(continued) E 12-20A
Req. 2
Tullis’ cash flows look strong. Operations are the main source of cash.
The company is investing in new plant assets without having to borrow.
(5-10 min.) E 12-21A
Case A — A combination of operations and issuing stock generated
Case B — The sale of plant assets generated the cash needed to
(10-15 min.) E 12-22A
a. Cash proceeds of sale = Book value of asset sold, $38,000* +
Plant Assets, Net
Beginning balance
129,000
Depreciation expense
16,000
Purchases
47,000
Book value sold*
38,000
Ending balance
122,000
b. Cash dividend declared = $72,000*
Retained Earnings
Stock dividends
Beginning balance
67,000
Cash dividends*
Net income
132,000
Ending balance
103,000
(10-15 min.) E 12-23A
Cash flows from operating activities:
Receipts:
Collections from customers
($86,000 + $73,000) ………………………..
$ 159,000
Collection of dividend revenue …………..
12,000
Total cash receipts………………………..
171,000
Payments:
To suppliers ……………………………………..
$(61,000)
To employees……………………………………
(47,000)
For interest ……………………………………….
(8,000)
For income tax ………………………………….
(16,000)
Total cash payments ……………………..
(132,000)
Net cash provided by (used for)
operating activities …………………………...
$ 39,000
Operating cash flow is strong as shown by the net cash provided by
operating activities.
(5-10 min.) E 12-24A
Salary Payable — Report cash payments to employees as operating
cash flows.
(20-30 min.) E 12-25A
Req. 1
Office World, Inc.
Statement of Cash Flows
Year Ended September 30, 2014
Cash flows from operating activities:
Receipts:
Collections from customers
($255,000 − $15,000) ……………………………….
$ 240,000
Dividends received …………………………………….
9,500
Total cash receipts …………………………………
249,500
Payments:
To suppliers ($101,000 + $10,500 + $1,600) ….
$(113,100)
To employees ($43,000 + $2,400) …………………
(45,400)
For income tax …………………………………………..
(22,500)
For interest ………………………………………………..
(2,200)
Total cash payments …………………………..….
(183,200)
Net cash provided by operating activities ……
66,300
Cash flows from investing activities:
Acquisition of plant assets ……………………………..
$(109,000)
Proceeds from sale of land ……………………………..
27,000
Net cash used for investing activities ………….
(82,000)
Cash flows from financing activities:
Proceeds from issuance of common stock ………
$ 93,000
Payment of long-term note payable …………………
(17,000)
Payment of dividends …………………………………….
(11,000)
Net cash provided by financing activities …….
65,000
Net increase in cash …………………………………………..
$ 49,300
Cash balance, September 30, 2013 ……………………..
15,500
Cash balance, September 30, 2014 ……………………..
$ 64,800
Noncash investing and financing activities:
Acquisition of plant assets by issuing note payable
$ 86,000
(continued) E 12-25A
Req. 2
Office World’s cash flows look strong. Operations are the main source of
(10-15 min.) E 12-26A
$7,000 decrease in
a.
Cash collections
=
$139,000
+
Accounts Receivable
($42,000 − $35,000)
=
$146,000
Cash payments
for inventory
$3,000 increase in
$2,000 increase in
b.
=
$67,000
+
Inventory
−
Accounts Payable
($59,000 − $56,000)
($26,000 − $24,000)
=
$68,000
(10-15 min.) E 12-27B
O+
a.
Loss on sale of equipment
I+
k.
Sale of long-term
investment
O+
b.
Decrease in accounts
receivable
F+
l.
Issuance of common stock
for cash
NIF
c.
Acquisition of equipment
by issuance of note
O–
m.
Decrease in accrued
payable
liabilities
O+
d.
Increase in accounts
O+
n.
Amortization of intangible
payable
assets
F–
e.
Payment of cash
I–
o.
Acquisition of building by
dividend
cash payment
I–
f.
Purchase of long-term
F–
p.
Payment of long-term debt
investment
F+
q.
Issuance of long-term note
I+
g.
Cash sale of land
payable to borrow cash
O–
h.
Increase in prepaid
F–
r.
Purchase of treasury stock
expenses
O+
s.
Net income
O+
i.
Increase in salary payable
O+
j.
Depreciation of equipment
(5-10 min.) E 12-28B
a.
Investing
h.
Financing
b.
Investing
i.
Investing
c.
Operating
j.
Noncash investing and
Financing
d.
Operating
k.
Financing
e.
Operating
l.
Operating
f.
Financing
m.
Investing
g.
Financing
(10-15 min.) E 12-29B
Cash flows from operating activities:
Net income ………………………………………………..
$ 35,000
Adjustments to reconcile net income to
net cash used for operating activities:
Depreciation expense …………………………...
$ 7,000
Gain on sale of land ………………………………
(14,000)
Increase in current assets other
than cash ……………………………………………
(25,000)
Decrease in current liabilities…………………
(19,000)
(51,000)
Net cash provided by (used for) operating
activities …………………………………………………
$(16,000)
Operating cash flow is weak, as shown by the negative net cash flows
from operating activities. Normally, net cash provided by operations
is more than net income because of the depreciation add-back.
(15-20 min.) E 12-30B
Cash flows from operating activities:
Net income ………………………………………………
$ 21,000
Adjustments to reconcile net income to
net cash used for operating activities:
Depreciation expense …………………………
$ 6,000
Increase in accounts receivable …………..
(81,000)
Increase in inventory …………………………..
(47,000)
Increase in accounts payable ………………
61,500
Decrease in accrued liabilities …………….
(5,000)
(65,500)
Net cash used for operating activities ………….
$(44,500)
Chaplaine Fur Traders shows signs of trouble collecting receivables and
selling inventory. There is a large build-up in both Accounts Receivable
and Inventory. The large increase in Accounts Payable implies that the
company is having trouble paying their bills.
(20-30 min.) E 12-31B
Req. 1
Tyler Travel Products, Inc.
Statement of Cash Flows
Year Ended December 31, 2014
Cash flows from operating activities:
Net income ………………………………………………….
$109,400
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation expense …………………………….
$ 21,000
Decrease in accounts receivable …………….
16,000
Increase in inventory ……………………………..
(22,000)
Increase in prepaid expenses …………………
(1,200)
Increase in accounts payable …………………
1,500
Decrease in accrued liabilities ………………..
(12,000)
3,300
Net cash provided by operating activities …..
112,700
Cash flows from investing activities:
Acquisition of plant assets …………………………..
$(95,000)
Proceeds from sale of land …………………………..
14,000
Net cash used for investing activities …………
(81,000)
Cash flows from financing activities:
Proceeds from issuance of common stock ……
$ 50,000
Payment of long-term note payable ………………
(18,000)
Payment of dividends …………………………………..
(12,000)
Net cash provided by financing activities …..
20,000
Net increase in cash …………………………………………
$ 51,700
Cash balance, December 31, 2013 …………………….
33,500
Cash balance, December 31, 2014 …………………….
$ 85,200
Noncash investing and financing activities:
Acquisition of plant assets by issuing note payable
$ 55,000
(continued) E 12-31B
Req. 2
Tyler’s cash flows look strong. Operations are the main source of cash.
(5-10 min.) E 12-32B
Case A — A combination of operations and issuing stock generated
most of the cash for acquisition of plant assets. The company
also sold plant assets for cash.
(10-15 min.) E 12-33B
a. Cash proceeds of sale = Book value of asset sold, $68,000* +
Plant Assets, Net
Beginning balance
152,000
Depreciation expense
28,000
Purchases
91,000
Book value sold*
68,000
Ending balance
147,000
Retained Earnings
Stock dividends
Beginning balance
76,000
Cash dividends*
Net income
128,000
Ending balance
113,000
(10-15 min.) E 12-34B
Cash flows from operating activities:
Receipts:
Collections from customers
($119,000 + $51,000) ……………………….
$ 170,000
Collection of dividend revenue ……………
14,000
Total cash receipts…………………………
184,000
Payments:
To suppliers ………………………………………
$(63,000)
To employees…………………………………….
(44,000)
For interest ………………………………………..
(9,000)
For income tax …………………………………..
(20,000)
Total cash payments ………………………
(136,000)
Net cash provided by operating activities..
$ 48,000
(5-10 min.) E 12-35B
Salary Payable — Report cash payments to employees as operating
cash flows.
(20-30 min.) E 12-36B
Req. 1
Quik Shop, Inc.
Statement of Cash Flows
Year Ended June 30, 2014
Cash flows from operating activities:
Receipts:
Collections from customers
($275,000 + $30,000) …………………………………..
$ 305,000
Dividends received ………………………………………..
7,500
Total cash receipts …………………………………….
312,500
Payments:
To suppliers ($106,000 + $12,500 − $1,200) ……..
$(117,300)
To employees ($50,000 − $1,800) …………………….
(48,200)
For income tax ……………………………………………….
(26,500)
For interest…………………………………………………….
(1,000)
Total cash payments ………………………………….
(193,000)
Net cash provided by operating activities ……….
119,500
Cash flows from investing activities:
Acquisition of plant assets …………………………………
$(133,000)
Proceeds from sale of land …………………………………
28,000
Net cash used for investing activities ……………..
(105,000)
Cash flows from financing activities:
Proceeds from issuance of common stock …………
$ 33,000
Payment of long-term note payable …………………….
(13,000)
Payment of dividends …………………………………………
(8,000)
Net cash provided by financing activities ……….
12,000
Net increase in cash …………………………..…………………..
$ 26,500
Cash balance, June 30, 2013 …………………………………..
12,400
Cash balance, June 30, 2014 …………………………………..
$ 38,900
Noncash investing and financing activities:
Acquisition of plant assets by issuing note payable
$ 75,000
(continued) E 12-36B
Req. 2
Quik Shop’s cash flows look strong. Operations are the main source of
(10-15 min.) E 12-37B
$6,000 increase in
a.
Cash collections
=
$141,000
−
Accounts Receivable
($53,000 − $47,000)
=
$135,000
Cash payments
for inventory
$4,000 decrease in
$3,000 increase in
b.
=
$76,000
−
Inventory
−
Accounts Payable
($39,000 − $35,000)
($32,000 − $29,000)
=
$69,000
Quiz
Q12–38
b
Q12–39
a
Q12–40
c
Q12-41
d
Q12-42
c
Q12-43
b
Q12-44
d
Q12-45
1. Receiving dividends – operating
2. Paying dividends – financing
Q12-46
b [Book value = $12,000 ($18,000 − $6,000); Gain =
$4,000; Proceeds = $16,000 ($12,000 + $4,000)]
Q12-47
a
Q12–48
c
Q12–49
a
Q12-50
d Net inc. − Gain + Depr. + A/R dec − Inv. inc − A/P dec + Acc Liab inc
($36,500 − $10,000 + $7,500 + $5,000 − $1,000 − $1,000 + $4,000)
Q12-51
b
Q12-52
a Cash from sale of equip., ($20,000 + $10,000) $30,000
Cash paid for purchase of equip. (55,500)
($67,000 − $20,000 − $7,500 + $X = $95,000)
Net cash used $25,500
Q12-53
d
Q12-54
a
Q12-55
c Cash flow from stock issuance ($24,000 – $12,000) $12,000
Cash dividends paid (26,500)
($66,000 + $36,500 − $X = $76,000)
Net cash used $14,500
Q12-56
b ($750,000 − $60,000 = $690,000)
Q12-57
c [$58,900 − ($5,000 − $2,600) = $56,500]