Chapter 12 – Statement of Cash Flows
ALTERNATE PROBLEMS
AP12–1.
Req. 1
Related
Cash
Balance sheet at December 31
Flow
Section
2015
2014
Change
Δ in Cash
Cash
$34,000
$29,000
+5,000
10
Net increase in cash
O
Accounts receivable
45,000
28,000
+17,000
3
Subtract from net income the increase in A/R
O
Merchandise inventory
32,000
38,000
–6,000
4
Add to net income the decrease in Inventory
I
Property and equipment
121,000
100,000
+21,000
7
Payment in cash for equipment
O
Less: Accumulated
depreciation
(30,000)
(25,000)
–5,000
2
Add back to NI because depreciation expense does not
affect cash
$202,000
$170,000
O
Accounts payable
$36,000
$27,000
+9,000
5
Add to net income the increase in Accounts payable
O
Wages payable
2,200
1,400
+800
6
Add to net income the increase in Wages payable
F
Note payable, long-term
40,000
46,000
–6,000
8
Cash used for repayment of note principal
F
Contributed capital
86,600
70,600
+16,000
9
Issuance of stock for cash
O,F
Retained earnings
37,200
25,000
+12,200
1
Increased for net income of $27,200 and decreased
for dividends declared and paid of $15,000
$202,000
$170,000
Income statement for 2015
Sales
$135,000
Cost of goods sold
70,000
Other expenses
37,800
Net Income
$ 27,200
Chapter 12 – Statement of Cash Flows
AP12–2.
Req.1
Related Cash
Balance sheet at December 31
Flow Section
2016
2015
Change
Δ in Cash
Cash
$64,000
$65,000
-1,000
10
Net decrease in cash
O
Accounts receivable
15,000
20,000
–5,000
3
Add to net income the decrease in A/R
O
Inventory
22,000
20,000
+2,000
4
Subtract from net income the increase in Inventory
I
Property and equipment
210,000
150,000
+60,000
7
Payment in cash for equipment
O
Less: Accumulated
depreciation
(60,000)
(45,000)
-15,000
2
Add to NI because depreciation expense does not
affect cash
$251,000
$210,000
O
Accounts payable
$8,000
$19,000
-11,000
5
Subtract from net income the decrease in Accounts
payable
O
Taxes payable
2,000
1,000
+1,000
6
Add to net income the increase in Taxes payable
F
Note payable, long-term
86,000
75,000
+11,000
8
Borrow additional note principal
F
Contributed capital
75,000
70,000
+5,000
9
Issuance of stock for cash
O,F
Retained earnings
80,000
45,000
+35,000
1
Increased for net income ($40,000) / decreased for
dividends ($5,000)
$251,000
$210,000
Income statement for 2016
Sales
$190,000
Cost of goods sold
90,000
Other expenses
60,000
Net Income
$40,000
Chapter 12 – Statement of Cash Flows
AP12–3.
Req. 1
Related
Cash
Balance sheet at December 31
Flow
Section
2015
2014
Change
Δ in Cash
Cash
$34,000
$29,000
+5,000
10
Net increase in cash
O
Accounts receivable
45,000
28,000
+17,000
3
Subtract from sales to compute collections from
customers
O
Merchandise inventory
32,000
38,000
-6,000
4
Subtract from CGS to compute payments to suppliers
I
Property and equipment
121,000
100,000
+21,000
7
Payment in cash for equipment
O
Less: Accumulated
depreciation
(30,000)
(25,000)
-5,000
2
Depreciation expense does not affect cash
$202,000
$170,000
O
Accounts payable
$36,000
$27,000
+9,000
5
Subtract from CGS to compute payments to suppliers
O
Wages payable
2,200
1,400
+800
6
Subtract from Wage expense to compute payments for
wages
F
Note payable, long-term
38,000
44,000
-6,000
8
Cash used for repayment of note principal
F
Contributed capital
88,600
72,600
+16,000
9
Issuance of stock for cash
O,F
Retained earnings
37,200
25,000
+12,200
1
Increased for net income of $27,200 and decreased
for dividends declared and paid of $15,000
$202,000
$170,000
Income statement for 2015
Sales
$135,000
Cost of goods sold
70,000
Other expenses
37,800
Net Income
$27,200
CP12–1.
Req. 1:
Depreciation and amortization was the largest item. The $143,156 expense was
added to net income in the reconciliation because it is a noncurrent deferred
expense which does not cause a cash outflow when it is recorded.
Chapter 12 – Statement of Cash Flows
CP12–3.
Req. 1
American Eagle
Outfitters
Urban Outfitters
Quality of
=
Cash flow from operations
$239,256
=
1.58
$282,702
=
1.53
income ratio
Net income
$151,705
$185,251
Quality of Income =
1.81
Req. 3
American Eagle
Urban Outfitters
Capital
=
Cash flow from operations
$239,256
=
$282,702
=
ratio
Req. 4
Capital Acquisitions =
2.62
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CP12–4.
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
Statement of Cash Flows
For the Quarter Ended May 31
Cash flows from operating activities:
Net income ……………………………………………………………..
$ 163,837
Add (deduct) to reconcile net income to net cash flow:
Depreciation expense …………………………………………………..
276,304
Amortization expense …………………………………………………..
5,901
Accounts receivable increase ………………………………………
(138,681)
Inventories increase ……………………………………………………..
(243,880)
Other current assets increase ………………………………………
(357,507)
Accounts payable increase …………………………………………..
280,935
Accrued liabilities increase …………………………………………..
164,087
Income taxes payable decrease …………………………………..
(43,031)
Long-term accounts receivable decrease …………………….
11,382
Net cash inflow from operating activities ………………..
$ 119,347
Cash flows from investing activities:
Fixed assets purchased ………………………………………….
(1,081,121)
Other assets decrease …………………………………………………
50,055
Net cash outflow from investing activities
(1,031,066)
Cash flows from financing activities:
Repayment of short-term debt …………………………………
(1,000,000)
Repayment of long-term debt ……………………………………….
(2,355,029)
Issuance of long-term debt ………………………………………
4,659,466
Net cash inflow from financing activities …………………
1,304,437
Net increase in cash during the quarter …………………………..
392,718
Cash, February 29 ……………………………………………………….
528,787
Cash, May 31 ………………………………………………………………
$ 921,505
Chapter 12 – Statement of Cash Flows
CP12–5.
Date: (today’s date)
To: Supervising Analyst
From: (your name)
Without this extra capital, it is unlikely that Carlyle can continue in business.
Instructor’s note: Subsequent to this date, Carlyle sought new financing through an
initial public offering. However, the company was unable to develop a niche in this very
competitive market and was subsequently liquidated.
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CP12–6.
Req. 1
The payment from Merrill Lynch to Enron does not automatically make the Nigerian
barge transaction a sale. When a loan is established between a lender and borrower, a
1) delivery has occurred or services have been rendered,
2) there is persuasive evidence of an arrangement for customer payment,
3) the price is fixed or determinable, and
4) collection is reasonably assured.
Without knowing about the secret side deal, it’s not obvious which of the four criteria
have not been fulfilled. Knowing about the side deal, however, makes it clear that the
first criterion has not been fulfilled. At the time of the initial transaction (and receipt of
Chapter 12 – Statement of Cash Flows
FINANCIAL REPORTING AND ANALYSIS PROJECTS
CP12–7.
The solutions to this case will depend on the company and/or accounting period
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CC12.
Operating activities
Net income 71,993$
Adjustments to reconcile net income to net cash provided by
operating activitites:
Depreciation 9,746
Amortization 1,559
Loss on sale of property and equipment 263
Changes in operating assets and liabilities
Receivables (5,887)
Product inventories (35,339)
Investing activities
Acquisition of businesses (5,934)
Purchases of property and equipment (19,844)
Sale of property and equipment 200
Net cash used in investing activities (25,578)
Other financing activities 944
Proceeds from stock issued under share–based compensation plans 13,085
Payments of cash dividends (26,470)
Purchases of treasury stock (77,769)
Net cash used in financing activities (41,759)
Change in cash and cash equivalents 7,766
Consolidated Statements of Cash Flows
(In thousands)
for the year ended December 31
POOL CORPORATION