5.31 continued.
Change
in Cash
=
Change in
Liabilities
+
Change in
Shareholders’
Equity
–
Change in
Non-cash
Assets
+7,500
+7,500
(4) Increases by $7,500; operating increase in cash from increase in
Accounts Payable.
(5) Increases by $7,500; operating decrease in cash for increase in
inventory.
The net effect of these two transactions is to leave cash from
operations unchanged, because the amounts added and subtracted
change in such a way as to cancel out each other.
d. Inventory ………………………………………………………… 6,000
Change
Change in
Shareholders’
Non-cash
Solutions 5-22
5.31 e. continued.
f. Cash ………………………………………………………………. 1,450
Change
in Cash
=
Change in
Liabilities
+
Change in
Shareholders’
Equity
–
Change in
Non-cash
Assets
+1,450
Opns
–1,450
(1) Increases by $1,450 for collection of cash from customers.
(4) Increases by $1,450; operating increase in cash reflected by
decrease in the amount of Accounts Receivable. OK to show as a
reduction in the subtraction on Line (5).
g. Cash ………………………………………………………………. 10,000
Bonds Payable ………………………………………………. 10,000
Change
in Cash
=
Change in
Liabilities
+
Change in
Shareholders’
Equity
–
Change in
Non-cash
Assets
+10,000
+10,000
Finan
(8) Increases by $10,000; increase in cash from security issue.
(11) Increases by $10,000.
5-23 Solutions
5.31 continued.
h. Cash ………………………………………………………………. 4,500
Equipment (Net) …………………………………………… 4,500
Change
in Cash
=
Change in
Liabilities
+
Change in
Shareholders’
Equity
–
Change in
Non-cash
Assets
+4,500
Invst
–4,500
(6) Increases by $4,500; increase in cash from sale of noncurrent
asset.
(11) Increases by $4,500.
5.32 (Heidi’s Hide-Out; inferring cash flows from trial balance data.)
c. Wage Expense ……………………………………………………….…….. $ (20,000)
Less Increase in Advances to Employees ($1,500 –
Solutions 5-24
5-25 Solutions
5.33 (Digit Retail Enterprises, Inc.; inferring cash flows from balance sheet and
income statement data.)
b. Cost of Goods Sold ……………………………………………………….. $ (145,000)
Less Increase in Merchandise Inventory ($65,000 –
Year ………………………………………………………………………… $ (160,000)
d. Salaries Expense …………………………………………………………. $ (68,000)
g. Increase in Retained Earnings ($11,800 – $11,500) ………… $ 300
Less Net Income ………………………………………………………….. (9,600)
Solutions 5-26
5.33 continued.
$90,000) …………………………………………………………………… 10,000
5.34 (Hale Company; preparing and interpreting a statement of cash flows
using a T-account work sheet.)
a. HALE COMPANY
Statement of Cash Flows
For the Year
Acquisition of Equipment ………………………………. (55,000)
Cash Flow from Investing ………………………………….. (50,000)
5-27 Solutions
5.34 a. continued.
The amounts in the T-account work sheet below are in thousands.
Cash
√ 52
Operations
Investing
Financing
√ 58
Accounts Receivable Inventory Land
Buildings and Accumulated
Solutions 5-28
5.34 a. continued.
Interest Payable Mortgage Payable Common Stock
4-29 Solutions
5.34 continued.
b. Deriving Direct Method Cash Flow from Operations Using Data from T-Account Work Sheet (All Dollar
Amounts in Thousands)
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)
Revenues………………
$1,200
$ (13)
= Accounts Receivable Increase
$ 1,187
Receipts from Customers
Cost of Goods Sold……
(788)
5
= Accounts Payable Increase
(794)
Payments for Merchandise
(11)
= Merchandise Inventory Increase
Wages and Salaries……
(280)
—
= Other Current Liabilities Increase
(280)
Payments for Wages and
Salaries
Depreciation Expense….
(54)
54
(Expense Not Using Cash)
—
Interest Expense………..
(12)
(2)
= Interest Payable Decrease
(14)
Payments for Interest
Income Tax Expense…..
(22)
—
= Income Taxes Payable Increase
(22)
Payments for Income Taxes
Net Income………………
$ 44
$ 44
Totals
$ 77
= Cash Flow from Operations
Derived via Direct Method
$ 77
= Cash Flow from Operations Derived via
Indirect Method
Solutions 5-30
5.34 continued.
c. Statement of Cash Flows presenting the direct method and a
reconciliation of income to cash flows from operations.
HALE COMPANY
Statement of Cash Flows
For the Year
Reconciliation of Net Income to Cash from Operations:
Net Income……………………………………………………. $ 44,000
Depreciation …………………………………………………. 54,000
Changes in Operating Accounts:
Investing Activities:
Cash Used for New Acquisition of Equipment ….. $ (55,000)
Cash Received from Disposition of Equipment …. 5,000
d. Cash flow from operations was sufficient to finance acquisitions of
equipment during the year. The firm used the excess cash flow to pay
dividends and retire long-term debt.
5-31 Solutions
5.35 (Dickerson Manufacturing Company; preparing and interpreting a
statement of cash flows using a T-account work sheet.)
a. DICKERSON MANUFACTURING COMPANY
Statement of Cash Flows
For the Year
Operations:
Net Income………………………………………………… $ 568,000
Cash Flow from Investing ………………………………. (1,029,000)
Financing:
Solutions 5-32
5.35 a. continued.
The amounts in the T-account work sheet below are in thousands.
Cash
√ 358
Operations
Investing
Financing
Accounts Receivable Inventory
√ 946 √ 1,004
5-33 Solutions
Solutions 5-34
5.35 a. continued.
Land Accounts Payable
b. Dickerson Manufacturing Company is heavily capital intensive. Its
5-35 Solutions
5.36 (GTI, Inc.; preparing and interpreting a statement of cash flows using a T–
account work sheet.) (Amounts in Thousands)
a.
T-Account Work Sheet for 2007
Operations
Investing
1,433 (7) Acquisition of
Property, Plant,
and Equipment
391 (9) Acquisition of
Patent
Financing
Solutions 5-36
5-37 Solutions
5.36 a. continued.
Property, Plant
Prepayments and Equipment (Net)
Other Noncurrent Assets Accounts Payable
Notes Payable to Banks Other Current Liabilities
Long-Term Debt Other Noncurrent Liabilities
Additional Paid-in Capital Retained Earnings
Solutions 5-38
5-39 Solutions
5.36 a. continued.
T-Account Work Sheet for 2008
Cash
√ 475
Operations
Investing
Financing
Solutions 5-40
5.36 a. continued.
Accounts Receivable Inventories
Property, Plant
Prepayments and Equipment (Net)
√ 122 √ 4,027
Other Noncurrent Assets Accounts Payable
Long-Term Debt Other Noncurrent Liabilities
Additional Paid-in Capital Retained Earnings