Items
__e__ 1. Indirect method
__d__ 2. Direct method
__f__ 3. Depreciation expense
__g__ 4. Cash return on assets
__a__ 5. Operating activities
__b__ 6. Investing activities
__h__ 7. Financing activities
__c__ 8. Noncash activities
Descriptions
a. Cash transactions involving net income.
b Cash transactions for the purchase and sale of long-term assets.
c. Purchase of long-term assets by issuing stock.
d. Shows the cash inflows and outflows from operations such as cash received
e. Begins with net income and then lists adjustments to net income in order to
f. Item included in net income, but excluded from net operating cash flows.
g. Net cash flows from operating activities divided by average total assets.
h. Cash transactions involving lenders and investors.
Chapter 11
Statement of Cash Flows
Exercise 11-1
Exercise 11-2
The $10,000 decrease in notes receivable should be properly recorded as an increase in
cash from investing activities. While most changes in current assets and current
Ethics come into play because, by recording the decrease in notes receivable as an
Nicole should insist that the $10,000 decrease in notes receivable be recorded as an
Exercise 11-3
1. Operating activities
2. Financing activities
3. Investing activities
4. Noncash activities
5. Operating activities
6. Financing activities
7. Investing activities
8. Operating activities
9. Operating activities
10. Investing activities
Exercise 11-4
1. Noncash activities
2. Financing activities
3. Financing activities
4. Operating activities
Technology Solutions
Statement of Cash Flows
For the Year Ended December 31, 2015
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash
flows from operating activities:
Cash Flows from Investing Activities
List of cash inflows and outflows from investing
activities
Cash Flows from Financing Activities
List of cash inflows and outflows from
Net increase (decrease) in cash $$$
Note: Noncash Activities
List of noncash transactions $$$
Cash Flows from Operating Activities
Net income $67,000
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation expense 20,000
Loss (on sale of land) 3,000
Decrease in accounts receivable 18,000
Exercise 11-8
Cash Flows from Operating Activities
Net income $111,000
Adjustments to reconcile net income to net cash
flows from operating activities:
Gain (on sale of land) (10,000)
Increase in accounts receivable (15,000)
Plasma Screens Corporation
Statement of Cash Flows
For the Year Ended December 31, 2015
Cash Flows from Operating Activities
Net income $ 160,000
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation expense 80,000
Decrease in accounts receivable 24,000
Decrease in inventory 15,000
Increase in prepaid rent (1,000)
Decrease in accounts payable (4,000)
Decrease in interest payable (4,000)
All of the adjustments are added to net income in arriving at net operating cash flows.
This could be a natural occurrence in the data, or it could imply that management may
be using some of these items to minimize net income.
Exercise 11-9
All of the adjustments are subtracted from net income in arriving at net operating cash
flows. This could be a natural occurrence in the data, or it could imply that
management may be using some of these items to overstate net income.
Exercise 11-10
Increase in income tax payable 2,000
Cash Flows from Investing Activities
Purchase of equipment (200,000)
Cash Flows from Financing Activities
Payment of notes payable (75,000)
Payment of cash dividends (35,000)
Net cash flows from financing activities (110,000)
Peach Computer
Statement of Cash Flows
For the Year Ended December 31, 2015
Cash Flows from Operating Activities
Net income $50,000
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation expense 60,000
Increase in accounts receivable (3,000)
Increase in inventory (12,000)
Exercise 11-11
($ in millions) Net Income ÷
Average
Total Assets =
Return
on Assets
($ in millions)
Operating
Cash Flow ÷
Average
Total Assets =
Cash Return
on Assets
($ in millions)
Operating
Cash Flow ÷ Sales =
Cash Flow
to Sales
($ in millions) Sales ÷
Average
Total Assets =
Asset
Turnover
Peach Computer
Statement of Cash Flows
For the Year Ended December 31, 2015
Cash Flows from Operating Activities
Cash received from customers $1,297,00
0
Cash paid to suppliers (868,000)
Cash paid for operating expenses (315,000)
Exercise 11-12
1.
2.
3.
Zoogle’s business strategy is closer to Apple’s high cash flow to sales margins and
lower asset turnover.
*Exercise 11-13
Net sales $1,300,00
0
0
Cost of goods sold $850,000
+ Increase in inventory 12,000
+ Decrease in accounts payable 6,000
Operating expenses $320,000
− Decrease in prepaid rent (5,000)
Income tax expense $20,000
+ Decrease in income tax payable 4,000
Net sales $2,400,00
0
+ Decrease in accounts receivable 25,000
0
Cost of goods sold $1,600,00
0
+ Increase in inventory 45,000
+ Decrease in accounts payable 15,000
0
*Exercise 11-14
Income tax expense $110,000
+ Decrease in income tax payable 5,000
1.
($ in millions)
Net sales $127,245
+ Decrease in accounts receivable 81
2.
Cost of goods sold $97,529
+ Increase in inventory 1,024
+ Decrease in accounts payable 463
*Exercise 11-15