Chapter 12 Statement of Cash Flows
12–81
PROBLEM 12-17B
Item
Type of Activity
Add or Subtract
a.
Operating
Subtract
b.
Investing
Subtract
c.
Operating
Subtract
d.
Operating
Add
e.
Financing
Subtract
f.
Operating
Subtract
g.
Financing
Subtract
h.
Financing
Add
i.
Investing
Add
j.
Operating
Add
k.
Financing
Add
l.
Operating
Add
m.
Operating
Add
n.
Financing
Subtract
12–82
Chapter 12 Statement of Cash Flows
12–83
PROBLEM 12-18B
Culinary Products Company
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash Flows from Operating Activities:
Net income
$18,400
Less: Increases in current assets and
Decreases in current liabilities:
Increase in accounts receivable
(800)
Increase in inventory
(400)
Decrease in accounts payable
(1,600)
Plus: Noncash charges
Depreciation expense
3,600
Plus: Loss on disposal of land
50
Less: Gain on sale of equipment
(500)
Net cash flow from operating activities
Cash flows from Investing Activities:
Proceeds from sale of equipment
18,500
Proceeds from sale of land
3,950
Paid to purchase equipment
(7,000)
Net cash flow from investing activities
Cash Flows from Financing Activities:
Paid for dividends
(9,200)
Repayment of debt
(3,600)
Net cash flow from financing activities
Net increase in cash
Plus: Beginning cash balance
Ending cash balance
Schedule of noncash invest. and finan act:
Chapter 12 Statement of Cash Flows
12–84
Issued common stock for land
PROBLEM 12–19B
Wang Beauty Products, Inc.
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash Flows from Operating Activities:
Net income
$142,000
Plus: Decreases in current assets and
Increases in current liabilities:
Decrease in inventory
16,000
Decrease in prepaid rent
2,400
Increase in salaries payable
4,000
Less: Increases in Current Assets and
Decreases in current liabilities:
Increase in accounts receivable
(8,000)
Decrease in accounts payable
(9,000)
Plus: Noncash Charges
Depreciation expense
22,800
Net Cash Flow from Operating Activities
$170,200
Cash Flows from Investing Activities:
Proceeds from sale of equipment
20,000
Paid to purchase equipment
(100,000)
Paid to purchase land
(112,000)
Net cash outflow from investing activities
(192,000)
Cash Flows from Financing Activities:
Proceeds from Stock Issue
50,000
Net Cash Flow from Financing Activities
50,000
Net Decrease in Cash
28,200
Plus: Beginning Cash Balance
40,600
Ending Cash Balance
$ 68,800
12–85
Chapter 12 Statement of Cash Flows
12–86
PROBLEM 12–20B
a.
(1)
Reconciliation of Accounts Receivable Account
Beginning balance
$86,000
Increase due to revenue recognized on account
274,000
Decrease due to cash collections from
customers
?
= (286,000)
Ending balance
$ 74,000
flows.
(2)
Reconciliation of Salaries Payable Account
Beginning balance
$ 9,600
Increase due to recognizing sal. exp. on acct.
115,000
Decrease due to cash settlements of sal. pay.
?
= (117,100)
Ending balance
$ 7,500
(3)
Reconciliation of Other Operating Expenses Payable Account
Beginning balance
$ 8,500
Increase due to recognizing other oper. exp. on
acct.
118,000
Decrease due to cash settlements of other
operating expenses payable
?
= (120,500)
Ending balance
$ 6,000
Chapter 12 Statement of Cash Flows
12–87
12–88
PROBLEM 12-20B (continued)
(4) Depreciation expense does not affect cash flow and is not
(5)
Reconciliation of Equipment Account
Beginning balance
$28,000
Increase due to purchasing equipment
?
= 14,000
Decrease due to selling equipment
0
Ending balance
$42,000
In the absence of contrary information, assume $14,000 cash was
used to purchase the equipment. This cash outflow appears in the
investing activities section of the statement of cash flows.
(6)
Reconciliation of Notes Payable Account
Beginning balance
$38,000
Increase due to issuing notes payable
-0-
Decrease due to cash settlements of notes pay.
?
= (6,000)
Ending balance
$32,000
In the absence of contrary information, assume $6,000 cash was paid
in settlement of the note. This cash outflow appears in the financing
activities section of the statement of cash flows.
(7)
Reconciliation of Interest Payable Account
Beginning balance
$ 6,400
Increase due to recognizing accrued int. exp.
4,600
Decrease due to cash settlements of interest pay.
?
= (4,800)
Ending balance
$ 6,200
The $4,800 cash outflow for settlements of interest payable appears
in the operating activities section of the statement of cash flows.
Chapter 12 Statement of Cash Flows
12–89
12–90
PROBLEM 12–20B (continued)
(8)
Reconciliation of Inventory
Beginning balance
$ 26,000
Increase due to inventory purchases
?
= 125,500
Decrease due to recognizing cost of goods
sold
(119,000)
Ending balance
$ 32,500
Reconciliation of Accounts Payable
Beginning balance
$10,000
Increase due to inventory purchases
125,500
Decrease due to cash settlements of accts. pay.
?
= (123,000)
Ending balance
$12,500
flows.
(9)
Reconciliation of Notes Receivable
Beginning balance
$80,000
Increase due to loans to creditors
-0-
Decrease due to cash collections from creditors
?
= 60,000
Ending balance
$20,000
Chapter 12 Statement of Cash Flows
12–91
Chapter 12 Statement of Cash Flows
12–92
PROBLEM 12-20B (cont.)
(10)
Reconciliation of Common Stock Account
Beginning balance
$140,000
Increase due to issuing common stock
?
= 50,000
Ending balance
$190,000
In the absence of contrary information, assume cash was obtained
when the stock was issued. This cash inflow appears in the financing
activities section of the statement of cash flows.
(11)
Reconciliation of Land Account
Beginning Balance
$48,000
Increase due to purchasing land
?
= 0
Decrease due to selling land
(20,000)
Ending Balance
$28,000
The reconciliation suggests that no land was purchased during the
period. The full sales price of $16,000 as reported in the transaction
data results in a cash inflow that appears in the investing activities
section of the statement of cash flows. The loss is not shown in the
operating activities section of the statement of cash flows under the
direct method.
12–93
PROBLEM 12-20B (cont.)
(12)
Reconciliation of Taxes Payable Account
Beginning balance
$3,200
Increase due to recognizing accrued tax exp.
6,600
Decrease due to cash settlements of taxes pay.
?
= (7,000)
Ending balance
$2,800
The $7,000 cash outflow for settlements of taxes payable appears in
the operating activities section of the statement of cash flows.
(13)
Reconciliation of Investments Account
Beginning balance
$10,000
Increase due to purchasing investments
40,000
Decrease due to selling investments
(20,000)
Ending balance
$30,000
The reconciliation suggests that a $40,000 cash outflow occurred as a
result of purchasing investments. This outflow is reported in the
investing activities section of the statement of cash flows. The
transaction data indicates that investments were sold for $26,000
cash. This cash inflow from the sale of investments should be shown
in the investing section of the statement of cash flows. The gain is
not shown in the operating activities section of the statement of cash
flows under the direct method.
Chapter 12 Statement of Cash Flows
12–94
PROBLEM 12–20B (cont.)
Electric Company
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash Flows from Operating Activities:
Cash receipts from:
Sales
$286,000
Total cash inflows
$286,000
Cash payments for:
Inventory purchases
(123,000)
Salaries
(117,100)
Other operating expenses
(120,500)
Interest
(4,800)
Taxes
(7,000)
Total cash outflows
(372,400)
Net cash flow from operating activities
(86,400)
Cash Flows from Investing Activities:
Proceeds from sale of land
16,000
Proceeds from sale of investments
26,000
Proceeds from note receivable
60,000
Paid to purchase equipment
(14,000)
Paid to purchase investments
(40,000)
Net cash flow from investing activities
48,000
Cash Flows from Financing Activities:
Proceeds from stock issue
50,000
Repayment of debt
(6,000)
Net cash flow from financing activities
44,000
Net increase in cash
5,600
Plus: Beginning cash balance
43,000
Ending cash balance
$ 48,600