PROBLEM SET A
Problem 16-1A (35 minutes)
LANSING COMPANY
Cash Flows from Operating Activities—Indirect Method
For Year Ended December 31, 2015
Cash flows from operating activities
Net income………………………………………………………………….. $ 6,000
Adjustments to reconcile net income to net cash
provided by operating activities
Income statement items not affecting cash
Problem 16-2AB (35 minutes)
LANSING COMPANY
Cash Flows from Operating Activities—Direct Method
For Year Ended December 31, 2015
Cash flows from operating activities
Cash receipts from customers (1)………………………………………………..$ 97,400
Cash payments to suppliers (2)…………………………………………………..(42,640) )
Supporting calculations
(1) Sales + Decrease in receivables = $97,200 + ($5,800 – $5,600) = $97,400
(2) Cost of Increase in Decrease in
(3) Salaries expense – Increase in salaries payable = $18,000 – ($880 – $700) = $17,820
++
Problem 16-3A (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:
Income statement items not affecting cash
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)
Noncash investing and financing activities
Problem 16-3A (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
Helping fund these cash outflows is $50,000 cash from issuance of stock.
In summary, perhaps the company should review the wisdom of paying
Problem 16-4AA (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
Accounts receivable……………………… 50,625 (b) $15,185 65,810
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
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
Noncash investing and
financing activities
Problem 16-4AA (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
Noncash investing and financing activities
Purchased equipment for $96,375 by signing a $66,375 long-term note payable
and paying $30,000 in cash.
Problem 16-5AB (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 paid for other expenses (Note 3)…………………. (131,775)
Noncash investing and financing activities
Purchased equipment for $96,375 by signing a $66,375 long-term note payable
and paying $30,000 in cash.
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 16-6A (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
Cash flows from financing activities
Cash received from issuing stock (12,000 x $5)……………… 60,000
Problem 16-7AA (50 minutes)
GOLDEN CORPORATION
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
Balance sheet–credits
Accum. depreciation—Equip…………..
$ 104,000 (f) $ 54,000 $ 158,000
Statement of cash flows
Operating activities
Net income………………………………….. (a) 136,000
Increase in accounts receivable…….. (b) 12,000
Investing activities
Payment for equipment…………………. (g) 36,000
Problem 16-7AA (Concluded)
GOLDEN CORPORATION
Statement of Cash Flows
For Year Ended December 31, 2015
Cash flows from operating activities
Net income…………………………………………………………….$136,000
Cash flows from investing activities
Cash paid for equipment………………………………………….. (36,000)
Problem 16-8AB (35 minutes)
GOLDEN CORPORATION
Statement of Cash Flows
For Year Ended December 31, 2015
Cash flows from operating activities
Cash received from customers (Note 1)……………..$1,780,000
Supporting calculations
(2) Cost of Increase in Increase in
goods sold inventory accounts payable =
(3) Income taxes expense – Increase in income taxes payable
+
–