Google and Yahoo’s cash flow to sales ratio is similar to Apple and much higher
than Dell, while its asset turnover is lower than Apple or Dell. Google and Yahoo’s
*Problem 11-6A (LO 11-5)
Alliance Technologies
Statement of Cash Flows
For the Year Ended December 31, 2015
Cash Flows from Operating Activities
Cash received from customers $412,000
Cash paid to suppliers (258,000)
Cash paid for operating expenses (54,000)
Net sales $405,000
+ Decrease in accounts receivable 7,000
Cost of goods sold $235,000
+ Increase in inventory 14,000
+ Decrease in accounts payable 9,000
Operating expenses $70,000
− Decrease in prepaid rent (10,000)
− Increase in salaries payable (6,000)
Income tax expense $27,000
− Increase in income tax payable (24,000)
*Problem 11-7A (LO 11-5)
Video Phones, Inc.
Statement of Cash Flows
For the Year Ended December 31, 2015
Cash Flows from Operating Activities
Cash received from customers $3,614,000
Cash paid to suppliers (2,426,000)
Cash paid for operating expenses (965,200)
Cash Flows from Investing Activities
Purchase investment in bonds (115,000)
Sale of land 31,000
Cash Flows from Financing Activities
Payment of cash dividends (30,000)
Net cash flows from financing activities (30,000)
Note: Noncash Activities
Purchase equipment issuing a note payable $70,000
Net sales $3,636,00
0
− Increase in accounts receivable (22,000)
0
Cost of goods sold $2,450,00
0
− Decrease in inventory (40,000)
+ Decrease in accounts payable 16,000
0
Operating expenses $958,000
+ Increase in prepaid rent 7,200
Interest expense $20,000
+ Decrease in interest payable 5,0
00
00
Income tax expense $58,000
− Increase in income tax payable (1,000)
*Problem 11-8A (LO 11-2, 1-5)
Reverse Logic
Income Statement
For the Year Ended December 31, 2015
Net sales $4,108
Expenses:
Cost of goods sold 2,624
Operating expenses 1,158
Depreciation expense 62
Net sales $4,108
− Increase in accounts receivable (38)
Cost of goods sold $2,624
− Decrease in inventory (50)
+ Decrease in accounts payable 11
Operating expenses $1,158
+ Increase in prepaid rent 5
Income tax expense $90
+ Decrease in income tax payable 9
Problem 11-1B (LO 11-1)
Problems: Set B
Type of
Activity
Cash Inflow
or Outflow Transaction
F CI 1. Issue common stock
I CI 2. Sale of land for cash
F CO 3. Purchase of treasury stock
O CI 4. Collection of an account receivable
F CI 5. Issuance of a note payable
O CO 6. Purchase of inventory
F CO 7. Repayment of note payable
O CO 8. Payment of employee salaries
Problem 11-2B (LO 11-2, 11-3)
CPU Hardware Designers
Statement of Cash Flows
For the Year Ended December 31, 2015
Cash Flows from Operating Activities
Net income $ 80,000
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation expense 30,000
Loss (on sale of land) 8,000
Increase in accounts receivable (70,000)
Increase in inventory (40,000)
Cash Flows from Investing Activities
Cash received from sale of land 4,000
Purchase of equipment (230,000)
Cash Flows from Financing Activities
Issuance of common stock 300,000
Payment of dividends (50,000)
Repayment of notes payable (60,000)
Net cash flows from financing activities 190,000
Problem 11-3B (LO 11-2)
Software Associates
Statement of Cash Flows
For the Year Ended December 31, 2015
Cash Flows from Operating Activities
Net income $78,000
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation expense 33,000
Decrease in accounts receivable 10,000
Decrease in inventory 13,000
Increase in prepaid rent (3,000)
Problem 11-4B (LO 11-2, 11-3)
Virtual Gaming Systems
Statement of Cash Flows
For the Year Ended December 31, 2015
Cash Flows from Operating Activities
Net income $195,000
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation expense 33,000
Gain (on sale of land) (7,000)
Decrease in accounts receivable 16,000
Increase in inventory (15,000)
Decrease in prepaid rent 2,600
Cash Flows from Investing Activities
Purchase investment in stock (95,000)
Sale of land 62,000
Cash Flows from Financing Activities
Issue common stock 60,000
Payment of cash dividends (120,000)
Net cash flows from financing activities (60,000)
Note: Noncash Activities
Purchase equipment issuing a note payable $30,000
Problem 11-5B (LO 11-4)
1.
($ in millions) Net Income ÷
Average
Total Assets =
Return
on Assets
IBM’s return on assets at 13.8% is lower than Apple, but higher than Dell.
Hewlett-Packard’s at 5.6% is lower than either Apple or Dell.
2.
($ in millions)
Operating
Cash Flows ÷
Average
Total Assets =
Cash Return
on Assets
IBM’s cash return on assets at 17.3% is lower than Apple, but higher than Dell.
Hewlett-Packard’s is lower than either Apple or Dell.
3.
($ in millions)
Operating
Cash Flows ÷ Net Sales =
Cash Flow
to Sales
($ in millions) Net Sales ÷
Average
Total Assets =
Asset
Turnover
Hewlett-Packard 127,245 ÷(124,503 + 129,517)/2 =1.0 times
It appears that Hewlett-Packard and IBM’s business strategies fall somewhere
between Apple and Dell. Hewlett-Packard and IBM have lower cash flow to sales
*Problem 11-6B (LO 11-5)
Software Associates
Statement of Cash Flows
For the Year Ended December 31, 2015
Cash Flows from Operating Activities
Cash received from customers $720,000
Cash paid to suppliers (400,000)
Net sales $710,000
+ Decrease in accounts receivable 10,000
Cost of goods sold $420,000
− Decrease in inventory (13,000)
− Increase in accounts payable (7,000)
Operating expenses $130,000
+ Increase in prepaid rent 3,000
+ Decrease in salaries payable 4,000
Income tax expense $49,000
− Increase in income tax payable (8,000)
*Problem 11-7B (LO 11-5)
Virtual Gaming Systems
Statement of Cash Flows
For the Year Ended December 31, 2015
Cash Flows from Operating Activities
Cash received from customers $2,616,000
Cash paid to suppliers (1,728,000)
Cash paid for operating expenses (612,400)
Cash Flows from Investing Activities
Purchase investment in stock (95,000)
Cash Flows from Financing Activities
Issue common stock 60,000
Payment of cash dividends (120,000)
Net cash flows from financing activities (60,000)
Note: Noncash Activities
Purchase equipment issuing a note payable $30,000