*BRIEF EXERCISE 13-14
+ Decrease in income taxes payable
Cash payment
for income taxes
=
Income tax
expense
– Increase in income taxes payable
*BRIEF EXERCISE 13-15
+ Increase in prepaid expenses
Cash
payments for
operating
expenses
=
Operating
expenses,
excluding
depreciation
– Decrease in prepaid expenses
and
+ Decrease in accrued expenses payable
– Increase in accrued expenses payable
$58,700 = $70,000 – $6,800 – $4,500
SOLUTIONS TO DO IT! REVIEW EXERCISES
DO IT! 13-1
1. Financing activity
2. Operating activity
DO IT! 13-2
Cash flows from operating activities
Net income ……………………………………………………. $100,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense ……………………………… $4,000
DO IT! 13-3
(a) Free cash flow = $72,400 – $26,000 – $18,000 = $28,400
(b) Cash provided by operating activities fails to take into account that a
company must invest in new plant assets just to maintain the current
SOLUTIONS TO EXERCISES
EXERCISE 13-1
(a) Financing activities.
(b) Noncash investing and financing activities.
(c) Noncash investing and financing activities.
EXERCISE 13-2
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Operating activity.
Noncash investing and
financing activity.
Investing activity.
Financing activity.
Operating activity.
Operating activity.
Operating activity.
Financing activity.
(i)
(j)
(k)
(l)
(m)
(n)
Operating activity.
Noncash investing and financing
activity.
Investing activity.
Noncash investing and financing
activity.
Operating activity (loss); investing
activity (cash proceeds from sale).
Financing activity.
EXERCISE 13-3
1. (a) Cash ………………………………………………….. 10,000
Loss on Disposal of Plant Assets ……….. 2,000
Land …………………………………………… 12,000
2. (a) Cash ………………………………………………….. 22,000
Common Stock ……………………………. 22,000
3. (a) Depreciation Expense ………………………… 14,000
section.
EXERCISE 13-3 (Continued)
4. (a) Salaries and Wages Expense …………………………. 7,000
Cash ………………………………………………………. 7,000
the statement of cash flows.
5. (a) Equipment …………………………………………………….. 9,000
Common Stock …………………………..………….. 1,000
statement of cash flows.
6. (a) Cash …………………………………………………………….. 3,200
(b) The cash receipt ($3,200) is reported in the investing section. The gain
EXERCISE 13-4
BRACEWELL COMPANY
Partial Statement of Cash Flows
For the Year Ended December 31, 2014
Cash flows from operating activities
Net income ……………………………………………………….. $195,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense …………………………………. $40,000
EXERCISE 13-5
NASREEN INC.
Partial Statement of Cash Flows
For the Year Ended December 31, 2014
Cash flows from operating activities
Net income …………………………..…………………….. $153,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense …………………………... $ 24,000)
EXERCISE 13-6
CHAUDRY CORP
Partial Statement of Cash Flows
For the Year Ended December 31, 2014
Cash flows from operating activities
Net income ………………………………………………. $ 67,000)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Cash flows from investing activities
Sale of plant assets ………………………………….. 16,000*
Cash flows from financing activities
Payment of cash dividends ……………………….. (17,000)
*Cost of equipment sold ……………………………. $ 49,000)
*Accumulated depreciation ……………………….. (28,000)
EXERCISE 13-7
(a) MEERA CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2014
Cash flows from operating activities
Net income …………………………………………………. $ 22,630)
Adjustments to reconcile net income
to net cash provided by operating activities:
Cash flows from investing activities
Sale of land ………………………………………………… 5,000
Cash flows from financing activities
Issuance of common stock ………………………….. $ 3,000
(b) $15,500 – $0 – $19,500 = ($4,000)
EXERCISE 13-8
SYAL COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2014
Cash flows from operating activities
Net income ………………………………………….. $103,000)
Adjustments to reconcile net income
to net cash provided by operating
Cash flows from investing activities
Sale of land …………………………………………. 27,000)
Cash flows from financing activities
Issuance of common stock ………………….. 42,000)
Payment of cash dividends ………………….. (45,000)
EXERCISE 13-9
(a) CASSANDRA CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2014
Cash flows from operating activities
Net income ……………………………………………. $ 18,300)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Cash flows from investing activities
Sale of plant assets …………………………..…… 3,500)
Purchase of investments ……………………….. (4,000)
Net decrease in cash ……………………………………. (700))
Cash at beginning of period …………………………. 17,700
*EXERCISE 13-10
ERISA MAGAMBO COMPANY
Worksheet
Statement of Cash Flows
For the Year Ended December 31, 2014
Balance
12/31/13
Reconciling Items
Balance
12/31/14
Balance Sheet Accounts
Debit
Credit
Debits
Cash
Accounts receivable
Inventory
Land
Equipment
Total
22,000
76,000
187,000
100,000
200,000
585,000
(k) 36,000
(a) 9,000
(f) 50,000
(b) 7,000
(e) 25,000
58,000
85,000
180,000
75,000
250,000
648,000
Credits
Accumulated depreciation—equipment
Accounts payable
Bonds payable
Common stock
Retained earnings
Total
42,000
45,000
200,000
164,000
134,000
585,000
(c) 11,000
(h) 50,000
(g) 70,000
(d) 24,000
(i) 50,000
(j) 120,000
66,000
34,000
150,000
214,000
184,000
648,000
Statement of Cash Flow Effects
Operating activities
Net income
Increase in accounts receivable
Decrease in inventory
Decrease in accounts payable
Depreciation expense
Investing activities
Sale of land
Purchase of equipment
Financing activities
Payment of dividends
Redemption of bonds
Issuance of common stock
Totals
Increase in cash
Totals
(j) 120,000
(b) 7,000
(d) 24,000
(e) 25,000
(i) 50,000
452,000
452,000
(a) 9,000
(c) 11,000
(f) 50,000
(g) 70,000
(h) 50,000
416,000
(k) 36,000
452,000