HANDOUT 12–2, continued
The Group, Inc. did not sell any equipment or repay any borrowings during the current year. The
company declared and paid dividends in the amount of $3,564 during the current year.
Using the information provided above, compute the net cash flows from operating activities using the
indirect method.
Then, compute the cash flows during the current year for each category and complete the following table:
Net Cash Flows from Operating Activities
$
Net Cash Flows from Investing Activities
Net Cash Flows from Financing Activities
Net Increase (Decrease) in Cash and Cash Equivalents
19,435
Cash and Cash Equivalents at beginning of year
72,634
Cash and Cash Equivalents at end of year
$ 92,069
HANDOUT 12–2 SOLUTION
STATEMENT OF CASH FLOWS (INDIRECT METHOD)
The Group, Inc.
Consolidated Balance Sheets
December 31
(in thousands)
Section
Current
Year
Prior
Year
Change
ASSETS
Cash and Cash Equivalents
$92,069
$72,634
+ 19,435
O
Accounts Receivables, Net
55,947
75,492
– 19,545
O
Inventories
50,784
53,129
– 2,345
O
Prepaid Expenses
12,112
13,057
– 945
I
Equipment
145,444
134,312
+ 11,132
O
Accumulated Depreciation
(50,515)
(36,689)
– 13,826
Total Assets
$305,841
$311,935
LIABILITIES AND STOCKHOLDERS’ EQUITY
O
Accounts Payable
$25,466
$34,879
– 9,413
O
Accrued Liabilities
40,574
40,722
– 148
F
Long-Term Debt
10,422
10,206
216
F
Common Stock
1,662
1,284
+ 378
O,F
Retained Earnings
227,717
224,844
+ 2,873
Total Stockholders’ Equity
229,379
226,128
Total Liabilities And Stockholders’ Equity
$305,841
$311,935
Consolidated Statement of Income
Year Ended December 31
(in thousands)
Current
Year
Net Sales
$130,896
Cost of Sales
74,040
Gross Profit
56,856
Operating Expenses:
Selling, General & Administrative Expenses
33,211
Depreciation Expense
13,826
Total Operating Expenses
47,037
Operating Income
9,819
Interest Income
239
Income Before Income Taxes
10,058
Income Tax Expense
3,621
Net Income
$6,437
HANDOUT 12–2 SOLUTION, continued
The Group, Inc. did not sell any equipment or repay any borrowings during the current year. The
company declared and paid dividends in the amount of $3,564 during the current year.
Using the information provided above, compute the net cash flow provided by (used for) operating
activities using the indirect method.
Net Income
$6,437
Adjustments:
Depreciation
13,826
Change in Accounts Receivable
19,545
Change in Inventories
2,345
Change in Prepaid Expenses
945
Change in Accounts Payable
(9,413)
Change in Accrued Liabilities
(148)
Net Cash Flows Provided by Operating Activities
$33,537
Then, compute the cash flows during the current year for each category and complete the following table:
Cash Flows from Operating Activities (see above)
$33,537
Cash Flows from Investing Activities (1)
(11,132)
Cash Flows from Financing Activities (2)
(2,970)
Net Increase in Cash and Cash Equivalents
19,435
Cash and Cash Equivalents at beginning of year
72,634
Cash and Cash Equivalents at end of year
$92,069
(1) Attributable to purchases of equipment (that is, the increase in the equipment account). There were no
other investing activities.
(2) Cash flows from financing activities were determined as follows:
Proceeds from issuance of long-term debt
$ 216
Proceeds from issuance of stock
378
Payment of dividends
(3,564)
Net Cash Flows from Financing Activities
$(2,970)
HANDOUT 12–3
STATEMENT OF CASH FLOWS (DIRECT METHOD)
The Group, Inc.
Consolidated Balance Sheet
December 31
(in thousands)
Current
Year
Prior
Year
ASSETS
Cash and Cash Equivalents
$92,069
$72,634
Accounts Receivables, Net
55,947
75,492
Inventories
50,784
53,129
Prepaid Expenses
12,112
13,057
Equipment
145,444
134,312
Accumulated Depreciation
(50,515)
(36,689)
Total Assets
$305,841
$311,935
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts Payable
$25,466
$34,879
Accrued Liabilities
40,574
40,722
Long-Term Debt
10,422
10,206
Common Stock
1,662
1,284
Retained Earnings
227,717
224,844
Total Liabilities And Stockholders’ Equity
$305,841
$311,935
Consolidated Statement of Income
Year Ended December 31
(in thousands)
Current
Year
Net Sales
$130,896
Cost of Sales
74,040
Gross Profit
56,856
Operating Expenses:
Selling, General & Administrative Expenses
33,211
Depreciation Expense
13,826
Total Operating Expenses
47,037
Operating Income
9,819
Interest Income
239
Income Before Income Taxes
10,058
Income Tax Expense
3,621
Net Income
$6,437
HANDOUT 12–3, continued
The Group, Inc. did not sell any equipment or repay any borrowings during the current year. The
company declared and paid dividends in the amount of $3,564 during the current year.
Using the information provided above, compute the net cash flows from operating activities using the
direct method.
Then, compute the cash flows during the current year for each category and complete the following table:
Net Cash Flows from Operating Activities
$
Net Cash Flows from Investing Activities
Net Cash Flows from Financing Activities
Net Increase (Decrease) in Cash and Cash Equivalents
19,435
Cash and Cash Equivalents at beginning of year
72,634
Cash and Cash Equivalents at end of year
$ 92,069
HANDOUT 12–3 SOLUTION
STATEMENT OF CASH FLOWS (DIRECT METHOD)
The Group, Inc.
Consolidated Balance Sheets
December 31
(in thousands)
Section
Current
Year
Prior
Year
Change
ASSETS
Cash and Cash Equivalents
$92,069
$72,634
+ 19,435
O
Accounts Receivables, Net
55,947
75,492
– 19,545
O
Inventories
50,784
53,129
– 2,345
O
Prepaid Expenses
12,112
13,057
– 945
I
Equipment
145,444
134,312
+ 11,132
O
Accumulated Depreciation
(50,515)
(36,689)
– 13,826
Total Assets
$305,841
$311,935
LIABILITIES AND STOCKHOLDERS’ EQUITY
O
Accounts Payable
$25,466
$34,879
– 9,413
O
Accrued Liabilities
40,574
40,722
– 148
F
Long-Term Debt
10,422
10,206
216
F
Common Stock
1,662
1,284
+ 378
O,F
Retained Earnings
227,717
224,844
+ 2,873
Total Stockholders’ Equity
229,379
226,128
Total Liabilities And Stockholders’ Equity
$305,841
$311,935
Consolidated Statement of Income
Year Ended December 31
(in thousands)
Current
Year
Net Sales
$130,896
Cost of Sales
74,040
Gross Profit
56,856
Operating Expenses:
Selling, General & Administrative Expenses
33,211
Depreciation Expense
13,826
Total Operating Expenses
47,037
Operating Income
9,819
Interest Income
239
Income Before Income Taxes
10,058
Income Tax Expense
3,621
Net Income
$6,437
HANDOUT 12–3 SOLUTION, continued
The Group, Inc. did not sell any equipment or repay any borrowings during the current year. The
company declared and paid dividends in the amount of $3,564 during the current year.
Using the information provided above, compute the net cash flow provided by (used for) operating
activities using the direct method.
Cash collected from customers (1)
$150,441
Cash payments to suppliers (2)
(81,108)
Cash payments for operating expenses (3)
(32,414)
Cash received for interest (4)
239
Cash payments for income tax expense (5)
(3,621)
$33,537
(1) Sales of $130,896 + decrease in Accounts Receivable of $19,435.
(2) Cost of Sales of $74,040 + decrease in Accounts Payable of $9,413 – decrease in Inventories of
$2,345.
(3) Operating Expenses (not including depreciation) of $33,211 + decrease in Accrued Liabilities of $148
– decrease in Prepaid Expenses of $945.
(4) Equals Interest Expense; no change in Interest Payable.
(5) Equals Income Tax Expense; no change in Taxes Payable.
Compute total net cash flows and their effect on cash at the end of the period.
Net Cash Flows from Operating Activities (see above)
$33,537
Net Cash Flows from Investing Activities (6)
(11,132)
Net Cash Flows from Financing Activities (7)
(2,970)
Net Increase (Decrease) in Cash and Cash Equivalents
19,435
Cash and Cash Equivalents at beginning of year
72,634
Cash and Cash Equivalents at end of year
$92,069
(6) Attributable to purchases of equipment (that is, the increase in the equipment account). There were no
other investing activities.
(7) Cash flows from financing activities were determined as follows:
Proceeds from issuance of long-term debt
$ 216
Proceeds from issuance of stock
378
Payment of dividends
(3,564)
Net Cash Flows from Financing Activities
$(2,970)