CP12–3 (continued)
HUNTER COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2015
Cash flows from operating activities:
Net income…………………………………………………………….
$12,000
1
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense …………………………………………….
$ 6,000
2
Decrease in accounts receivable ……………………………..
2,000
3
Decrease in inventory …………………………………………….
6,000
4
Increase in accounts payable ………………………………….
3,000
5
Decrease in salaries and wages payable…………………..
(200
)6
16,800
Net cash provided by operating activities ………………
28,800
Cash flows from investing activities:
Cash payments to purchase equipment …………………….
(9,000
)7
Net cash provided by (used in) investing activities ….
(9,000
)
Cash flows from financing activities:
Cash payments on notes payable (long-term) …………….
(10,000
)8
Cash receipts from issuing stock …………………………..….
20,000
9
Cash payments for dividends……………………………………
(3,800
)10
Net cash provided by financing activities ……………….
6,200
Net increase in cash during the year ……………………………….
26,000
11
Cash balance, January 1, 2015………………………………………
18,000
Cash balance, December 31, 2015 …………………………………
$44,000
CP12–4
Req. 1 SOFT TOUCH COMPANY
Statement of Cash Flows
For the Year Ended December 31
Cash flows from operating activities:
Net income…………………………………………………………….
$ 4,500
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense …………………………………………….
500
Decrease in accounts receivable ……………………………..
1,000
Decrease in accounts payable …………………………………
(1,000
)
Decrease in salaries and wages payable…………………..
(500
)
Net cash provided by operating activities ………………
4,500
Cash flows from investing activities:
Cash payments to purchase equipment …………………….
(1,000
)
Net cash provided by (used in) investing activities ….
(1,000
)
Cash flows from financing activities:
Cash proceeds from bank loan …………………………………
2,000
Net cash provided by financing activities ………………..
2,000
Net increase in cash during the year ……………………………….
5,500
Cash balance, January 1 ………………………………………………
8,000
Cash balance, December 31 ………………………………………….
$13,500
Req. 2
Soft Touch Company appears to be in a good cash position, with an ending cash
balance of $13,500. This balance is $5,500 greater than the prior year because the
company generated positive cash flows from operations (+$4,500) and obtained
additional funding from the bank, enabling the company to acquire additional equipment
with cash. The company is well positioned to continue expanding its business in the
upcoming year.
CP12–5
HAMBURGER HEAVEN
Statement of Cash Flows
For the Year Ended December 31
Cash flows from operating activities:
Cash receipts from customers 1 ……………………………………………………..
$2,130
Cash payments to suppliers 2 ………………………………………………………..
(932
)
Cash payments for salaries and wages 3 ………………………………………..
(491
)
Cash payments for rent 4 ………………………………………………………………
(242
)
Cash payments for insurance 5 ………………………………………………………
(89
)
Cash payments for utilities 6 ………………………………………………………….
(90
)
Cash payments for interest ……………………………………………………….…..
(60
)
Net cash provided by operating activities …………………………………..
$ 226
1 $2,060 + ($450 – $380) = $2,130
2 $900 + ($82 – $60) + ($210 – $200) = $932
3 $500 – ($29 – $20) = $491
4 $250 – ($10 – $2) = $242
5 $80 + ($14 – $5) = $89
6 $50 + ($60 – $20) = $90
CP12–6
Req. 1 SOFT TOUCH COMPANY
Statement of Cash Flows
For the Year Ended December 31
Cash flows from operating activities:
Cash collected from customers1 ………………………………..
$ 76,000
Cash paid for salaries and wages to employees2 …………
(68,500
)
Cash paid for other operating expenses3 …………………….
(1,000
)
Cash paid for income tax ………………………………………….
(2,000
)
Net cash provided by operating activities ……………….
4,500
Cash flows from investing activities:
Cash payments to purchase equipment …………………….
(1,000
)
Net cash provided by (used in) investing activities ….
(1,000
)
Cash flows from financing activities:
Cash proceeds from bank loan …………………………………
2,000
Net cash provided by financing activities ………………..
2,000
Net increase in cash during the year ……………………………….
5,500
Cash balance, January 1 ………………………………………………
8,000
Cash balance, December 31 ………………………………………….
$13,500
1 $75,000 + 3,500 – 2,500 = $76,000
2 $68,000 + 1,500 – 1,000 = $68,500
3 $2,000 – 1,000 = $1,000 decrease in accounts payable for operating expenses
Req. 2
Soft Touch Company appears to be in a good cash position, with an ending cash
balance of $13,500. This balance is $5,500 greater than the prior year because the
company generated positive cash flows from operations (+$4,500) and obtained
additional funding from the bank, enabling the company to acquire additional equipment
with cash. The company is well positioned to continue expanding its business in the
upcoming year.
CP12–7
Req. 1 SOFT TOUCH COMPANY
Statement of Cash Flows
For the Year Ended December 31
Cash flows from operating activities:
Net income…………………………………………………………….
$ 4,500
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense …………………………………………….
1,000
Loss on disposal of equipment ………………………………..
500
Decrease in accounts receivable ……………………………..
1,000
Decrease in accounts payable …………………………………
(1,000
)
Decrease in salaries and wages payable…………………..
(500
)
Net cash provided by operating activities ………………
5,500
Cash flows from investing activities:
Cash proceeds from disposal of equipment ………………..
1,000
Cash payments to purchase equipment …………………….
(3,000
)
Net cash provided by (used in) investing activities ….
(2,000
)
Cash flows from financing activities:
Cash proceeds from bank loan …………………………………
2,000
Net cash provided by financing activities ………………..
2,000
Net increase in cash during the year ……………………………….
5,500
Cash balance, January 1 ………………………………………………
8,000
Cash balance, December 31 ………………………………………….
$13,500
12-36 Solutions Manual
© 2016 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
ANSWERS TO GROUP A PROBLEMS
PA12–1
Activity
Cash
Flow
I
–
1
Bought used equipment for cash.
I
–
2
Paid cash to purchase new equipment.
F
–
3
Declared and paid cash dividends to stockholders.
O
+
4
Collected payments on account from customers.
O
–
5
Recorded and paid interest on debt to creditors.
F
–
6
Repaid principal on loan from bank.
O
–
7
Prepaid rent for the following period.
O
–
8
Made payment to suppliers on account.
PA12–2
DIRECT PRODUCTS COMPANY
Statement of Cash Flows
For the Year Ended December 31
Cash flows from operating activities:
Net income…………………………………………………………….
$ 7,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense …………………………………………….
$2,000
Decrease in accounts receivable ……………………………..
20
Increase in inventory ………………………………………………
(220
)
Increase in prepaid rent ………………………………………….
(5
)
Decrease in prepaid insurance ………………………………..
3
Decrease in accounts payable …………………………………
(40
)
Increase in salaries and wages payable ……………………
40
Increase in utilities payable ……………………………………..
5
1,803
Net cash provided by operating activities ………………
$8,803
© 2016 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
PA12–3
Req. 1
Related
Cash
Balance Sheet at December 31
Flow
Section
Current
Previous
Change
Δ in Cash
Cash
$34,000
$29,000
+5,000
10
Net increase in cash
O
Accounts receivable
35,000
28,000
+7,000
3
Subtract from net income the increase in A/R
O
Inventory
41,000
38,000
+3,000
4
Subtract from net income the increase in Inventory
I
Equipment
121,000
100,000
+21,000
7
Payment in cash for equipment
O
Accumulated depreciation–
Equipment
(30,000)
(25,000)
-5,000
2
Add back to NI because depreciation expense does
not affect cash
$201,000
$170,000
O
Accounts payable
$36,000
$27,000
+9,000
5
Add to net income the increase in Accounts Payable
O
Salaries and wages payable
1,200
1,400
–200
6
Subtract from net income the decrease in Salaries and
Wages Payable
F
Note payable (long-term)
38,000
44,000
-6,000
8
Cash used in repayment of note principal
F
Common Stock
88,600
72,600
+16,000
9
Issuance of stock for cash
O
Retained earnings
37,200
25,000
+12,200
1
Increased for net income amount (see income
statement below)
$201,000
$170,000
Income Statement for the current year
Sales revenue
$120,000
Cost of goods sold
70,000
Other expenses
37,800
Net Income
$12,200
PA12–3 (continued)
XS Supply Company
Statement of Cash Flows
For the Year Ended December 31
Cash flows from operating activities:
Net income
$12,200
1
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense
$ 5,000
2
Increase in accounts receivable
(7,000)
3
Increase in inventory
(3,000)
4
Increase in accounts payable
9,000
5
Decrease in salaries and wages payable
(200)
6
3,800
Net cash provided by operating activities
16,000
Cash flows from investing activities:
Cash payments to purchase equipment
(21,000)
7
Net cash provided by (used in) investing activities
(21,000)
Cash flows from financing activities:
Cash payments on notes payable (long-
term)
(6,000)
8
Cash receipts from issuing stock
16,000
9
Net cash provided by financing activities
10,000
Net increase in cash during the year
5,000
10
Cash balance, January 1
29,000
Cash balance, December 31
$34,000
Req. 2
There was an increase in cash for XS Supply Company this year of $5,000. Operating
activities provided a positive cash flow of $16,000. This inflow of cash from operating
activities, combined with the stock issuance for $16,000 cash, allowed the company to
invest $21,000 in equipment and pay down a long-term note by $6,000.
PA12–4
Req. 1 HEADS UP COMPANY
Statement of Cash Flows
For the Year Ended December 31
Cash flows from operating activities:
Net income…………………………………………………………….
$ 1,250
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense …………………………………………….
250
Decrease in accounts receivable ……………………………..
850
Decrease in accounts payable …………………………………
(500
)
Decrease in salaries and wages payable…………………..
(250
)
Net cash provided by operating activities ………………
1,600
Cash flows from investing activities:
Cash payments to purchase equipment …………………….
(500
)
Net cash provided by (used in) investing activities ….
(500
)
Cash flows from financing activities:
Cash proceeds from bank loan …………………………………
1,200
Net cash provided by financing activities ………………..
1,200
Net increase in cash during the year ……………………………….
2,300
Cash balance, January 1 ………………………………………………
4,000
Cash balance, December 31 ………………………………………….
$6,300
Req. 2
Heads Up Company appears to be in a good cash position, with an ending cash
balance of $6,300. This balance is $2,300 greater than the prior year because the
company generated positive cash flows from operations (+$1,600) and obtained
additional funding from the bank, enabling the company to acquire additional equipment
with cash. The company is well positioned to continue expanding its business in the
upcoming year.
PA12–5
DIRECT PRODUCTS COMPANY
Statement of Cash Flows
For the Year Ended December 31
Cash flows from operating activities:
Cash receipts from customers 1 ……………………………………………………..
$48,620
Cash payments to suppliers 2 ………………………………………………………..
(21,260
)
Cash payments for salaries and wages3 ………………………………………….
(8,960
)
Cash payments for rent 4 ………………………………………………………………
(4,505
)
Cash payments for insurance 5 ………………………………………………………
(1,897
)
Cash payments for utilities 6 ………………………………………………………….
(1,395
)
Cash payments for interest ……………………………………………………….…..
(1,800
)
Net cash provided by operating activities …………………………………..
$ 8,803
1 $48,600 + $580 – $560 = $48,620
2 $21,000 + ($990 – $770) – ($420 – $460) = $21,260
3 $9,000 + ($60 – $100) = $8,960
4 $4,500 + ($25 – $20) = $4,505
5 $1,900 + ($25 – $28) = $1,897
6 $1,400 + ($15 – $20) = $1,395