Statement of Cash Flows ♦ 649
650 ♦ Chapter 13
10. Fill in the blanks (a) through (f) for M&A Corp.’s Statement of Cash Flows.
M&A Corporation
Statement of Cash Flows
For the Year Ended December 31, 2007
Cash Flows from Operating Activities
Net Income
$115,500
Adjustments to Reconcile Net Income to Net
Cash Flows from Operating Activities
Depreciation Expense
$10,000
Gain on Sale of Furniture and Fixtures
(a)
Changes in Current Assets and
Current Liabilities
Decrease in Accounts Receivable
17,400
Increase in Inventory
(10,000)
Increase in Prepaid Rent
(700)
Decrease in Accounts Payable
(28,500)
Increase in Income Taxes Payable
1,500
(b)
Net Cash Flows from Operating Activities
$99,300
Cash Flows from Investing Activities
Sale of Furniture and Fixtures
(c)
Purchase of Furniture and Fixtures
(29,800)
Net Cash Flows from Investing Activities
(12,900)
Cash Flows from Financing Activities
Issue of Notes Payable
20,000
Payment of Notes Payable
(5,000)
Dividends Paid
(d)
Net Cash Flows from Financing Activities
7,000
Net Increase (Decrease) in Cash
$ (e)
Cash at Beginning of Year
(f)
Cash at End of Year
$103,400
Schedule of Non-cash Investing and Financing Transactions:
Converted Bonds into Common Stock
$ 50,000
(a)
(b)
(c)
(d)
(e)
Statement of Cash Flows ♦ 651
11. From the following information, prepare the cash flows from operating activities section for
Monson Corporation for 2007.
Net income = $171,000
Depreciation expense = 48,800
Loss on sale of furniture and fixtures = 7,000
Decrease in Accounts Receivable = 34,800
Decrease in merchandise inventory = 105,000
Increase in Prepaid insurance = 1,000
Decrease in Accounts Payable = 60,000
Increase in Income Taxes Payable = 3,000
Monson Corporation
Statement of Cash Flows
652 ♦ Chapter 13
Statement of Cash Flows ♦ 653
12. From the following information, prepare the cash flows from operating activities section for Max
Topic Corporation for 2007.
Net income = $71,000
Depreciation expense = 25,000
Equipment with a cost of 10,000 and accumulated depreciation of 4,000 sold for 8,000.
Decrease in Accounts Receivable = 18,000
Decrease in merchandise inventory = 50,000
Increase in Prepaid Rent = 1,000
Decrease in Accounts Payable = 28,500
Decrease in Income Taxes Payable = 1,500
Max Topic Corporation
Statement of Cash Flows
654 ♦ Chapter 13
Statement of Cash Flows ♦ 655
13. From the information below, prepare the statement of cash flows for Moester, Inc. using the
indirect method.
Moester, Inc.
Income Statement
For the Year Ended December 31, 2007
Sales
$240,000
Cost of Goods Sold
144,000
Gross Margin
$ 96,000
Operating Expenses (Includes Depreciation Expense of $7,200)
63,600
Income from Operations
$ 32,400
Other Revenue and Expenses:
Gain on Sale of Equipment from Investing
$6,000
Interest Expense
(4,800)
1,200
Income before Income Taxes
$ 33,600
Income Tax Expense
9,600
Net Income
$ 24,000
12-31-05
12-31-04
Assets
Cash
$ 46,800
$ 32,400
Accounts Receivable (net)
120,000
90,000
Inventory
138,000
165,600
Prepaid Expenses
0
24,000
Land
30,000
0
Equipment
87,600
48,000
Accumulated Depreciation
(21,600)
(28,800)
Total Assets
$400,800
$331,200
Liabilities & Stockholders’ Equity
Accounts Payable
$ 13,200
$ 44,400
Accrued Liabilities
0
14,400
Notes Payable
12,000
0
Mortgage Payable
30,000
0
Common Stock
216,000
180,000
Paid-in Capital in Excess of Par
68,400
44,400
Retained Earnings
61,200
48,000
Total Liabilities/Stockholders’ Equity
$400,800
$331,200
Additional Information for Year End Dec. 31, 2005:
Equipment that costs $15,600 with accumulated depreciation of $14,400 was sold at a gain of
$6,000.
Purchased equipment for $55,200
Borrowed funds by issuing notes payable, $36,000.
Paid notes payable, $24,000.
Land was purchased for $30,000 by signing a mortgage note for the entire cost.
Issued 3,000 shares of $10 par value common stock for $60,000.
Paid cash dividend of $10,800
656 ♦ Chapter 13
Statement of Cash Flows ♦ 657
CASE
PepsiCo’s Financial Statements
Answer the following question(s) using these selected portions of PepsiCo’s financial statements.
658 ♦ Chapter 13
Statement of Cash Flows ♦ 659
660 ♦ Chapter 13
Statement of Cash Flows ♦ 661
662 ♦ Chapter 13
Statement of Cash Flows ♦ 663
664 ♦ Chapter 13
Statement of Cash Flows ♦ 665
666 ♦ Chapter 13
1. Refer to PepsiCo’s Financial Statements. For 2001, what is PepsiCo’s total cash from operating
activities; from investing activities; from financing activities? Does the cash from the beginning of
the year match anything on the Balance Sheet? Does this make sense?
What was the total cash inflow/outflow for 2001?
2. Refer to PepsiCo’s Financial Statements. PepsiCo shows a cash decrease of over a half of a billion
dollars over a two year period. Is this a cause for concern? Why or why not? What are some large
line items that help support your answer?
3. Refer to PepsiCo’s Financial Statements. Does PepsiCo use the direct or indirect method in
preparing the statement of cash flows? Give two reasons that support your answer.
What is the largest adjustment to net income for each of the three years shown? How much is this
adjustment in 2001?
Statement of Cash Flows ♦ 667
4. Refer to PepsiCo’s Financial Statements. What is PepsiCo’s free cash flow for 2001 and 2000?