Chapter 12 Statement of Cash Flows
12–61
EXERCISE 12–8B
a.
Reconciliation of Land Account
Beginning balance
$178,000
Increase due to purchasing land
?
= $103,000
Decrease due to selling land
(71,000)
Ending balance
$210,000
Cash Flows from Investing Activities
Proceeds from the sale of land
$ 95,000
Paid for the purchase of land
(103,000)
Net cash outflow from investing activities
$( 8,000)
Chapter 12 Statement of Cash Flows
12–62
EXERCISE 12–9B
a.
Reconciliation of Office Equipment Account
Beginning balance
$76,300
Increase due to purchasing office equip.
30,300
Decrease due to selling office equip.
?
= (31,200)
Ending balance
$75,400
In order to balance the account, office equipment with an original
cost of $31,200 must have been sold.
b.
Since a gain was recognized, the equipment must have been sold for
an amount of cash that was more than the book value of the
equipment. Specifically, the cash collected from the sale of the
equipment was $22,800 ($31,200 original cost − $14,400 accumulated
depreciation + $6,000 gain).
12–63
Chapter 12 Statement of Cash Flows
12–64
EXERCISE 12–10B
a.
Reconciliation of Investment securities Account
Beginning balance
$110,000
Decrease due to selling investment sec.
?
= (8,000)
Ending balance
$102,000
Reconciliation of Machinery Account
Beginning balance
$465,000
Increase due to purchasing machinery
?
= 49,000
Decrease due to selling machinery
(34,000)
Ending balance
$480,000
12–65
EXERCISE 12-10B (cont.)
d.
Reconciliation of Land Account
Beginning balance
$95,000
Decrease due to selling land
?
= (20,000)
Ending balance
$75,000
In order to balance the account, land with an original cost of $20,000
must have been sold. Since a loss was incurred on the sale of the
land, the land must have been sold for an amount of cash less than
the original cost. Cash collected from the sale of the land was
$16,000 ($20,000 original cost − $4,000 loss on the sale).
e.
Teva Company
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from investing activities:
Proceeds from sale of machinery
$ 15,500
Proceeds from sale of investment securities
5,000
Proceeds from the sale of land
16,000
Paid to purchase machinery
(49,000)
Net cash outflow from investing activities
$(12,500)
Chapter 12 Statement of Cash Flows
12–66
12–67
EXERCISE 12–11B
a.
Reconciliation of Bonds Payable Account
Beginning balance
$800,000
Increase due to issuing bonds payable
300,000
Decrease due to paying off bonds payable
?
= (500,000)
Ending balance
$600,000
Cash Flows from Financing Activities
Proceeds from issue of bond liabilities
$ 300,000
Repayment of bond liabilities
(500,000)
Net cash outflow from financing activities
$(200,000)
Chapter 12 Statement of Cash Flows
12–68
EXERCISE 12–12B
a.
Reconciliation of Common Stock Account
Beginning balance
$300,000
Increase due to issuing common stock
?
= 50,000
Ending balance
$350,000
Cash Flows from Financing Activities
Proceeds from issue of common stock
$ 50,000
Paid for purchase of treasury stock
(18,000)
Net cash inflow from financing activities
$ 32,000
Cash Flows from Financing Activities:
Proceeds from issue of common stock
Payment of dividends
(50,000)
Proceeds from issue of bonds
Net cash inflow from financing activities
EXERCISE 12–13B
a.
Bond Payable Account Information
Beginning balance
$150,000
Increase due to issuing bonds payable
?
= 50,000
Ending balance
$200,000
Common Stock Account Information
Beginning balance
$400,000
Increase due to issue of common stock
?
= 250,000
Ending balance
$650,000
Chapter 12 Statement of Cash Flows
12–70
12–71
PROBLEM 12-14B
a. Direct Method
Reconciliation of Accounts Receivable
Beginning balance
$ 36,000
Increase due to revenue recognized on account
495,000
Decrease due to cash collections from
customers
?
= (500,000)
Ending balance
$ 31,000
Reconciliation of Inventory
Beginning balance
$ 65,000
Increase due to inventory purchases
?
= 220,000
Decrease due to recognizing cost of goods sold
(215,000)
Ending balance
$ 70,000
Reconciliation of Accounts Payable*
Beginning balance
$ 20,000
Increase due to inventory purchases on acct.
220,000
Decrease due to cash settlements of accts. pay.
?
= (222,000)
Ending balance
$ 18,000
Chapter 12 Statement of Cash Flows
PROBLEM 12-14B (cont.)
Reconciliation of Prepaid Insurance
Beginning balance
$ 24,000
Increase due to the cash payment for ins.
?
= 43,000
Decrease due to recognizing ins. expense
(42,000)
Ending balance
$25,000
Reconciliation of Salaries Payable
Beginning balance
$ 4,500
Increase due to recognizing sal. exp. on acct.
122,000
Decrease due to cash settlements of sal. pay.
?
= (121,400)
Ending balance
$ 5,100
Reconciliation of Unearned Revenue
Beginning balance
$ 9,500
Increase due to collecting cash in advance
?
= 20,700
Decrease due to recognizing revenue
(20,000)
Ending balance
$10,200
Cash Flows from Operating Activities:
Cash collections from customers from sales
Cash collections from customers for services
Cash payments for:
Chapter 12 Statement of Cash Flows
12–73
Salaries
(121,400)
Net cash inflow from operating activities
$ 134,300
12–74
PROBLEM 12-14B (cont.)
b. Indirect Method
Begin by determining the amount of change in the balances in the
current asset and liability accounts.
Account Title
2017
2016
Change
Accounts receivable
$31,000
$36,000
(5,000)
Merchandise inventory
70,000
65,000
5,000
Prepaid insurance
25,000
24,000
1,000
Accounts payable
18,000
20,000
(2,000)
Salaries payable
5,100
4,500
600
Unearned revenue
10,200
9,500
700
Crimson Sports, Inc.
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities:
Net income
$125,500
Add:
Decrease in accounts receivable (1)
5,000
Increase in unearned revenue (2)
700
Increase in salaries payable (2)
600
Deduct:
Decrease accounts payable (2)
(2,000)
Increase in merchandise inventory (1)
(5,000)
Increase in prepaid insurance (1)
(1,000)
Add: Noncash expenses
Depreciation expense (3)
12,000
Deduct: gain on sale of equipment (4)
(1,500)
Net cash inflow from operating activities
$134,300
(1 ) Add decreases and subtract increases in current asset account balances, other than cash, to net
income.
(2) Add increases and subtract decreases in current liability account balances to net income.
Chapter 12 Statement of Cash Flows
12–75
(3) Add noncash expenses (e.g., depreciation) to net income.
(4) Add losses and subtract gains from the sale of noncurrent assets to net income.
12–76
PROBLEM 12-15B
a.
Reconciliation of Investment securities Account
Beginning balance
$60,000
Increase due to purchase of investment sec.
?
= 2,300
Decrease due to sale of investment sec.
(11,300)
Ending balance
51,000
In order to balance the account, investment securities costing $2,300
must have been purchased.
b. Since a loss was incurred, the securities must have been sold for
an amount of cash that was less than the cost of the securities.
Specifically, the cash collected from the sale of the securities was
$10,500 ($11,300 original cost – Loss on sale of $800).
c.
Reconciliation of Equipment Account
Beginning balance
$275,000
Increase due to purchasing equipment
80,000
Decrease due to selling equipment
?
= (45,000)
Ending balance
$310,000
In order to balance the account, equipment costing $45,000 must
have been sold.
d. Since a gain was incurred, the equipment must have been sold
for an amount of cash that was more than the book value of the
equipment. Specifically, the cash collected from the sale of the
equipment is equal to the book value plus the gain. In this case,
the amount of the cash inflow is $16,500 [($45,000 original cost −
$38,000 accumulated depreciation) + $9,500 gain].
Chapter 12 Statement of Cash Flows
12–77
PROBLEM 12-15B (cont.))
e.
Reconciliation of Buildings Account
Beginning balance
$950,000
Increase due to purchasing buildings
?
= 120,000
Decrease due to cost of demolished
building
(90,000)
Ending balance
$980,000
In order to balance the account, buildings costing $120,000 must have
been purchased. In the absence of information to the contrary, we
assume cash was paid to purchase the buildings.
f.
Reconciliation of Land Account
Beginning balance
$110,000
Increase due to purchasing land
?
= 45,000
Decrease due to selling land
(20,000)
Ending balance
$135,000
In order to balance the account, land costing $45,000 must have been
purchased. In the absence of information to the contrary, we assume
cash was paid to purchase the land.
g.
Vigotti Company
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash Flows from Investing Activities:
Proceeds from sale of investment securities
$ 10,500
Proceeds from sale of equipment
16,500
Proceeds from sale of land
15,000
Paid to purchase of investment securities
(2,300)
Paid to purchase equipment
(80,000)
Paid to purchase buildings
(120,000)
Paid to purchase land
(45,000)
Chapter 12 Statement of Cash Flows
12–78
Net cash outflow from investing activities
$(205,300)
12–79
PROBLEM 12-16B
a.
Reconciliation of Bonds Payable Account
Beginning balance
$600,000
Increase due to issuing bonds payable
90,000
Decrease due to cash repayment of bonds pay.
?
= (290,000)
Ending balance
$400,000
In order to balance the account, bond liabilities with face value of
$290,000 have been repaid. In the absence of information to the
contrary, we assume cash was used to pay off the bond liabilities.
b.
Reconciliation of Common Stock Account
Beginning balance
$150,000
Increase due to issuing common stock
?
= 40,000
Ending balance
$190,000
In order to balance the account, common stock of $40,000 must have
been issued. In the absence of information to the contrary, we
assume cash was collected when the stock was issued.
c.
Reconciliation of Treasury Stock Account
Beginning balance
$15,000
Increase due to purchasing treasury stock
?
= 5,000
Ending balance
$20,000
In order to balance the account, treasury stock of $5,000 must have
been purchased. In the absence of information to the contrary, we
assume cash was paid when the stock was purchased.
Chapter 12 Statement of Cash Flows
12–80
PROBLEM 12-16B (cont.)
d.
Reconciliation of Retained Earnings Account
Beginning balance
$80,000
Increase due to recognizing net income
49,000
Decrease due to paying dividends
?
= 33,000
Ending balance
$96,000
Cash Flows from Financing Activities
Proceeds from issue of bond liabilities
$ 90,000
Proceeds from issue of common stock
40,000
Repayment of bond payable
(290,000)
Paid for purchase of treasury stock
(5,000)
Payment of dividends
(33,000)
Net cash flow from financing activities
$(198,000)