25 Minutes, Easy
a.
Cash flows from investin
g
activities:
Purchases of marketable securities (78,000)$
Proceeds from sales of marketable securities
(
1
)
46,000
Loans made to borrowers (55,000)
Collections on loans 62,000
Cash
p
aid to ac
q
uire
p
lant assets
(
see
p
art b
)
(60,000)
Proceeds from sales of
p
lant assets
(
2
)
5
2
,
000
Net cash used in investin
g
activities
(33
,
000)
$
Su
ortin
com
utations:
(
1
)
Proceeds from sales of marketable securities:
46
000
$
(
)
p
100
000
12
000
Proceeds from sales of
p
lant assets 5
2
,
000
$
b.
Schedule of noncash investin
g
and financin
g
activities:
Purchases of
p
lant assets 170,000$
Less: Portion financed throu
g
h issuance of lon
g
-term debt
110
,
000
60
000
$
c. Management has more control over the timing and amount of outlays for investing activities
than for operating activities. Many of the outlays for operating activities are contractual,
PROBLEM 13.3
A
HOLMES EXPORT CO.
For the Year Ended December 31, 2015
Partial Statement of Cash Flows
HOLMES EXPORT CO.
Hill Education.
16
000
30 Minutes, Medium
a.
Cash flows from o
p
eratin
g
activities:
Cash received from customers
(
1
)
2,920,000$
Interest and dividends received
(
2
)
1
7
1
,
000
Cash
p
rovided b
y
o
p
eratin
g
activitie
s
3,091,000$
Cash
p
aid to su
pp
liers and em
p
lo
y
ees
(
3
)
(2,476,000)$
Interest
p
aid
(
4
)
(176,000)
Income taxes
p
aid
(
5
)
(103
,
000)
Cash disbursed for o
p
eratin
g
activities
(2
,755,
000)
Net cash flow from o
p
eratin
g
activities 336,000$
(
1
)
Cash received from customers:
Net sales 2,850,000$
2
$
3
1
1
000
$
p
3
8
p
11
000
p
p
29
899
2
$
(
)
9
1
6
000
$
p
p
13
PROBLEM 13.4
A
TREECE, INC.
For the Year Ended December 31, 2015
Partial Statement of Cash Flows
TREECE, INC.
PROBLEM 13.4
A
TREECE, INC. (concluded)
b. In addition to more aggressive collection of accounts receivable, management could increase
cash flows from operations by (only two required):
Hill Education.
25 Minutes, Medium
Cash flows from o
p
eratin
g
activities:
Net income 223,000$
Add: De
p
reciation ex
p
ense 115,000$
Decrease in accrued income taxes
p
a
y
able 13,000
Gain on sales of marketable securities
4
,
000
89
,
000
Net cash flow from o
p
eratin
g
activities
336
,
000
$
Credit sales cause receivables to increase, while collections cause them to decline. If receivables
decline over the year, collections during the year must have exceeded credit sales for the year.
Thus, cash receipts exceed revenue measured on the accrual basis.
PROBLEM 13.5
A
TREECE, INC.
For the Year Ended December 31, 2015
Partial Statement of Cash Flows
TREECE, INC. (INDIRECT)
Hill Education.
9
000
202
000
45 Minutes, Strong
a.
Cash flows from o
p
eratin
g
activities:
Cash received from customers
(
1
)
3,140,000$
Interest received
(
2
)
42
,
000
Cash
p
rovided b
y
o
p
eratin
g
activities 3,182,000
Cash
p
aid to su
pp
liers and em
p
lo
y
ees
(
3
)
(2,680,000)$
p
24
000
244
164
$
PROBLEM 13.6
A
21st CENTURY TECHNOLOGIES
For the Year Ended December 31, 2015
Statement of Cash Flows
21st CENTURY TECHNOLOGIES
(
(114
b. (1)
(2)
21st CENTURY TECHNOLOGIES (concluded)
The primary reason why cash provided by operating activities substantially exceeded
The primary reason for the net decrease in cash was the large cash outlays for investing
60 Minutes, Strong
a.
Balance sheet effects:
Beginning Ending
B
a
l
ance
B
a
l
ance
Cash and cash e
q
uivalents 80,000 (x) 43,000 37,000
Accounts receivable 100,000 (3) 750,000 850,000
Plant and e
q
ui
p
ment
(
net of
accumulated de
p
reciation
)
600
,
000
(6)
2
,
200
,
000
(2)
14
7,
000
2
,
6
5
3
,
000
Totals 7
80
,
000
3
,5
40
,
000
Liabilities & Owners’ E
q
uit
y
Notes
p
a
y
able
(
short-term
)
0 (7) 1,450,000 1,450,000
Accounts
p
a
y
abl
e
30,000 (4) 33,000 63,000
Accrued ex
p
enses
p
a
y
abl
e
45,000 (5) 13,000 32,000
11
000
(1)
440
000
000
80
000
2
963
000
2
963
000
3
40
000
Cash effects:
O
p
eratin
g
activities:
Net income (1) 440,000
De
p
reciation ex
p
ense (2) 147,000
Increase in accounts receivable (3) 750,000
Increase in accounts
p
a
y
able
(
4
)
33,000
Decrease in accrued
ex
p
enses
p
a
y
able (5) 13,000
g
43
000
PROBLEM 13.7
A
Changes
Credit
Changes
Effect of Transactions
SATELLITE WORLD
Sources Uses
SATELLITE WORLD
Worksheet for a Statement of Cash Flows
For the Year Ended December 31, 2015
Assets
Debit
p
y
(
b
.
Cash flows from o
p
eratin
g
activities:
Net income 440,000$
Add: De
p
reciation ex
p
ense 147,000
Increase in accounts
p
a
y
able
33
,
000
Subtotal 620,000$
p
y
)
Cash flows from financin
g
activities:
Short-term borrowin
g
from bank 1,450,000$
Issuance of ca
p
ital stock 5
00
,
000
Net cash
p
rovided b
y
financin
g
activities
1
,
9
5
0
,
000
Net increase
(
decrease
)
in cash (43,000)$
80
000
3
000
$
3
000
1
8
0
000
$
PROBLEM 13.7
A
SATELLITE WORLD
For the Year Ended December 31, 2015
Statement of Cash Flows
SATELLITE WORLD (continued)
Hill Education.
13
000
63
000
c.
d. Satellite World does not appear headed for insolvency. First, the company has a $5.5
million line of credit, against which it has drawn only $1,450,000. This gives the company
PROBLEM 13.7
A
SATELLITE WORLD (concluded)
Satellite World’s credit sales resulted in $750,000 in new receivables, which were
uncollected as of year-end. These credit sales all were included in the computation of net
net income measured on the accrual basis.
Note to instructor: It is not uncommon for cash flows to lag behind a rising net income figure in a
growing business. This is why many rapidly growing businesses find themselves “strapped for
cash” to finance their growth even if they are profitable.
Hill Education.
60 Minutes, Strong
a.
Balance sheet effects:
Beginning Ending
B
a
l
ance
B
a
l
ance
Cash and cash e
q
uivalents 10,000 (x) 50,000 60,000
Marketable securities 20,000 (8) 15,000 5,000
Accounts receivable 40,000 (4) 17,000 23,000
Inventories 120,000 (5) 2,000 122,000
Plant and e
q
ui
p
ment
(
net of
accumulated de
p
reciation
)
300
,
000
(9)
20
,
000
(3)
3
5,
000
28
5,
000
Totals
490
,
000
49
5,
000
Liabilities & Owners’ E
q
uit
y
490
000
123
000
123
000
49
000
Cash effects:
O
p
eratin
g
activities:
Net loss (1) 34,000
De
p
reciation ex
p
ense (3) 35,000
Decrease in accounts receivable (4) 17,000
Increase in inventor
y
(5) 2,000
Increase in accounts
p
a
y
able
(
6
)
23,000
Decrease in accrued (7) 3,000
ex
p
enses
p
a
y
able
Loss on sale of marketable
securities
(
8
)
1,000
Investin
g
activities:
Proceeds from sale of
marketable securities
(
8
)
14,000
g
(
1
000
(
10
000
10
000
MIRACLE TOOL, INC.
Worksheet for a Statement of Cash Flows
For the Year Ended December 31, 2015
Assets
Debit
PROBLEM 13.8
A
Changes
Credit
Changes
MIRACLE TOOL, INC.
Sources Uses
(2)
4