15–13 Solutions
15.5 (Metals Company deriving direct method cash flow from operations using data from T-account work
sheet.) (All Dollar Amounts in Millions) (Based on financial statements of Alcoa.)
(c)–(d) Sum Across Rows to Derive Direct Receipts and Expenditures
Indirect
Changes in
Direct
From Operations:
Operations
Method
Related Balance Sheet Accounts from T-Account Work
Sheet
Method
Receipts Less Expenditures
(a)
(b)
(c)
(d)
$20,465.0
$74.6
= Accounts Receivable Decrease
20,539.6
Receipts from Customers
20.8
(20.8)
Gain Produces No Operating Cash
–
214.0
(47.1)
Alcoa’s Share of Earnings Retained by Affiliates
166.9
Receipts for Equity
Method Investments
(9,963.3)
664.0
Depreciation on Manufacturing Facilities
(9,464.3)
Payments for Inventory
33.9
= Accounts Payable Increase
(198.9)
= Increase in Inventories
(5,721.3)
Payments for General and
(5,570.2)
(40.3)
= Prepayments Increase
Administrative Services
(110.8)
= Decrease in Other Current Liabilities
(2,887.3)
–
(2,887.3)
Payments for Interest
(911.6)
82.0
Deferred Income Taxes Uses no Cash this Period
(829.6)
Payment for Income Taxes
Net Income …………………….
= $1,367.4
= 1,367.4
Totals …………………………..………..
$1,804.0
= Cash Flow from Operations
$1,804.0
= Cash Flow from Operations Derived via Indirect Method
Derived via Direct Method
Solutions 15–14
15.6 (Ingers Company; working backwards from statement of cash flows.)
(2) Cash (Operations—Depreciation Expense Add-
back) ………………………………………………………….. 179.4
Accumulated Depreciation …………………………. 179.4
(6) Cash (Operations—Decrease in Accounts Re-
ceivable) ……………………………………………………… 50.9
Accounts Receivable …………………………………. 50.9
(7) Inventories ……………………………………………………. 15.2
Cash (Operations—Increase in Inventories) …….. 15.2
15–15 Solutions
Solutions 15–16
15.6 continued.
(13) Marketable Securities ……………………………………….. 4.6
Cash (Investing—Acquisition of Marketable
Securities) ……………………………………………….. 4.6
(17) Long-Term Debt Payable ………………………………….. 129.7
Cash (Financing—Repayment of Long-Term
Debt) ………………………………………………………. 129.7
(18) Cash (Financing—Issue of Common Stock
under Option Plan) ……………………………………….. 47.9
Common Stock, Additional Paid-in Capital ……. 47.9
(21) Leasehold Asset ………………………………………………. 147.9
Capitalized Lease Obligation …………………………. 147.9
(22) Preferred Stock ……………………………………………….. 62.0
Common Stock, Additional Paid-in Capital ……….. 62.0
15–17 Solutions
15.7 (Warren Corporation; preparing a statement of cash flows.)
a. Cash
√ 223,200
Operations
Net Income (5) 234,000
Loss on Sale of Ma-
chinery (1b) 15,600
Amortize Patent (2b) 5,040
Decrease in
Increase in Ac-
counts Payable (13) 153,360
Investing
Sale of Machinery (1b) 57,600 463,200 (1a) Acquisition of
Machinery
Financing
13,200 (3) Retirement of
Preferred Stock
Solutions 15–18
Serial Bonds
√ 174,000
15–19 Solutions
15.7 a. continued.
Allowance for Un-
Accounts Receivable collectible Accounts Inventory
√ 327,600 20,400 √ √ 645,600
3,600 (6) (6) 3,600 2,400 (8) 66,000 (9)
18,000 (7)
√ 306,000 19,200 √ √ 579,600
Leasehold Allowance for
Improvements Amortization Patents
√ 104,400 58,800 √ √ 36,000
10,800 (12) (2a) 2,400 5,040 (2b)
√ 104,400 69,600 √ √ 33,360
Bonds Payable
Accounts Payable Dividends Payable (Current)
126,000 √ — √ 60,000 √
153,360 (13) 48,000 (4) (15) 60,000 60,000 (14)
279,360 √ 48,000 √ 60,000 √
Solutions 15–20
506,400 √
15–21 Solutions
15.7 continued.
b. WARREN CORPORATION
Statement of Cash Flows
For the Year Ending June 30, 2009
Operations:
Net Income ………………………………………………. $ 234,000
Loss on Sale of Machinery …………………………. 15,600
Depreciation …………………………………………….. 106,800
Amortization of Leasehold Improvements …….. 10,800
Cash Flow from Operations……………………………. $ 612,000
Investing:
Sale of Machinery …………………………………….. $ 57,600
Payment of Legal Fee for Patent Defense … …. (2,400)
Acquisition of Securities for Plant Expan–
sion …………………………………………………….. (180,000)
Acquisition of Machinery ……………………………. (463,200)
Solutions 15–22
15.8 (Roth Company; preparing a statement of cash flows.)
a. Cash
√ 37,950
Operations
Net Income (1) 95,847 3,600 (2) Gain on Sale of
Bond Discount Marketable
Amortization (6) 225 Securities
Depreciation (10) 1,875 16,050 (4) Gain on Condem-
Increase in Income nation of Land
Investing
Sale of Marketable 122,250 (5) Acquisition of
Financing
Issuance of Bonds (7) 97,500
Marketable
Securities Accounts Receivable Inventory
15–23 Solutions
Solutions 15–24
15.8 a. continued.
Accumulated Investment in
Depreciation 30%-Owned Company Other Assets
Accounts Payable Dividends Payable Income Taxes Payable
31,830 √ -0- √ -0- √
25,995 √ 12,000 √ 51,924 √
Deferred
Unrealized Holding
Loss on Marketable
15–25 Solutions
15.8 continued.
b. ROTH COMPANY
Statement of Cash Flows
For the Three Months Ended March 31, 2009
Operations:
Net Income ………………………………………………. $ 95,847
Equity in Earnings …………………………………….. (8,640)
Increase in Accounts Receivable ………………… (37,500)
Increase in Inventories …………………………..….. (26,250)
Decrease in Accounts Payable …………………… (5,835)
Cash Flow from Operations……………………………. $ 52,500
Investing:
Proceeds from Sale of Marketable Securi-
ties ……………………………………………………… $ 17,400
Supplementary Information
Holders of the firm’s preferred stock converted shares with a carrying
value of $45,000 into shares of common stock.
Solutions 15–22
15.8 continued.
c. Roth deriving direct method cash flow from operations using data from T-account work sheet.
(a) (The letters correspond to the column headers in the exhibit below.) Copy Income Statement and Cash Flow from Operations
(b) Copy Information from T-Account Work Sheet Next to Related Income Statement Item
(c) – (d) Sum Across Rows to Derive Direct Receipts and Expenditures
Indirect
Changes in
Direct
From Operations:
Operations
Method
Related Balance Sheet Accounts from T-Account Work
Sheet
Method
Receipts Less Expenditures
(a)
(b)
(c)
(d)
$364,212
$(37,500
)
= Accounts Receivable Increase
326,712
Receipts from Customers
3,600
(3,600)
Gain Produces No Operating Cash
—
8,640
(8,640)
Roth’s Share of Earnings Retained by Affiliates
—
Receipts for Equity
Method Investments
16,050
(16,050)
—
Proceeds of Land
Condemnation
(207,612)
Depreciation on Manufacturing Facilities
(239,697)
Payments for Inventory
(5,835)
= Accounts Payable Increase
(26,250)
= Increase in Inventories
(33,015)
= Prepayments Increase
(33,015)
Payments for Selling and
= Decrease in Other Current Liabilities
Administrative Services
(1,875)
1,875
—
(1,725)
225
Bond Discount Amortization Uses No Cash this Period
(1,500)
Payments for Interest
(52,428)
504
Deferred Income Taxes Uses no Cash this Period
—
Payment for Income Taxes
51,924
= Increase in Income Taxes Payable
15–23 Solutions
Net Income …………………….
$95,847
= 95,847
Totals …………………………..………..
$52,500
= Cash Flow from Operations
$52,500
= Cash Flow from Operations Derived via Indirect Method
Derived via Direct Method
15–23 Solutions
15.9 (Biddle Corporation; preparing a statement of cash flows.)
a. Cash
√ 45,000
Operations
Investing
Sale of Equipment (4) 9,500 42,500 (6) Acquisition of
Land
Financing
19,000 (3) Retirement of
Bonds, Includ-
ing Income
Solutions 15–24
15.9 a. continued.
Plant and Accumulated
Equipment Depreciation Patents
√ 316,500 50,000 √ √ 16,500
26,500 (4) (4) 15,000 10,000 (9) 1,500 (10)
√ 290,000 45,000 √ √ 15,000
Deferred Income
Accounts Payable Accrued Liabilities Taxes
100,000 √ 105,000 √ 50,000 √
15–25 Solutions
15.9 continued.
b. BIDDLE CORPORATION
Statement of Cash Flows
For the Year Ended December, 2009
Operations:
Income from Continuing Operations …………….. $ 54,500
Loss on Sale of Equipment ………………………… 2,000
Depreciation …………………………………………….. 10,000
Amortization …………………………………………….. 1,500
Deferred Income Taxes ……………………………… 20,000
Increase in Accounts Payable …………………….. 30,000
Increase in Accounts Receivable ………………… (35,000)
Solutions 15–26
15.10 (Plainview Corporation; preparing a statement of cash flows.)
a. Cash
√ 165,300
Operations
Net Income (1) 236,580 17,000 (5) Gain on Sale of
Loss from Fire (6) 35,000 Marketable
Equity in Loss (9) 17,920 Securities
Decrease in 131,100 (12) Increase in
Loss on Retirement
of Bonds (21) 5,000
Investing
Financing
Re-issue of Treasury 130,000 (2) Dividends
Stock (3) 6,000 145,000 (17) Payment of Note
√ 142,100