow adequacy ratio? Would you feel comfortable making a loan based on the ratio you computed in (1)? Explain
your answer.
181. A friend of yours says: “It’s easy to look at the statement of cash flows and see that a company has been profitable,
because positive cash flows are equal to profitability.” Is your friend right? Explain.
182. Which category of cash flows – operating, investing, or financing activities – do you think is most likely to have a net
cash outflow over a number of years? Explain.