c.
PROBLEM 13.7
A
SATELLITE WORLD (concluded)
Satellite World’s credit sales resulted in $750,000 in new receivables, which were
uncollected as of year-end. These credit sales all were included in the computation of net
income, but those that remained uncollected at year-end do not represent cash receipts.
60 Minutes, Strong
a.
Balance sheet effects:
Beginning Ending
B
a
l
ance
B
a
l
ance
Cash and cash e
q
uivalents 10,000 (x) 50,000 60,000
MIRACLE TOOL, INC.
Worksheet for a Statement of Cash Flows
For the Year Ended December 31, 2015
Assets
Debit
PROBLEM 13.8
A
Changes
Credit
Changes
MIRACLE TOOL, INC.
3
4
1
(
b
.
Cash flows from o
p
eratin
g
activities:
Net loss (34,000)$
Add: De
p
reciation ex
p
ense 35,000
Less: Increase in inventor
y
2,000$
Decrease in accrued ex
p
enses
3
,
000
5,
000
Cash
p
aid to ac
q
uire
p
lants assets
(
see su
pp
lementar
y
sch
e
(2
,
000)
Net cash used in investin
g
activities 12,000
1
1
000
$
p
q
p
2
000
$
PROBLEM 13.8
A
MIRACLE TOOL, INC.
For the Year Ended December 31, 2015
Statement of Cash Flows
MIRACLE TOOL, INC. (continued
)
1
000
c.
d.
e.
PROBLEM 13.8
A
MIRACLE TOOL, INC. (continued
)
This company is contracting its operations. Its investment in marketable securities,
Miracle Tool, Inc. has substantially more cash than it did a year ago. Nonetheless, the
Miracle Tool, Inc. achieved its positive cash flow from operating activities basically by
liquidating assets and by not paying its bills. It has converted most of its accounts
receivable into cash, which probably means that credit sales have declined substantially
over the past several months. A decrease in sales shows up in the income statement
immediately, but may take months before its effects appear in a statement of cash flows.
near future.
•
PROBLEM 13.8
A
MIRACLE TOOL, INC. (concluded)
If management decides to continue business operations, it should consider taking the following
actions:
Expand the company’s product lines! The combination tool alone can no longer support
profitable operations. Also, dependency upon a single product—especially a faddish
product with a limited market potential—is not a sound long-term strategy.
30 Minutes, Medium
a.
Cash flows from o
p
eratin
g
activities:
Cash received from customers
(
1
)
3,040,000$
Income taxes
p
aid
(6
5,
000)
Cash disbursed for o
p
eratin
g
activities
(2
,
34
5,
000)
Net cash flow from o
p
eratin
g
activities 735,000$
g
Net cash used for investin
g
activities: (1,600,000)
Cash flows from financin
g
activities:
Proceeds from issuin
g
bonds
p
a
y
abl
e
2,000,000$
Dividends
p
aid
(
250
,
000
)
1
,
2
8
,
1
$
$
$
$
$
$
$
SOLUTIONS TO PROBLEM SET B
PROBLEM 13.1B
WELCH COMPAN
Y
For the Year Ended December 31, 2015
Statement of Cash Flows
WELCH COMPAN
Y
25 Minutes, Easy
a.
Cash flows from investin
g
activities:
Purchases of marketable securities (65,000)$
PROBLEM 13.2B
MARY’S FASHIONS
For the Year Ended December 31, 2015
Partial Statement of Cash Flows
MARY’S FASHIONS
25 Minutes, Easy
a.
Cash
p
aid to ac
q
uire
p
lant assets
(
see
p
art b
)
(50,000)
Proceeds from sales of
p
lant assets
(
2
)
,
Net cash
(
used
)
for investin
g
activities
(32
,
000)
$
(
)
8
Proceeds from sales of marketable securities 5
,
$
(
2
)
Proceeds from sales of
p
lant assets:
Cost of
p
lant assets sold or retired 100,000$
000
$
9
Proceeds from sales of
p
lant assets
,
$
b.
Schedule of noncash investin
g
and financin
g
activities:
90
000
p
q
p
0
000
$
PROBLEM 13.3B
RPZ IMPORTS
For the Year Ended December 31, 2015
Partial Statement of Cash Flows
RPZ IMPORTS
30 Minutes, Medium
a.
Cash flows from o
p
eratin
g
activities:
Cash received from customers
(
1
)
2,590,000$
Interest and dividends received
(
2
)
,
Cash
p
rovided b
y
o
p
eratin
g
activities 2,681,000$
Cash
p
aid to su
pp
liers and em
p
lo
y
ees
(
3
)
(1,576,000)
Interest
p
aid
(
4
)
(58,000)
Income taxes
p
aid
(
5
)
(112
,
000)
Cash disbursed for o
p
eratin
g
activities
(1
,7
46
,
000)
Net cash flow from o
p
eratin
g
activities
93
5,
000
$
2
90
$
40
000
4
91
000
$
p
pp
p
y
2
000
p
pp
49
000
p
p
p
p
4
2
000
1
6
$
p
2
p
000
$
p
p
2
PROBLEM 13.4B
ROYCE INTERIORS, INC.
For the Year Ended December 31, 2015
Partial Statement of Cash Flows
ROYCE INTERIORS, INC.
10
000
PROBLEM 13.4B
ROYCE INTERIORS, INC. (concluded)
b. Management could increase cash flows from operations by (only two required):