P14A-37A Preparing the statement of cash flows—direct method
Learning Objective 4
Appendix 14A
1. Net Cash Prov. by Op. Act. $125,100
Collections from Cust. $438,900
Use the Rolling Hills, Inc. data from Problem P14-34A.
Requirements
1. Prepare the 2018 statement of cash flows by the direct method.
2. How will what you learned in this problem help you evaluate an investment?
SOLUTION
Requirement 1
P14A-37A, cont.
Requirement 1, cont.
P14A-37A, cont.
Requirement 1, cont.
Requirement 2
P14B-38A Using a spreadsheet to prepare the statement of cash flows—indirect method
Learning Objective 5
Appendix 14B
Cash Pmt. of Div. $28,300
Cash Pmt. for Acq. of Land $25,200
The 2018 comparative balance sheet and income statement of Appleton Group, Inc. follow.
Appleton disposed of a plant asset at book value during 2018.
P14B-38A, cont.
Prepare the spreadsheet for the
2018 statement of cash flows.
Format cash flows from
operating activities by the
indirect method. A plant asset
was disposed of for $0. The cost
and accumulated depreciation of
the disposed asset was $11,600.
There were no sales of land, no
retirement of common stock, and
no treasury stock transactions.
Assume plant asset and land
acquisitions were for cash.
P14B-38A, cont.
SOLUTION
APPLETON GROUP, INC.
Statement of Cash Flows
Year Ended December 31, 2018
Balance Transacon Analysis Balance
Panel A – Balance Sheet:
12/31/2017
DEBIT CREDIT
12/31/2018
Cash
$ 15,900
1,200
(m)
$ 14,700
Accounts Receivable
43,900
1,700
(c)
42,200
Merchandise Inventory
93,900
(d)
3,700
97,600
Land
17,000
(i)
25,200
42,200
Plant Assets
110,750
(h)
22,800
11,600
(g)
121,950
Accumulated Depreciation—Plant Assets
(16,450)
(g)
11,600
15,400
(b)
(20,250)
(20,240)
Total Assets
$ 265,000
$ 298,400
26,900
(e)
1,000
22,700
1,800
24,500
65,000
(j)
14,000
51,000
130,700
8,200
138,900
19,700
(l)
28,300
66,700
58,100
Problems (Group B)
P14-39B Identifying the purpose and preparing the statement of cash flows—indirect
method
Learning Objectives 1, 2
2. Net Income $492,800
4. Net Cash Prov. by Op. Act. $359,500
Classic Rare Coins (CRC) was formed on January 1, 2018. Additional data for the year follow:
a. On January 1, 2018, CRC issued no par common stock for $525,000.
b. Early in January, CRC made the following cash payments:
1. For store fixtures, $51,000
2. For merchandise inventory, $240,000
3. For rent expense on a store building, $18,000
c. Later in the year, CRC purchased merchandise inventory on account for $243,000. Before
year-end, CRC paid $153,000 of this accounts payable.
d. During 2018, CRC sold 2,800 units of merchandise inventory for $325 each. Before year-end,
the company collected 95% of this amount. Cost of goods sold for the year was $290,000, and
ending merchandise inventory totaled $193,000.
e. The store employs three people. The combined annual payroll is $82,000, of which CRC still
owes $5,000 at year-end.
f. At the end of the year, CRC paid income tax of $17,000. There was no income taxes payable.
g. Late in 2018, CRC paid cash dividends of $38,000.
h. For store fixtures, CRC uses the straight-line depreciation method, over five years, with zero
residual value.
Requirements
1. What is the purpose of the statement of cash flows?
2. Prepare CRC’s income statement for the year ended December 31, 2018. Use the single-step
format, with all revenues listed together and all expenses listed together.
3. Prepare CRC’s balance sheet at December 31, 2018.
4. Prepare CRC’s statement of cash flows using the indirect method for the year ended
December 31, 2018.
P14-39B, cont.
SOLUTION
Requirement 1
P14-39B, cont.
Requirement 3
P14-39B, cont.
Requirement 4
Year Ended December 31, 2018