Chapter 21: The Statement of Cash Flows
79. The following information relates to the Maxwell Company for 2016:
Gain on sale of land
$ 800
Bond payable premium amortization
300
Decrease in accounts payable
700
Increase in prepaid expenses
100
Net income
9,400
Purchased equipment
15,000
Increase in salaries payable
400
Proceeds from sale of land
7,000
Decrease in inventories
2,100
Payment of dividends
1,600
Depreciation expense
1,000
Required:
Compute net cash provided by operating activities for the Maxwell Company for 2016.
80. Selected accounting information for the Zebra Company for 2016 follows:
Increase in prepaid expenses
$ 7,000
Increase in wages payable
3,500
Net income
300,000
Amortization of premium on bonds payable
2,000
Depreciation expense
27,000
Increase in accounts payable
10,000
Decrease in inventories
15,000
Increase in deferred income tax liability
4,000
Decrease in accounts receivable
4,500
Issuance of long-term note
100,000
Gain on sale of land
15,000
Declaration of cash dividends
8,000
Patent amortization expense
10,000
Proceeds from sale of land
20,000
Required:
Prepare the 2016 Net Cash Flow from Operating Activities section of Zebra’s statement of cash flows, using the
indirect method.
81. Accounting information from the records of the Sarah Jane’s Clothing Corporation at the end of 2016 is shown below:
Net income
$100,000
Proceeds from sale of long-term investment in marketable securities
20,000
Proceeds from sale of building
80,000
Gain on sale of building
35,000
Increase in accounts receivable
5,000
Increase in accounts payable
7,000
Cash dividends declared
5,000
Depreciation expense
18,000
Patent amortization expense
1,000
Amortization of premium on bonds payable
1,500
Purchase of equipment
30,000
Issue of common stock
25,000
Increase in accrued liabilities
4,000
Decrease in prepaid expenses
2,000
Required:
Prepare Sarah Jane’s Clothing ‘s 2016 Net Cash Flow from Operating Activities section of a statement of cash flows,
using the indirect method.
82. The following are several transactions and events that might be disclosed on a company’s statement of cash flows:
a.
declaration of cash dividends
b.
decrease in account payable
c.
decrease in account receivable
d.
depletion expense
e.
gain on the sale of land
f.
increase in inventories
g.
payment of cash dividends
h.
issuance of preferred stock
i.
net income
j.
purchase of equipment
Required:
Identify in which section (if any) of the statement of cash flows each of the preceding items would appear and indicate
whether it would be reported as an inflow (addition) or an outflow (subtraction).
b.
Operating activities: outflow (subtraction)
c.
Operating activities: inflow (addition)
d.
Operating activities: inflow (addition)
e.
Operating activities: outflow (subtraction)
f.
Operating activities: outflow (subtraction)
g.
Financing activities: outflow (subtraction)
h.
Financing activities: inflow (addition)
i.
Operating activities: inflow (addition)
j.
Investing activities: outflow (subtraction)
1
Challenging
ACCT.WHAL.16.21.3 – LO: 21.3
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
Bloom’s: Evaluating
83. Rhonda Company reported $70,000 of net income for 2016. During the year, machinery costing $10,000 and with
accumulated depreciation of $8,000 was sold at a loss of $500. Land and machinery were purchased during the year
for cash. Selected account information follows:
2016
December 31
January 1
Land
$45,000
$32,000
Machinery
28,000
20,000
Accumulated Depreciation: Machinery
7,000
12,000
Required:
Compute the net cash from investing activities for 2016 using the visual inspection method.
Purchase of land ($32,000 – $45,000)
Purchase of machinery ($20,000 -$10,000 – $28,000)
Sale of machinery ($10,000 – $8,000 – $500)
Net cash used for investing activities
84. The following is a list of items to be included in the 2016 statement of cash flows for the Winter Company:
Beginning cash balance
$ 90,000
Decrease in accounts payable
4,000
Increase in accounts receivable
3,000
Payment of dividends
6,000
Loss on sale of equipment
3,000
Decrease in prepaid expenses
1,000
Proceeds from bonds
46,000
Depreciation expense
12,000
Purchase of building
80,000
Net loss
32,000
Decrease in inventory
6,000
Proceeds from sale of equipment
10,000
Required:
Prepare the 2016 statement of cash flows using the visual method.
Operating Activities:
Net loss
Adjustments for noncash income items:
Add:
Depreciation
Add:
Loss on sale of equipment
capital items:
Decrease in inventory
Decrease in prepaid expenses
Decrease in accounts payable
Increase in accounts receivable
Net cash provided by operating activities
Investing Activities:
Proceeds from sale of equipment
Payment for purchase of building
Net cash used by investing activities
Financing Activities:
Proceeds from issuance of bonds
Payment of dividends
Net cash provided by financing activities
Net Decrease in Cash
Cash, January 1, 2016
Cash, December 31, 2016
85. The account balance information for Miller Company at the end of 2016 and 2017 and related 2017 activities are
presented below:
December 31
Liabilities and Equities:
2017
2016
Accounts Payable
$ 250,000
$ 230,000
Deferred Tax Liability, noncurrent
80,000
60,000
Bonds Payable, long-term
500,000
200,000
Common Stock, $1 par
110,000
80,000
Additional Paid-in Capital
423,000
130,000
Retained Earnings
470,000
390,000
Total Liabilities and Equities
$1,833,000
$1,090,000
Additional information for 2017 activities:
·
Bonds payable in the amount of $125,000 were converted into 12,000
shares of common stock.
·
Additional common stock was issued for cash of $11 per share.
·
The only changes in retained earnings in 2017 were a result of net income
and cash dividends.
·
Other than the bond conversion, the only transaction affecting bonds
payable during 2017 was the issue for cash at face value of new bonds
payable.
·
Net income for the year 2017 was $200,000.
Required:
Compute the net cash provided by financing activities for the Miller Company using the visual inspection method.
Issue common stock [($30,000 – $12,000) × $11)
Issue bonds payable [($500,000 – $200,000) + $125,000]
425,000
Cash dividends paid [$200,000 – ($470,000 – $390,000)]
Cash provided
86. A spreadsheet for a statement of cash flows is presented below along with additional information.
Additional information:
·
Net income was $508.
·
Dividends paid amounted to $16.
·
Last year, depreciation expense was inadvertently understated by $60. The
appropriate correction was made this year. The company also received a
related income tax refund of $10.
·
Six shares of $100 par common stock were issued as a small stock
dividend. The current market value of the stock was $700 (in total).
·
Bonds payable were issued for $50. One year of amortization was recorded.
·
The treasury stock was reissued for $60.
·
The preferred stock was converted to an equal number of common shares.
The book value method was used.
·
Property, plant, and equipment costing $200 was sold for a $120 gain. The
assets were 90% depreciated.
Required:
Complete the spreadsheet:
Spreadsheet:
Change
Increase or
Spreadsheet Entries
Account Titles
(Decrease)
Debit
Credit
Cash
190
________
________
Account receivable
400
________
________
Inventory
(150)
________
________
Property, plant, and equipment
244
________
________
Patents
(20)
________
________
Discount on bonds payable
8
________
________
Treasury stock
(40)
________
________
Accumulated depreciation
10
________
________
Accounts payable
300
________
________
Salaries payable
(200)
________
________
Bonds payable
60
________
________
Preferred stock
(400)
________
________
Premium on preferred stock
(100)
________
________
Common stock, $100 par
1,000
________
________
Chapter 21: The Statement of Cash Flows
Additional paid-in capital
220
________
________
________
________
________
________
Retained earnings
(258)
________
________
________
________
________
________
Net Cash Flow from Operating Activities
_________________________________
________
________
_________________________________
________
________
_________________________________
________
________
_________________________________
________
________
_________________________________
________
________
_________________________________
________
________
_________________________________
________
________
_________________________________
________
________
_________________________________
________
________
_________________________________
________
________
Cash Flows from Investing Activities
_________________________________
________
________
_________________________________
________
________
Cash Flows from Financing Activities
_________________________________
________
________
_________________________________
________
________
_________________________________
________
________
Investing and Financing Activities
Not Affecting Cash
_________________________________
________
________
Chapter 21: The Statement of Cash Flows
_________________________________
________
________
Net Increase in Cash
________
________
87. On September 4, 2016, Chester Fish Company purchased 1,000 shares of Christopher Company common stock for
$76 per share as a short-term investment in securities classified as available-for-sale. On December 31, 2016, the
stock had a fair value of $72 per share, and on March 10, 2017, Chester sold the stock for $80 per share.
Required:
In journal entry form, prepare the spreadsheet entries to record these transactions for Chester Fish Company’s 2016
and 2017 statement of cash flows.
88. Jamison Company is preparing its statement of cash flows for the current year. During the year, the company retired
two issuances of debt and properly recorded the transactions. These transactions were as follows:
1) Paid cash of $115,000 to retire bonds payable with a face value of $120,000 and a book value of $116,000.
2) Paid cash of $48,000 to retire bonds payable with a face value of $45,000 and a book value of $46,000.
Required:
Record, in journal entry form, the entries that Jamison would make for the bond transactions on its spreadsheet to
prepare its statement of cash flows.