CHAPTER 13
Statement of Cash Flows
ASSIGNMENT CLASSIFICATION TABLE
Learning Objectives
Questions
Brief
Exercises
Do It!
A
Problems
B
Problems
*1. Indicate the usefulness
of the statement of
cash flows.
1, 2, 6, 15
*2. Distinguish among
operating, investing,
and financing activities.
3, 4, 5, 6, 7,
8, 9, 16, 22
1, 2, 3
1
1A
1B
*3. Prepare a statement
of cash flows using
the indirect method.
10, 11, 12,
13, 14
4, 5, 6, 7
2
2A, 3A, 5A,
7A, 9A, 11A
2B, 3B, 5B,
7B, 9B, 11B
*4. Analyze the statement
of cash flows.
8, 9, 10, 11
3
7A, 8A
7B, 8B
*5. Explain how to use a
worksheet to prepare the
statement of cash flows
using the indirect method.
17
12
12A
*6. Prepare a statement
of cash flows using
the direct method.
8, 18, 19, 20,
21
13, 14, 15
4A, 6A, 8A,
10A
4B, 6B, 8B,
10B
chapter.
ASSIGNMENT CHARACTERISTICS TABLE
Problem
Number
Description
Difficulty
Level
Time
Allotted (min.)
1A
Distinguish among operating, investing, and financing
activities.
Simple
10–15
2A
Determine cash flow effects of changes in equity accounts.
Simple
10–15
3A
Prepare the operating activities section—indirect method.
Simple
20–30
*4A
Prepare the operating activities section—direct method.
Simple
20–30
5A
Prepare the operating activities section—indirect method.
Simple
20–30
*6A
Prepare the operating activities section—direct method.
Simple
20–30
7A
Prepare a statement of cash flows—indirect method, and
compute free cash flow.
Moderate
40–50
*8A
Prepare a statement of cash flows—direct method, and
compute free cash flow.
Moderate
40–50
9A
Prepare a statement of cash flows—indirect method.
Moderate
40–50
*10A
Prepare a statement of cash flows—direct method.
Moderate
40–50
11A
Prepare a statement of cash flows—indirect method.
Moderate
40–50
*12A
Prepare a worksheet—indirect method.
Moderate
40–50
1B
Distinguish among operating, investing, and financing
activities.
Simple
10–15
2B
Determine cash flow effects of changes in plant asset
accounts.
Simple
10–15
3B
Prepare the operating activities section—indirect method.
Simple
20–30
*4B
Prepare the operating activities section—direct method.
Simple
20–30
5B
Prepare the operating activities section—indirect method.
Simple
20–30
*6B
Prepare the operating activities section—direct method.
Simple
20–30
7B
Prepare a statement of cash flows—indirect method, and
compute free cash flow.
Moderate
40–50
ASSIGNMENT CHARACTERISTICS TABLE (Continued)
Problem
Number
Description
Difficulty
Level
Time
Allotted (min.)
*8B
Prepare a statement of cash flows—direct method, and
compute free cash flow.
Moderate
40–50
9B
Prepare a statement of cash flows—indirect method.
Moderate
40–50
*10B
Prepare a statement of cash flows—direct method.
Moderate
40–50
11B
Prepare a statement of cash flows—indirect method.
Moderate
40–50
BLOOM’S TAXONOMY TABLE
13-4 Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 6/e, Solutions Manual (For Instructor Use Only)
Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End–of-Chapter Exercises and Problems
Learning Objective
Knowledge
Comprehension
Application
Analysis
Synthesis
Evaluation
Q13-9
Q13-16
P13-1A
P13-1B
3. Prepare a statement of cash
flows using the indirect
method.
Q13-13
Q13-10
Q13-11
Q13-12
Q13-14
BE13-4
BE13-5
BE13-6
DI13-2
E13-4
E13-5
E13-7
E13-8
E13-9
P13-3A
P13-5A
P13-7A
P13-9A
P13-11A
P13-3B
P13-5B
P13-7B
P13-9B
P13-11B
BE13-7
E13-6
P13-2A
P13-2B
P13-7A
P13-7B
4. Analyze the statement of
cash flows.
E13-7
E13-9
P13-7A
P13-8A
P13-7B
P13-8B
BE13-8
BE13-9
BE13-10
BE13-11
DI13-3
P13-7A
P13-8A
P13-7B
P13-8B
*5 Explain how to use a
worksheet to prepare the
statement of cash flows
using the indirect method.
Q13-17
BE13-12
E13-10
P13-12A
*6. Prepare a statement of cash
flows using the direct
method.
Q13-18
Q13-8
Q13-20
Q13-21
Q13-19
BE13-13
BE13-14
BE13-15
E13-11
E13-12
E13-13
E13-14
P13-4A
P13-6A
P13-8A
P13-10A
P13-4B
P13-6B
P13-8B
P13-10B
P13-8A
P13-8B
Broadening Your Perspective
BYP13-3
BYP13-4
BYP13-5
BYP13-6
BYP13-9
BYP13-1
BYP13-2
BYP13-7
BYP13-8
ANSWERS TO QUESTIONS
1. (a) The statement of cash flows reports the cash receipts, cash payments, and net change in cash
period.
2. The statement of cash flows answers the following questions about cash: (a) Where did the cash
3. The three types of activities are:
equipment and (b) lending money and collecting loans.
4. (a) Major inflows of cash in a statement of cash flows include cash from operations; issuance of
property, plant, and equipment.
5. The statement of cash flows presents investing and financing activities so that even noncash
schedule to the financial statements.
6. Examples of significant noncash activities are: (1) issuance of stock for assets, (2) conversion of
of property, plant, and equipment.
7. Comparative balance sheets, a current income statement, and certain transaction data all provide
transactions provide additional detailed information needed to determine how cash was provided
or used during the period.
8. The advantage of the direct method is that it presents the major categories of cash receipts and
cash payments in a format that is similar to the income statement and familiar to statement users. Its
The advantage of the indirect method is it is often considered easier to prepare, and it focuses
on the differences between net income and net cash provided by operating activities. It also tends to
Both methods are acceptable but the FASB expressed a preference for the direct method. Yet,
the indirect method is the overwhelming favorite of companies.
Questions Chapter 13 (Continued)
9. When total cash inflows exceed total cash outflows, the excess is identified as a “net increase in cash”
10. The indirect method involves converting accrual net income to net cash provided by operating activities.
current liability accounts from one period to the next.
11. It is necessary to convert accrual–based net income to cash-basis income because the unadjusted
income must be adjusted to reflect the net cash provided by operating activities.
12. A number of factors could have caused an increase in cash despite the net loss. These are (1) high
accounting, e.g. depreciation.
13. Depreciation expense.
Increase/decrease in accounts receivable.
Increase/decrease in inventory.
Increase/decrease in accounts payable.
14. Under the indirect method, depreciation is added back to net income to reconcile net income to net
15. The statement of cash flows is useful because it provides information to the investors, creditors,
during the period.
16. This transaction is reported in the note or schedule entitled “Noncash investing and financing activities”
as follows: “Issuance of common stock for land, $1,700,000.”
*17. A worksheet is desirable because it allows the accumulation and classification of data that will
appear on the statement of cash flows. It is an optional but efficient device that aids in the prepa–
ration of the statement of cash flows.
*18. Net cash provided by operating activities under the direct approach is the difference between cash
revenues and cash expenses. The direct approach adjusts the revenues and expenses directly
to reflect the cash basis. This results in cash net income, which is equal to “net cash provided by
operating activities.”
Questions Chapter 13 (Continued)
+ Decrease in accounts receivable
*19.
(a)
Cash receipts from customers = Revenues from sales
– Increase in accounts receivable
+ Increase in inventory
(b)
Purchases = Cost of goods sold
– Decrease in inventory
+ Decrease in accounts payable
Cash payments to suppliers = Purchases
– Increase in accounts payable
*20. Sales ……………………………………………………………………………………………………… $2,000,000
Add: Decrease in accounts receivable ………………………………………………………… 200,000
Cash receipts from customers ……………………………………………………………………. $2,200,000
22. In its 2010 statement of cash flows, PepsiCo reported (a) $8,448 million net cash provided by
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 13-1
(a) Cash inflow from financing activity, $150,000.
(b) Cash outflow from investing activity, $200,000.
BRIEF EXERCISE 13-2
(a) Investing activity. (d) Operating activity.
BRIEF EXERCISE 13-3
Cash flows from financing activities
Proceeds from issuance of bonds payable ………………….. $ 500,000)
BRIEF EXERCISE 13-4
Net income …………………………..…………………….. $2,000,000
Adjustments to reconcile net income
to net cash provided by operating activities:
BRIEF EXERCISE 13-5
Cash flows from operating activities
Net income …………………………………………………… $250,000
Adjustments to reconcile net income
BRIEF EXERCISE 13-6
Net income ………………………………………………………….. $250,000
Adjustments to reconcile net income to net
cash provided by operating activities:
BRIEF EXERCISE 13-7
Original cost of equipment sold ……………………………. $ 22,000
Less: Accumulated depreciation …………………………. 8,500
BRIEF EXERCISE 13-8
BRIEF EXERCISE 13-9
BRIEF EXERCISE 13-10
BRIEF EXERCISE 13-11
Free cash flow is cash provided by operations less capital expenditures and cash
dividends paid. For Russel Inc. this would be $283,000 ($643,000 – $280,000 –
$80,000). Since it has positive free cash flow that far exceeds its dividend, an
down its debt.
*BRIEF EXERCISE 13-12
Balance
1/1/14
Reconciling Items
Balance
12/31/14
Balance Sheet Accounts
Debit
Credit
Prepaid expenses
Accrued expenses payable
18,600
8,200
(a) 6,500
(b) 2,000
12,100
10,200
Statement of Cash Flow Effects
Operating activities
Decrease in prepaid expenses
Increase in accrued expenses
payable
(a) 6,500
(b) 2,000
8,500
8,500
*BRIEF EXERCISE 13-13
+ Decrease in accounts receivable
Receipts from
customers
=
Sales
revenues
– Increase in accounts receivable