Chapter 12 – Reporting and Analyzing Cash Flows
Exercise 12–15B (20 minutes)
FERRON COMPANY
Statement of Cash Flows
For Year Ended December 31, 2013
Cash flows from operating activities
Receipts from customers …………………………………....
$ 495,000
Receipts of interest……………………………………………..
3,500
Payments for merchandise ………………………………....
(254,500)
Payments for salaries ………………………………………....
(76,500)
Payments for other expenses ……………………………...
(20,000)
Net cash provided by operating activities …………....
$147,500
Cash flows from investing activities
Receipt from sale of equipment …………………………..
60,250
Payment for store equipment ……………………………...
(24,750)
Net cash provided by investing activities …………....
35,500
Cash flows from financing activities
Payment to retire long-term notes payable …………..
(100,000)
Receipt from borrowing on six-month note ………....
35,000
Payment of cash dividends ………………………………...
(10,000)
Net cash used in financing activities …………………...
(75,000)
Net increase in cash and cash equivalents ……………..
$108,000
Cash and cash equivalents at prior year–end ………....
40,000
Cash and cash equivalents at current year–end ……...
$148,000
Note No. ___
Noncash investing and financing activities
(1) Issued common stock to retire $185,500 of bonds payable.
(2) Purchased land financed with a $105,250 long-term note payable.
Exercise 12–16B (40 minutes)
1.
THOMAS CORPORATION
Statement of Cash Flows
For Year Ended December 31, 2013
Cash flows from operating activities
Cash received from customers ………………………………….
$5,000,000
Cash received from dividends ……………………………….….
208,400
Cash paid for merchandise ……………………………………….
(2,590,000)
Cash paid for wages ……………………………………………..….
(550,000)
Cash paid for rent ………………………………………………….….
(320,000)
Cash paid for interest ……………………………………………….
(218,000)
Cash paid for taxes ……………………………………………….….
(450,000)
Net cash provided by operating activities ………………….
$1,080,400
Cash flows from investing activities
Cash paid for purchases of machinery …………………..….
(2,236,000)
Cash paid for purchases of long-term investments ..….
(1,260,000)
Cash received from sale of land …………………………….….
220,000
Cash received from sale of machinery ……………………….
710,000
Net cash used in investing activities ………………………….
(2,566,000)
Cash flows from financing activities
Cash received from issuing stock …………………………..
1,540,000
Cash received from borrowing ………………………………….
3,600,000
Cash paid for note payable ……………………………………….
(386,000)
Cash paid for dividends …………………………………………….
(500,000)
Cash paid for treasury stock purchases. ………………..….
(218,000)
Net cash provided by financing activities ……………….….
4,036,000
Net increase in cash………………………………………………..….
$2,550,400
Beginning balance of cash …………………………..………….….
333,000
Ending balance of cash …………………………………………..….
$2,883,400
2.
a. (i) Financing section reported the largest cash inflow of $4,036,000.
(ii) Investing section reported the largest cash outflow of $2,566,000.
b. The largest individual item among the investing cash outflows is the purchase
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Financial Accounting, 7th Edition
24
Problem 12-1A (50 minutes)
Part 1
FORTEN COMPANY
Statement of Cash Flows
For Year Ended December 31, 2013
Cash flows from operating activities
Net income ………………………………………………………………………………
$114,975
Adjustments to reconcile net income to net
cash provided by operating activities:
Increase in accounts receivable ($65,810 – $50,625) ………..……
(15,185)
Increase in inventory ($275,656 – $251,800) ………………………..…
(23,856)
Decrease in prepaid expenses ($1,875 – $1,250) ……………………
625
Decrease in accounts payable ($114,675 – $53,141) ………………
(61,534)
Depreciation expense …………………………………………………….…
20,750
Loss on disposal of equipment ……………………………………..……
5,125
Net cash provided by operating activities …………………………..
$ 40,900
Cash flows from investing activities
Cash received from sale of equipment ……………………………..……
11,625
Cash paid for equipment ……………………………………………………….
(30,000)
Net cash used in investing activities ………………………………………
(18,375)
Cash flows from financing activities
Cash borrowed on short–term note …………………………………..……
4,000
Cash paid on long–term note ……………………………………………..……
(50,125)
Cash received from issuing stock (2,500 x $20) ………………….……
50,000
Cash paid for dividends …………………………………………………….…
(50,100)
Net cash used in financing activities ………………………………………
(46,225)
Net decrease in cash …………………………………………………………………
$(23,700)
Cash balance at December 31, 2012 …………………………………….……
73,500
Cash balance at December 31, 2013 …………………………………….……
$ 49,800
Noncash investing and financing activities
Purchased equipment for $96,375 by signing a $66,375 long-term note payable
and paying $30,000 in cash.
Problem 12–2AA (60 minutes)
FORTEN COMPANY
Spreadsheet for Statement of Cash Flows
For Year Ended December 31, 2013
December
31, 2012
Analysis of Changes
December
31, 2013
Debit
Credit
Balance sheet—debits
Cash ………………………………………………….
$ 73,500
$ 49,800
Accounts receivable ……………………..….
50,625
(b)
$15,185
65,810
Merchandise inventory ………………….….
251,800
(c)
23,856
275,656
Prepaid expenses …………………………..
1,875
(d)
$ 625
1,250
Equipment …………………………………….….
108,000
(h)
96,375
(g)
46,875
157,500
$485,800
$550,016
Balance sheet—credits
Accum. depreciation—Equip. ……….….
$ 46,000
(g)
30,125
(f)
20,750
$ 36,625
Accounts payable …………………………..
114,675
(e)
61,534
53,141
Short–term notes payable ……………..….
6,000
(j)
4,000
10,000
Long–term notes payable ………………….
48,750
(k)
50,125
(i)
66,375
65,000
Common stock, $5 par value ………..….
150,250
(l)
12,500
162,750
Paid-in capital in excess of
par value, common stock …………..….
0
(l)
37,500
37,500
Retained earnings …………………………..
120,125
(m)
50,100
(a)
114,975
185,000
$485,800
$550,016
Statement of cash flows
Operating activities
Net income ……………………………………….
(a)
114,975
Increase in accts. receivable …………….
(b)
15,185
Increase in merch. inventory …………….
(c)
23,856
Decrease in prepaid expenses ………….
(d)
625
Decrease in accounts payable ………….
(e)
61,534
Depreciation expense ……………………….
(f)
20,750
Loss on sale of equipment ……………….
(g)
5,125
Investing activities
Receipt from sale of equipment …….….
(g)
11,625
Payment to purchase equipment ….….
(h)
30,000
Financing activities
Borrowed on short–term note………..….
(j)
4,000
Payment on long-term note …………..….
(k)
50,125
Issued common stock for cash …….….
(l)
50,000
Payments of cash dividends …………….
(m)
50,100
Noncash investing and
financing activities:
Purchase of equip. financed
by long-term note payable ………
(i)
66,375
(h)
66,375
$600,775
$600,775
Problem 12–3AB (40 minutes)
FORTEN COMPANY
Statement of Cash Flows
For Year Ended December 31, 2013
Cash flows from operating activities
Cash received from customers (Note 1) ………………..
$567,315
Cash paid for merchandise (Note 2) ……………………..
(370,390)
Cash paid for other expenses (Note 3) ………………....
(131,775)
Cash paid for income taxes ………………………………...
(24,250)
Net cash provided by operating activities …………....
$ 40,900
Cash flows from investing activities
Cash received from sale of equipment ………………...
11,625
Cash paid for equipment ……………………………………..
(30,000)
Net cash used in investing activities …………………...
(18,375)
Cash flows from financing activities
Cash borrowed on short-term note ……………………...
4,000
Cash paid on long-term note ……………………………....
(50,125)
Cash received from issuing stock (2,500 x $20) ……..
50,000
Cash paid for dividends ……………………………………...
(50,100)
Net cash used in financing activities …………………..
(46,225)
Net decrease in cash ……………………………………………..
$(23,700)
Cash balance at December 31, 2012 ……………………....
73,500
Cash balance at December 31, 2013 ……………………....
$ 49,800
Noncash investing and financing activities
Purchased equipment for $96,375 by signing a $66,375 long-term note payable
and paying $30,000 in cash.
Supporting calculations
(1) Sales – Increase in receivables = $582,500 – ($65,810 – $50,625) = $567,315
(2) Cost of Increase in Decrease in
(3) Other expenses – Decrease in prepaid expenses = $132,400 – ($1,875 – $1,250)
+
+
Problem 12–5AA (50 minutes)
GOLDEN CORPORATION
Spreadsheet for Statement of Cash Flows
For Year Ended December 31, 2013
December
31, 2012
Analysis of Changes
December
31, 2013
Debit
Credit
Balance sheet—debits
Cash ………………………………………………….
$ 107,000
$ 164,000
Accounts receivable ……………………..….
71,000
(b)
$ 12,000
83,000
Merchandise inventory ………………….….
526,000
(c)
75,000
601,000
Equipment …………………………………….….
299,000
(g)
36,000
335,000
$1,003,000
$1,183,000
Balance sheet—credits
Accum. depreciation—Equip. ……….….
$ 104,000
(f)
$ 54,000
$ 158,000
Accounts payable …………………………..
71,000
(d)
16,000
87,000
Income taxes payable ……………………….
25,000
(e)
3,000
28,000
Common stock, $2 par value …………….
568,000
(h)
24,000
592,000
Paid-in capital in excess of
par value, common stock ……………….
160,000
(h)
36,000
196,000
Retained earnings …………………………..
75,000
(i)
89,000
(a)
136,000
122,000
$1,003,000
$1,183,000
Statement of cash flows
Operating activities
Net income …………………………………….….
(a)
136,000
Increase in accounts receivable …..….
(b)
12,000
Increase in merch. inventory …………….
(c)
75,000
Increase in accounts payable ………..….
(d)
16,000
Increase in income tax payable ……..….
(e)
3,000
Depreciation expense ……………………….
(f)
54,000
Investing activities
Payment for equipment …………………….
(g)
36,000
Financing activities
Issued common stock for cash …….….
(h)
60,000
Paid cash dividends ………………………….
________
(i)
89,000
$481,000
$481,000