150. An analysis of the general ledger accounts indicates that equipment, with an original cost of $134,000 and
accumulated depreciation of $105,000 on the date of sale, was sold for $20,000 during the year. Using this
information, indicate the items to be reported on the statement of cash flows using the indirect method.
151. On the basis of the following data for Larson Co. for the year ending December 31, 2011 and the preceding
year ended December 31, 2010, prepare a statement of cash flows. Use the indirect method of reporting cash
flows from operating activities. In addition to the balance sheet data, assume that:
Equipment costing $125,000 was purchased for cash.
Equipment costing $85,000 with accumulated depreciation of $65,000 was sold for $15,000.
The stock was issued for cash.
The only entries in the retained earnings account were net income of $51,000 and cash dividends declared of
$13,000.
Year
Year
2011
2010
Cash
$100,000
$ 78,000
Accounts receivable (net)
78,000
85,000
Inventories
101,500
90,000
Equipment
410,000
370,000
Accumulated depreciation
(150,000)
(158,000)
$539,500
$465,000
Accounts payable (merchandise creditors)
$ 58,500
$ 55,000
Cash dividends payable
5,000
4,000
Common stock, $10 par
200,000
170,000
Paid-in capital in excess of par—
common stock
62,000
60,000
Retained earnings
214,000
176,000
$539,500
$465,000
Cash flows from operating activities:
Net income, per income statement
$ 51,000
Add: Depreciation
$57,000
Decrease in accounts receivable
7,000
Increase in accounts payable
3,500
Loss on sale of equipment
5,000
72,500
$ 123,500
Deduct: Increase in inventories
11,500
Net cash flow from operating activities
$112,000
Cash flows from investing activities:
Cash from sale of equipment
$ 15,000
Less: Cash paid for purchase of equipment
125,000
Net cash flow used for investing activities
(110,000)
Cash flows from financing activities:
Cash received from sale of common stock
$32,000
Less: Cash paid for dividends
12,000*
Net cash flow provided by financing activities
20,000
Increase in cash
$ 22,000
Cash at the beginning of the year
78,000
Cash at the end of the year
$100,000
*$13,000 + $4,000 – $5,000 = $12,000
152. The comparative balance sheet of Posner Company, for 2011 and the preceding year ended December 31,
2010, appears below in condensed form:
Year
Year
2011
2010
Cash
$ 53,000
$ 50,000
Accounts receivable (net)
37,000
48,000
Inventories
108,500
100,000
Investments
…..
70,000
Equipment
573,200
450,000
Accumulated depreciation-equipment
(142,000)
(176,000)
$629,700
$542,000
Accounts payable
$ 62,500
$ 43,800
Bonds payable, due 2011
…..
100,000
Common stock, $10 par
325,000
285,000
Paid-in capital in excess of par—
common stock
80,000
55,000
Retained earnings
162,200
58,200
$629,700
$542,000
Sales
$625,700
Cost of merchandise sold
340,000
Gross profit
$285,700
Operating expenses:
Depreciation expense
$26,000
Other operating expenses
68,000
94,000
Income from operations
$191,700
Other income:
Gain on sale of investment
$ 4,000
Other expense:
Interest expense
6,000
(2,000)
Income before income tax
$189,700
Income tax
60,700
Net income
$129,000
(a)
Fully depreciated equipment costing $60,000 was scrapped, no salvage, and equipment was purchased for $183,200.
(b)
Bonds payable for $100,000 were retired by payment at their face amount.
(c)
5,000 shares of common stock were issued at $13 for cash.
(d)
Cash dividends declared and paid, $25,000.
153. The comparative balance sheet of Barry Company, for 2011 and the preceding year ended December 31,
2010, appears below in condensed form:
Year
Year
2011
2010
Cash
$ 72,000
$ 42,500
Accounts receivable (net)
61,000
70,200
Inventories
121,000
105,000
Investments
…..
100,000
Equipment
515,000
425,000
Accumulated depreciation-equipment
(153,000)
(175,000)
$616,000
$567,700
Accounts payable
$ 59,750
$ 47,250
Bonds payable, due 2011
…..
75,000
Common stock, $20 par
375,000
325,000
Premium on common stock
50,000
25,000
Retained earnings
131,250
95,450
$616,000
$567,700
Additional data for the current year are as follows:
(a)
Net income, $75,800.
(b)
Depreciation reported on income statement, $38,000.
(c)
Fully depreciated equipment costing $60,000 was scrapped, no salvage, and equipment was purchased for $150,000.
(d)
Bonds payable for $75,000 were retired by payment at their face amount.
(e)
2,500 shares of common stock were issued at $30 for cash.
Cash dividends declared and paid, $40,000.
(g)
Investments of $100,000 were sold for $125,000.
154. The Dickinson Company reported net income of $155,000 for the current year. Depreciation recorded on
buildings and equipment amounted to $65,000 for the year. In addition, a building with an original cost of
$250,000 and accumulated depreciation of $190,000 on the date of the sale, was sold for $75,000. Balances of
the current asset and current liability accounts at the beginning and end of the year are as follows:
End of Year
Beginning of Year
Cash
$20,000
$15,000
Accounts receivable
19,000
32,000
Inventories
50,000
65,000
Accounts payable
12,000
18,000
Instructions
Prepare the cash flows from the operating activities section of the statement of cash flows using the indirect method.
Net income
$155,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense
65,000
Gain on sale of building
(15,000)
Decrease in accounts receivable
13,000
Decrease in inventories
15,000
Decrease in accounts payable
(6,000)
Net cash provided by operating activities
$227,000
155. The net income reported on an income statement for the current year was $58,000. Depreciation recorded
on fixed assets for the year was $24,000. In addition, equipment with an original cost of $130,000 and
accumulated depreciation of $115,000 on the date of the sale, was sold for $20,000. Balances of the current
asset and current liability accounts at the end and beginning of the year are listed below. Prepare the cash flows
from operating activities section of a statement of cash flows using the indirect method.
End
Beginning
Cash
$65,000
$ 70,000
Accounts receivable (net)
70,000
63,000
Inventories
85,000
102,000
Prepaid expenses
4,000
4,500
Accounts payable
(merchandise creditors)
50,000
58,000
Cash dividends payable
4,500
6,500
Salaries payable
6,000
7,500
Cash flows from operating activities:
Net income, per income statement
$58,000
Add: Depreciation
$24,000
Decrease in inventories
17,000
Decrease in prepaid expenses
500
41,500
$99,500
Deduct: Gain on sale of equipment
$ 5,000
Increase in accounts receivable (net)
7,000
Decrease in accounts payable
8,000
Decrease in salaries payable
1,500
21,500
156. On the basis of the following data for Grant Co. for 2011 and the preceding year ended December 31,
2010, prepare a statement of cash flows. Use the indirect method of reporting cash flows from operating
activities. Assume that equipment costing $125,000 was purchased for cash and equipment costing $85,000
with accumulated depreciation of $65,000 was sold for $15,000; that the stock was issued for cash; and that the
only entries in the retained earnings account were net income of $56,000 and cash dividends declared of
$18,000.
Year
Year
2011
2010
Cash
$90,000
$ 78,000
Accounts receivable (net)
78,000
85,000
Inventories
106,500
90,000
Equipment
410,000
370,000
Accumulated depreciation
(150,000)
(158,000)
$534,500
$465,000
Accounts payable (merchandise creditors)
$ 53,500
$ 55,000
Cash dividends payable
5,000
4,000
Common stock, $10 par
200,000
170,000
Paid-in capital in excess of par—
common stock
62,000
60,000
Retained earnings
214,000
176,000
$534,500
$465,000
Cash flows from operating activities:
Add: Depreciation
$57,000
Decrease in accounts receivable
7,000
Loss on sale of equipment
5,000
69,000
$125,000
Deduct: Increase in inventories
16,500
Decrease in accounts payable
1,500
18,000
Net cash flow from operating activities
$107,000
Cash flows from investing activities:
Cash from sale of equipment
$ 15,000
Less: Cash paid for purchase of equipment
125,000
Net cash flow used for investing activities
(110,000)
Cash flows from financing activities:
Cash received from sale of common stock
$32,000
Less: Cash paid for dividends
17,000*
Net cash flow provided by financing activities
15,000
Increase in cash
$ 12,000
Cash at the beginning of the year
78,000
Cash at the end of the year
$90,000
*$18,000 + $4,000 – $5,000 = $17,000
157. Balances of the current asset and current liability accounts at the end and beginning of the year are as
follows:
End
Beginning
Cash
$ 62,000
$73,000
Accounts receivable (net)
75,000
60,000
Inventories
54,000
47,000
Accounts payable
(merchandise creditors)
43,000
37,000
Salaries payable
2,800
3,800
Sales (on account)
210,000
Cost of merchandise sold
70,000
Operating expenses other than depreciation
67,000
Use the direct method to prepare the cash flows from operating activities section of a statement of cash flows.
Cash flows from operating activities:
Cash received from customers
$195,000
Less: Cash payments for merchandise
$71,000
Cash payments for operating
expenses
68,000
139,000
Net cash flow from operating activities
$ 56,000
158. The comparative balance sheet of Colson Company, for 2011 and the preceding year ended December 31,
2010 appears below in condensed form:
Year
Year
2011
2010
Cash
$ 45,000
$ 53,500
Accounts receivable (net)
51,300
58,000
Inventories
147,200
135,000
Investments
0
60,000
Equipment
493,000
375,000
Accumulated depreciation-equipment
(113,700)
(128,000)
$622,800
$553,500
Accounts payable
$ 61,500
$ 42,600
Bonds payable, due 2014
0
100,000
Common stock, $10 par
250,000
200,000
Paid-in capital in excess of par—
common stock
75,000
50,000
Retained earnings
236,300
160,900
$622,800
$553,500
Sales
$623,000
Cost of merchandise sold
348,500
Gross profit
$274,500
Operating expenses:
Depreciation expense
$24,700
Other operating expenses
75,300
100,000
Income from operations
$174,500
Other income:
Gain on sale of investment
$ 5,000
Other expense:
Interest expense
12,000
(7,000)
Income before income tax
$167,500
Income tax
64,100
Net income
$103,400
(a)
Fully depreciated equipment costing $39,000 was scrapped, no salvage, and equipment was purchased for $157,000.
(b)
Bonds payable for $100,000 were retired by payment at their face amount.
(c)
5,000 shares of common stock were issued at $15 for cash.
(d)
Cash dividends declared were paid $28,000.
(e)
All sales are on account.
159. The cash flows from operating activities are reported by the direct method on the statement of cash
flows. Determine the following:
(a)
If sales for the current year were $475,000 and accounts receivable increased by $39,000 during the year, what was the amount of cash
received from customers?
(b)
If income tax for the current year was $39,000 and income tax payable decreased by $11,000 during the year, what was the amount of
cash payments for income tax?
160. Selected data for the current year ended December 31 are as follows:
Balance
Balance
December 31
January 1
Accrued expenses (operating expenses)
$29,500
$ 22,000
Accounts payable (merchandise creditors)
90,000
135,000
Inventories
42,500
68,000
Prepaid expenses
23,000
20,000
During the current year, the cost of merchandise sold was $620,000 and the operating expenses other than depreciation were $142,000. The direct
method is used for presenting the cash flows from operating activities on the statement of cash flows.
Determine the amount reported on the statement of cash flows for (a) cash payments for merchandise and (b) cash payments for operating expenses.
161. Based on the following, what is free cash flow?
Cash from Operations
$155,000
Cash from Investing
$(30,000)
Cash from Financing
$ 30,000
Cost of merchandise sold
$620,000
Add decrease in accounts payable
45,000
$665,000
Deduct decrease in inventories
25,500
Cash payments for merchandise
$639,500
Operating expenses other than depreciation
$142,000
Deduct increase in accrued expenses
7,500
$134,500
Add increase in prepaid expenses
3,000
Cash payments for operating expenses
$137,500
162. Balances of the current asset and current liability accounts at the end and beginning of the year are as
follows:
End
Beginning
Cash
$ 67,000
$73,000
Accounts receivable (net)
73,000
60,000
Inventories
54,000
47,000
Accounts payable
(merchandise creditors)
43,000
37,000
Salaries payable
2,800
3,800
Sales (on account)
210,000
Cost of merchandise sold
70,000
Operating expenses other than depreciation
67,000
Use the direct method to prepare the cash flows from operating activities section of a statement of cash flows.
Cash flows from operating activities:
Cash received from customers
$197,000
Less: Cash payments for merchandise
$71,000
Cash payments for operating
expenses
68,000
139,000
Net cash flow from operating activities
$ 58,000
163. On the basis of the following data for Branch Co. for the year ended December 31, 2011 and the preceding
year, prepare a statement of cash flows using the indirect method of reporting cash flows from operating
activities.
Assume that equipment costing $125,000 was purchased for cash and the land was sold for $15,000. The stock
was issued for cash and the only entries in the retained earnings account were net income of $56,000 and cash
dividends declared and paid of $18,000.
Year
Year
2011
2010
Cash
$65,000
$ 54,000
Accounts receivable (net)
78,000
85,000
Inventories
106,500
90,000
Land
—
20,000
Equipment
495,000
370,000
Accumulated depreciation
(215,000)
(158,000)
$529,500
$461,000
Accounts payable (merchandise creditors)
$ 53,500
$ 55,000
Common stock, $10 par
200,000
170,000
Paid-in capital in excess of par—
common stock
62,000
60,000
Retained earnings
214,000
176,000
$529,500
$461,000
Cash flows from operating activities:
Add: Depreciation
$57,000
Decrease in accounts receivable
7,000
Loss on sale of land
5,000
69,000
$125,000
Deduct: Increase in inventories
16,500
Decrease in accounts payable
1,500
18,000
Net cash flow from operating activities
$107,000
Cash flows from investing activities:
Cash from sale of land
$ 15,000
Less: Cash paid for purchase of equipment
125,000
Net cash flow used for investing activities
(110,000)
Cash flows from financing activities:
Cash received from sale of common stock
$32,000
Less: Cash paid for dividends
18,000
Net cash flow provided by financing activities
14,000
Increase in cash
$ 11,000
Cash at the beginning of the year
54,000
Cash at the end of the year
$65,000
164. On the basis of the following data for Breach Co. for the year ended December 31, 2011 and the preceding
year, prepare a statement of cash flows using the indirect method of reporting cash flows from operating
activities.
Assume that equipment costing $25,000 was purchased for cash and no long term assets were sold during the
period.
Stock was issued for cash – 3,200 shares at par.
Net income for 2010 was $76,000.
Cash dividends declared and paid were $13,000.
Year
Year
2011
2010
Cash
$170,000
$ 74,000
Accounts receivable (net)
78,000
85,000
Inventories
106,500
90,000
Equipment
395,000
370,000
Accumulated depreciation
(195,000)
(158,000)
$554,500
$461,000
Accounts payable (merchandise creditors)
$ 51,000
$ 50,000
Taxes payable
2,500
5,000
Common stock, $10 par
262,000
230,000
Retained earnings
239,000
176,000
$554,500
$461,000
Cash flows from operating activities:
Net income, per income statement
$ 76,000
Add: Depreciation
$37,000
Decrease in accounts receivable
7,000
Increase in accounts payable
1,000
45,000
$121,000
Deduct: Increase in inventories
16,500
Decrease in taxes payable
2,500
19,000
Net cash flow from operating activities
$102,000
Cash flows from investing activities:
Cash paid for purchase of equipment
(25,000)
Net cash flow used for investing activities
(25,000)
Cash flows from financing activities:
Cash received from sale of common stock
$32,000
Less: Cash paid for dividends
13,000
Net cash flow provided by financing activities
19,000
Increase in cash
$ 96,000
Cash at the beginning of the year
74,000
Cash at the end of the year
$170,000
165. Complete each of the columns on the table below, indicating in which section each item would be reported
on the statement of cash flow (Operating, Investing, or Financing), the amount that would be reported, and
whether the item would create an increase or decrease in cash. For item that affect more than one section of the
statement, indicate all affected. Assume the indirect method of reporting cash flows operating activities.
The first item has been completed as an example.
Item
Statement Section
Amount
to Report
+/– Effect
on Cash
Depreciation of $20,000 for the period
Operating
$20,000
Increase
Issuance of common stock for $30,000
Increase in Accounts Payable of $7,000
Retirement of $100,000 Bonds Payable at 97.
Purchase of long term investments for $76,500
Dividends declared and paid of $8,300
Increase in Prepaid Rent of $4,500
Decrease in Inventory of $5,300
Purchase of equipment for $17,600 cash.
Sale of land originally costing $60,000 for $66,000
Decrease in Taxes Payable for $2,100
Issuance of common stock for $30,000
Financing
30,000
Increase
Increase in Accounts Payable of $7,000
Operating
7,000
Increase
Retirement of $100,000 Bonds Payable at 97.
Operating
3,000
Increase
Purchase of long term investments for $76,500
Investing
76,500
Decrease
Dividends declared and paid of $8,300
Financing
8,300
Decrease
Increase in Prepaid Rent of $4,500
Operating
4,500
Decrease
Decrease in Inventory of $5,300
Operating
5,300
Increase
Purchase of equipment for $17,600 cash.
Investing
17,600
Decrease
Decrease in Taxes Payable for $2,100
Operating
2,100
Decrease