Chapter 12 – Reporting and Analyzing Cash Flows
Problem 12–5BA (50 minutes)
SATU COMPANY
Spreadsheet for Statement of Cash Flows
For Year Ended December 31, 2013
December
31, 2012
Analysis of Changes
Debit
Credit
Balance sheet—debits
Cash ………………………………………………….
$ 28,400
Accounts receivable ………………………...
25,860
(b)
$ 5,638
Merchandise inventory ……………………..
140,320
(c)
$ 25,347
Equipment ………………………………………..
77,500
(g)
30,250
$272,080
Balance sheet—credits
Accum. depreciation—Equip. …………..
$ 31,000
(f)
15,700
Accounts payable ……………………………..
157,530
(d)
137,158
Income taxes payable ……………………….
6,100
(e)
4,000
Common stock, $5 par value …………….
25,000
(h)
15,000
Paid–in capital in excess of
par value, common stock ……………….
20,000
(h)
48,000
Retained earnings …………………………….
32,450
(i)
60,000
(a)
202,767
$272,080
Statement of cash flows
Operating activities
Net income ………………………………………..
(a)
202,767
Decrease in accounts receivable ……..
(b)
5,638
Increase in merch. inventory …………….
(c)
25,347
Decrease in accounts payable ………….
(d)
137,158
Decrease in income taxes payable …...
(e)
4,000
Depreciation expense ……………………….
(f)
15,700
Investing activities
Payment for equipment …………………….
(g)
30,250
Financing activities
Issued common stock for cash ………..
(h)
63,000
Paid cash dividends ………………………….
________
(i)
60,000
$543,860
$543,860
Problem 12–5BA (concluded)
SATU COMPANY
Statement of Cash Flows
For Year Ended December 31, 2013
Cash flows from operating activities
Net income ……………………………………………………….……………
$202,767
Adjustments to reconcile net income to net
cash provided by operating activities
Decrease in accounts receivable ($25,860 – $20,222) …….
5,638
Increase in inventory ($165,667 – $140,320) ……………………
(25,347)
Decrease in accounts payable ($157,530 – $20,372) ………
(137,158)
Decrease in taxes payable ($6,100 – $2,100) ………………….
(4,000)
Depreciation expense ………………………………………………….
15,700
Net cash provided by operating activities …………………….
$ 57,600
Cash flows from investing activities
Cash paid for equipment ……………………………………………….
(30,250)
Cash flows from financing activities
Cash received from issuing stock (3,000 x $21) ……………..
63,000
Cash paid for dividends ………………………………………………..
(60,000)
Net cash provided by financing activities …………………….
3,000
Net increase in cash …………………………………………………………
$ 30,350
Cash balance at beginning of 2013 ………………………………….
28,400
Cash balance at end of 2013 ……………………………………………
$ 58,750
Problem 12-7B (35 minutes)
SALT LAKE COMPANY
Cash Flows from Operating Activities—Indirect Method
For Year Ended December 31, 2013
Cash flows from operating activities
Net income …………………………..……………………………………..…
$ 20,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation expense ……………………………………………….…
$32,000
Increase in accounts receivable ………………………………..…
(600
)
Decrease in merchandise inventory …………………………..
120
Decrease in accounts payable ………………………………….…
(200
)
Increase in salaries payable ……………………………………..…
300
Increase in utilities payable …………………………..………….…
200
Decrease in prepaid insurance ………………………………….…
40
Decrease in prepaid rent …………………………..…………………
100
31,960
Net cash provided by operating activities …………………….…
$ 51,960
Chapter 12 – Reporting and Analyzing Cash Flows
SERIAL PROBLEM — SP 12
Serial Problem — SP 12, Success Systems (45 minutes)
SUCCESS SYSTEMS
Statement of Cash Flows (Indirect)
For Quarter Ended March 31, 2014
Cash flows from operating activities
Net income ……………………………………………………….………………..……
$ 18,686
Adjustments to reconcile net income to net
cash provided by operating activities
Increase in accounts receivable ($22,720 – $5,668) ………….……
(17,052)
Increase in inventory ($704 – $0) ……………………………………..……
(704)
Increase in computer supplies ($2,005 – $580) ………………..……
(1,425)
Decrease in prepaid insurance ($1,665 – $1,110) ……………..……
555
Decrease in accounts payable ($1,100 – $0) …………………….……
(1,100)
Increase in wages payable ($875 – $500) ………………………..…
375
Decrease in unearned computer service revenue ………………
(1,500)
Depreciation expense–Office Equipment …………………………..
400
Depreciation expense–Computer Equipment ……………….……
1,250
Net cash used by operating activities ……………………………….……
Cash flows from investing activities
Net cash used in investing activities ………………………………………
Cash flows from financing activities
Cash received from stock issuance ………………………………….……
25,000
Cash paid for dividends …………………………………………………….…
(4,800)
Net cash provided by financing activities …………………………..
Net increase in cash ……………………………………………………………..……
Cash balance at December 31, 2013 …………………………………….……
Cash balance at March 31, 2014 …………………………..……………………
© 2015 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Solutions Manual, Chapter 12
47
1. Apple uses the indirect method of reporting operating cash flows. We
2. In all three fiscal years, Apple’s cash flows from operating activities
markedly exceed its cash dividends paid, as shown in the table below:
($ millions)
Fiscal 2012
Fiscal 2011
Fiscal 2010
Cash provided by operating activities ……
$50,856
$37,529
$18,595
Cash dividends paid …………………………..…
(2,488)
(0)
(0)
3. In fiscal 2012, the largest item in reconciling the difference between net
income and cash flow from operations was the change (increase) in
accounts receivable of $5,551 million.
4. In fiscal 2012, the largest cash inflow from investing activities was $99,770
million from proceeds from sales of marketable securities. The largest cash
outflow from investing activities was for purchases of marketable
securities, in the amount of $151,232 million.
5. Answer depends on the financial statement information obtained.
© 2015 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Financial Accounting, 7th Edition
48
1. Apple’s cash flow on total assets ratio ($ millions)
Current Year = Operating cash flows/Average total assets
= $50,856 / [($176,064 + $116,371)/2]
= $50,856 / $146,218 = 34.8%
2. The cash flow on total assets ratio reflects the return on average assets by
using actual operating cash flows instead of net income. This return
3. For both years, Apple has a higher cash flow on total assets ratio than
Google.
4. Many business decision makers (such as analysts) feel that the cash flow