Problem 12-3A (50 minutes)
Part 1
FORTEN COMPANY
Statement of Cash Flows
For Year Ended December 31, 2015
Cash flows from operating activities
Net income………………………………..…….….…….…….….…….….$114,975
Adjustments to reconcile net income to net
cash provided by operating activities:
Increase in inventory ($275,656 – $251,800)………………………….(23,856)
Decrease in prepaid expenses ($1,875 – $1,250)………………… 625
Decrease in accounts payable ($114,675 – $53,141)…..……..... (61,534)
Cash flows from financing activities
Cash borrowed on short–term note…………………………………… 4,000
Cash paid on long–term note…………………………….….…….…...(50,125)
Cash received from issuing stock (2,500 x $20)……………………50,000
Cash paid for dividends…………………….……………………….…… (50,100)
Net cash used in financing activities……….….….…….….…….… (46,225)
Noncash investing and financing activities
forwarded, distributed, or posted on a website, in whole or part.
Problem 12-3A (Concluded)
Part 2
Forten Company’s operations provide a positive net cash inflow of $40,900—a
good result. At the same time, the cash balance decreased by $23,700 (32%)
necessary to replace the older equipment sold.
Helping fund these cash outflows is $50,000 cash from issuance of stock.
Moreover, the company took on additional debt (more than 30% increase in
recognize that that the debt must eventually be repaid with interest.
In summary, perhaps the company should review the wisdom of paying cash
when the company is taking on additional debt.
Financial and Managerial Accounting, 6th Edition
Problem 12-4AA (60 minutes)
FORTEN COMPANY
Spreadsheet for Statement of Cash Flows
For Year Ended December 31, 2015
December
31, 2014
Analysis of Changes December
31, 2015
Debit Credit
Balance sheet—debits
Cash……….……..……..........…......…...
$ 73,500 $ 49,800
Equipment……….….......…........…......
108,000 (h) 96,375 (g) 46,875 157,500
$485,800 $550,016
Balance sheet––credits
Accum. depreciation—Equip.............
$ 46,000 (g) 30,125 (f) 20,750 $ 36,625
Accounts payable………………………… 114,675 (e) 61,534 53,141
Short–term notes payable..…............. 6,000 (j) 4,000 10,000
Statement of cash flows
Operating activities
Net income…………………………………. (a) 114,975
Increase in accts. receivable…....….... (b) 15,185
Increase in merch. inventory….…….... (c) 23,856
Decrease in prepaid expenses......….. (d) 625
Decrease in accounts payable........... (e) 61,534
Borrowed on short–term note…………. (j) 4,000
Payment on long–term note…............ (k) 50,125
Issued common stock for cash…...…. (l) 50,000
Payments of cash dividends……...….. (m) 50,100
Noncash investing and
financing activities
Purchase of equip. financed
Problem 12-4AA (Concluded)
FORTEN COMPANY
Statement of Cash Flows
For Year Ended December 31, 2015
Cash flows from operating activities
Net income………………………………..…….….…….…….….…….….$114,975
Adjustments to reconcile net income to net
cash provided by operating activities:
Income statement items not affecting cash
Decrease in prepaid expenses ($1,875 – $1,250 )……………….. 625
Decrease in accounts payable ($114,675 – $53,141)…..……..... (61,534)
Net cash provided by operating activities………………………….. $ 40,900
Cash flows from investing activities
Cash flows from financing activities
Cash borrowed on short–term note…………………………………… 4,000
Cash paid on long–term note…………………………….….…….…...(50,125)
Cash received from issuing stock (2,500 x $20)……………………50,000
Cash paid for dividends…………………….……………………….…… (50,100)
Noncash investing and financing activities
Financial and Managerial Accounting, 6th Edition
Problem 12-5AB (40 minutes)
FORTEN COMPANY
Statement of Cash Flows
For Year Ended December 31, 2015
Cash flows from operating activities
Cash received from customers (Note 1)….….…......... $567,315
Cash paid for inventory (Note 2)………….…………….…. (370,390)
Cash flows from investing activities
Cash received from sale of equipment…..….…......... 11,625
Cash paid for equipment………..……….….….….…….…. (30 ,000 )
Net cash used in investing activities…………............ (18,375)
Cash flows from financing activities
Cash borrowed on short-term note……….……..……... 4,000
Cash paid on long-term note……………………………….. (50,125)
Noncash investing and financing activities
Supporting calculations
(1) Sales – Increase in receivables = $582,500 – ($65,810 – $50,625) = $567,315
(2) Cost of Increase in Decrease in
goods sold inventory payables =
+
+
Problem 12-6A (35 minutes)
GOLDEN CORPORATION
Statement of Cash Flows
For Year Ended December 31, 2015
Cash flows from operating activities
Net income………………………………..…………..…….….……...$136,000
Adjustments to reconcile net income to net
cash provided by operating activities
Income statement items not affecting cash
Depreciation expense……………………………………..….… 54,000
Changes in current assets and current liabilities
Problem 12-7AA (50 minutes)
31, 2014
31, 2015
Debit Credit
Balance sheet–-debits
Cash……………………..…..........…..…..$ 107,000 $ 164,000
Accounts receivable……..…..........….. 71,000 (b) $ 12,000 83,000
Problem 12-7AA (Concluded)
GOLDEN CORPORATION
Statement of Cash Flows
For Year Ended December 31, 2015
Cash flows from operating activities
Net income………………………………..…………..…….….……...$136,000
Adjustments to reconcile net income to net
cash provided by operating activities
Income statement items not affecting cash
Depreciation expense……………………………………..….… 54,000
Changes in current assets and current liabilities
Increase in taxes payable ($28,000 – $25,000)……………… 3,000
Net cash provided by operating activities…….….…........... $122,000
Cash flows from investing activities
Cash paid for equipment…………………….….….….…….……. (36,000)
Cash flows from financing activities
Cash received from issuing stock (12,000 x $5)……………… 60,000
Cash paid for cash dividends……………….……..…….…….… (89,000)
Financial and Managerial Accounting, 6th Edition
Problem 12-8AB (35 minutes)
GOLDEN CORPORATION
Statement of Cash Flows
For Year Ended December 31, 2015
Cash flows from operating activities
Net cash provided by operating activities …......... $122,000
Cash flows from investing activities
Cash paid for equipment………….….…….…..…….….. (36,000)
Cash flows from financing activities
Cash from issuing stock (12,000 x $5)………………… 60,000
Cash paid for cash dividends ……….………………….. (89,000)
Net cash used in financing activities ……….……….. (29,000)
Supporting calculations
(1) Sales – Increase in receivables = $1,792,000 – ($83,000 – $71,000) = $1,780,000
(3) Income taxes expense – Increase in income taxes payable
PROBLEM SET B
Problem 12-1B (35 minutes)
SALT LAKE COMPANY
Cash Flows from Operating Activities—Indirect Method
For Year Ended December 31, 2015
Income statement items not affecting cash
Depreciation expense…………………..….…..…….….…….…..$32,000
Changes in current operating assets and liabilities
Increase in accounts receivable……………..….…….….…… (600)
Decrease in inventory………………..…………….….….…….…. 120
Decrease in accounts payable………………….….….…….…. (200)
Financial and Managerial Accounting, 6th Edition