Chapter 13 Statement of Cash Flows
Chapter 13
Statement of Cash Flows
Quick Check
Answers:
QC-1. c
QC-3. c
QC-5. a
QC-7. d
QC-9. a
QC-2. c
QC-4. b
QC-6. b
QC-8. c
QC-10. b
Short Exercises
(5-10 min.) S13-1
a.
Amortization expense
h.
Increase in inventory
O-
b.
Retained earnings
i.
Increase in accounts payable
O+
c.
Decrease in prepaid expense
j.
Repayment of long-term loan
F
d.
Loss on sale of land
k.
Gain on sale of building
O-
e.
Issuance of common stock
l.
Payment of dividends
F
f.
Purchase of equipment
m.
Increase in accounts receivable
O-
g.
Increase in accrued liabilities
n.
Net income
O+
Copyright © 2015 Pearson Education, Inc.
13-6
Beginning cash balance
158,000
Net increase (decrease) in cash for the year (Req. 4)
243,100
Ending cash balance
$401,100
(5-10 min.) S13-9
Account Title
Behavior during year
Accounts receivable
Decreased
Inventory
Increased
Other current assets
Decreased
Accounts payable
Decreased
Other current liabilities
Increased
(10-15 min.) S13-10
Req. 1
Cash flows from operating activities:
Received from customers
$ 50,000
Paid for interest
(4,300)
Paid for utilities
(17,000)
Paid for taxes
(5,500)
Paid to employees
(13,000)
Paid to suppliers
(39,000)
Paid for insurance
(9,200)
Paid for advertising
(7,400)
Net cash provided (used)by operating activities
$ (45,400)
Req. 2
Cash flows from investing activities:
Paid for equipment
$(14,000)
Received from sale of land
15,000
Received from sale of plant assets
6,900
Net cash provided (used) by investing activities
$ 7,900
Req. 3
Cash flow from financing activities:
Paid dividends
$(7,400)
Received from issuing long-term note payable
29,000
Net cash provided (used) byfinancing activities
$21,600
Net cash provided (used) by operating activities (Req. 1)
(45,400)
Net cash provided (used) by investing activities (Req. 2)
7,900
Net cash provided (used) by financing activities (Req. 3)
21,600
Net increase (decrease) in cash for the year
$(15,900)
Req. 5
Beginning cash balance
349,000
Net increase (decrease) in cash for the year (Req. 4)
(15,900)
Ending cash balance
$333,100
(5 – 10 min.) S13-11
1.
Patsy is an accountant at Highland Restaurant Group,
Inc. She has helped to prepare the financial statements.
She knows that the internal controls over cash are
weak, but she does not speak up because she feels that
it is not her job.
Credibility – Disclose delays or deficiencies in
information, timeliness, processing, or internal
controls in conformance with organization
policy and/or applicable law.
2.
Teri uses the indirect method to prepare the statement
of cash flows even though her company has adopted
International Financial Reporting Standards. She is
unfamilar with the steps required to produce a
statement using the direct method.
Competence – Perform professional duties in
accordance with relevant laws, regulations, and
technical standards.
3.
Lamar is an accountant at Boise & Hall, Inc. Lamar
confides to a close friend that he is concerned about
the future of Boise & Hall. Lamar explains that
operating cash flows are negative; this information is
on the not-yet-released financial statements.
Confidentiality – Keep information confidential
except when disclosure is authorized or legally
required.
4.
The statement of cash flows has never been Julius’
strength; he struggled with it in school. This year, Julius
cannot get the statement of cash flows to balance so he
decides to hide the amount that the statement is off by
adding that difference to one of the items in the
operating section.
Competence – Perform professional duties in
accordance with relevant laws, regulations, and
technical standards.
5.
Darryl does not disclose to upper management that his
sister is a partner in the accounting firm that the
company is hiring for the audit.
Integrity – Mitigate actual conflicts of interest,
regularly communicate with business associates
to avoid apparent conflicts of interest. Advise all
parties of any potential conflicts.
Managerial Accounting 4e Solutions Manual
Exercises (Group A)
(5-10 min.) E13-12A
Mosaic Travel Services, Inc.
Statement of Cash Flows – Indirect Method (Operating Activities)
For year ended December 31, 2014
Cash flows from operating activities:
Net Income
$33,000
Adjustments to reconcile net income to cash basis:
Loss on sale of land
$ 3,400
Depreciation expense
7,000
Decrease in accounts receivable
1,000
Increase in inventory
(40,000)
Decrease in prepaid insurance
3,000
Decrease in accounts payable
(9,000)
Increase in wages payable
2,000
Increase in interest payable
1,000
Increase in income tax payable
3,000
Total reconciling adjustments
(28,600)
Net cashprovided (used) by operating activities
$4,400
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13–16
(15-20 min.) E13-22B
Dream Big Travel Services, Inc.
Statement of Cash Flows – Indirect Method
For year ended December 31, 2014
Cash flows from operating activities:
Net Income
$37,000
Adjustments to reconcile net income to cash basis:
Loss on sale of land
$ 3,900
Depreciation expense
5,000
Decrease in accounts receivable
5,000
Increase in inventory
(35,000)
Decrease in prepaid insurance
2,000
Decrease in accounts payable
(3,000)
Increase in wages payable
11,000
Increase in interest payable
2,000
Increase in income taxes payable
3,000
Total reconciling adjustments
(6,100)
Net cash provided (used) by operating activities
$30,900
(10-15 min.) E13-23B
Dream Big Travel Services, Inc.
Statement of Cash Flows – Indirect Method
For year ended December 31, 2014
Cash flows from operating activities:
Net Income
$37,000
Adjustments to reconcile net income to cash basis:
Loss on sale of land
$ 3,900
Depreciation expense
5,000
Decrease in accounts receivable
5,000
Increase in inventory
(35,000)
Decrease in prepaid insurance
2,000
Decrease in accounts payable
(3,000)
Increase in wages payable
11,000
Increase in interest payable
2,000
Increase in income taxes payable
3,000
Total reconciling adjustments
(6,100)
Net cash provided (used) by operating activities
30,900
Cash flows from investing activities:
Proceeds from sale of land
8,100
Purchase of equipment
(20,000)
Net cash flows provided (used) by investing activities
(11,900)
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13–17
Cash flows from financing activities:
Long term notes issued
5,000
Dividends paid
(7,000)
Issuance of stock for cash
7,000
Net cash provided (used) by financing activities
5,000
Net increase (decrease) in cash
24,000
Cash, beginning of year
18,000
Cash, end of year
$42,000
(10-15 min.) E13-24B
Req. 1
Cash dividends paid during the year total $22,000.
(5-10 min.) E13-25B
Eduardo Corporation
Statement of Cash Flows – Indirect Method (Operating Activities)
For year ended December 31
Cash flows from operating activities:
Net Income
$42,000
Adjustments to reconcile net income to cash basis:
Depreciation expense
$ 18,000
Increase in current assets other than cash
(5,000)
Decrease in current liabilities
(7,000)
Total reconciling adjustments
6,000
Net cash provided (used) by operating activities
$48,000