E14-20 Computing operating activities cash flow—indirect method
Learning Objective 2
Net Cash Prov. by Op. Act. $49,500
The accounting records of CD Sales, Inc. include the following accounts:
Account Beginning Balance Ending Balance
Cash $ 7,500 $ 6,500
Accounts Receivable 21,000 17,500
Merchandise Inventory 20,000 30,000
Accounts Payable 15,000 19,000
Compute CD’s net cash provided by (used for) operating activities during July 2018. Use the
indirect method.
SOLUTION
E14-21 Preparing the statement of cash flows—indirect method
Learning Objective 2
Net Cash Prov. by Op. Act. $98,000
The income statement of Boost Plus, Inc. follows:
E14-21, cont.
Additional data follow:
a. Acquisition of plant assets is $124,000. Of this amount, $108,000 is paid in cash and $16,000
by signing a note payable.
b. Cash receipt from sale of land totals $20,000. There was no gain or loss.
c. Cash receipts from issuance of common stock total $36,000.
d. Payment of notes payable is $15,000.
e. Payment of dividends is $5,000.
f. From the balance sheet:
September 30
2018 2017
Cash $ 39,000 $ 13,000
Accounts Receivable 46,000 61,000
Merchandise Inventory 94,000 88,000
Land 82,000 102,000
Plant Assets 214,000 90,000
Accumulated Depreciation (61,000) (34,000)
Accounts Payable 32,000 15,000
Accrued Liabilities 12,000 20,000
Notes Payable (long-term) 16,000 15,000
Common Stock, no par 40,000 4,000
Retained Earnings 314,000 266,000
Prepare Boost Plus’s statement of cash flows for the year ended September 30, 2018, using the
indirect method. Include a separate section for non-cash investing and financing activities.
E14-21, cont.
SOLUTION
E14-22 Computing cash flows for investing and financing activities
Learning Objective 2
2. Book Value on Plant Assets Sold $7,000
Consider the following facts for Java Jolt:
a. Beginning and ending Retained Earnings are $45,000 and $70,000, respectively. Net income
for the period is $60,000.
b. Beginning and ending Plant Assets are $124,500 and $134,500, respectively.
c. Beginning and ending Accumulated Depreciation—Plant Assets are $21,500 and $26,500,
respectively.
d. Depreciation Expense for the period is $17,000, and acquisitions of new plant assets total
$29,000. Plant assets were sold at a $5,000 gain.
Requirements
1. How much are cash dividends?
2. What was the amount of the cash receipt from the sale of plant assets?
SOLUTION
Requirement 1
E14-22, cont.
Requirement 2
E14-23 Computing the cash effect
Learning Objective 2
2. Payment: $8,000
4. Dividends $47,000
Rouse Exercise Equipment, Inc. reported the following financial statements for 2018:
E14-23, cont.
E14-23, cont.
Requirements
1. Compute the amount of Rouse Exercise’s acquisition of plant assets. Assume the acquisition
was for cash. Rouse Exercise disposed of plant assets at book value. The cost and
accumulated depreciation of the disposed asset was $47,900. No cash was received upon
disposal.
2. Compute new borrowing or payment of long-term notes payable, with Rouse Exercise having
only one long-term notes payable transaction during the year.
3. Compute the issuance of common stock with Rouse Exercise having only one common stock
transaction during the year.
4. Compute the payment of cash dividends.
Note: Exercise E14-23 must be completed before attempting Exercise E14-24.
SOLUTION
E14-24 Preparing the statement of cash flows—indirect method
Learning Objective 2
Net Cash Prov. by Op. Act. $160,000
Use the Rouse Exercise Equipment data in Exercise E14-23. Prepare the company’s statement of
cash flows—indirect method—for the year ended December 31, 2018. Assume investments are
purchased with cash.
SOLUTION
E14-25 Identifying and reporting non-cash transactions
Learning Objective 2
Total Non-cash Inv. and Fin. Act. $153,000
Dirtbikes, Inc. identified the following selected transactions that occurred during the year ended
December 31, 2018:
a. Issued 750 shares of $3 par common stock for cash of $17,000.
b. Issued 5,100 shares of $3 par common stock for a building with a fair market value of
$96,000.
c. Purchased new truck with a fair market value of $29,000. Financed it 100% with a long-term
note.
d. Retired short-term notes of $28,000 by issuing 1,900 shares of $3 par common stock.
e. Paid long-term note of $10,500 to Bank of Tallahassee. Issued new long-term note of $23,000
to Bank of Trust.
Identify any non-cash transactions that occurred during the year, and show how they would be
reported in the non-cash investing and financing activities section of the statement of cash flows.
SOLUTION