Financial Reporting & Analysis (7th Ed.)
Chapter 17 Solutions
Statement of Cash Flows
Exercises
Exercises
E17-1. Deriving a direct method presentation of cash flow from
operating activities
ABC Mining Company
Cash Flow from Operations
For the Year Ended December 31, 2017
E17-2. Determining cash flow from operating activities
(AICPA adapted)
Lino’s net cash from operating activities is calculated below:
1The increase in accounts receivable is net of the allowance for doubtful accounts.
E17-3. Calculating cash flows from operating activities, direct method
Cash flow from operating activities for Hamilton Corporation is
presented below:
Net cash provided by operating activities $109,800
Supporting calculations:
Cash paid to suppliers $207 ,000
4Cash paid for insurance:
E17-4. Determining cash collections from customers
The following analysis is to determine the amount of cash collected
on accounts receivable during 2017:
Accounts Receivable
Beginning balance $170,00
0$25,000 Write-offs
Total cash collected from customers $711,300
E17-5. Determining cash flows from investing and operating activities
(AICPA adapted)
Requirement 1:
Net income $300,000
+ Depreciation 52,000
– Gain on sale of equipment (5 ,000)
1Computation of cash from sale of equipment:
Cost of equipment $25,000
2Computation of cash paid for equipment:
Karr would also indicate with a supplemental disclosure that
$30,000 of equipment purchases were paid by issuance of a note.
E17-6. Determining cash flows from investing and financing activities
Requirement 1:
Requirement 2:
Dividends paid ($19,000)
E17-7. Determining cash flows from investing activities
(AICPA adapted)
Purchase of stock in Maybel ($26,000)
Net cash used in investing activities ($41 ,000)
E17-8. Relationship between balance sheet and statement of cash
flows
Solution approach: The following journal entries can be derived
from the information given. Posting the entries then yields the
balance sheet found below.
The effects of this journal entry on the balance sheet are shown in
the “Sale of Equipment” column of the worksheet that follows. Net
(excluding the sale of equipment) and the last column shows the
E17-9. Determining operating cash flow
(AICPA adapted)
Net Income $150,000
Net cash provided by operating activities $144 ,900
E17-10. Statement of cash flows preparation
(AICPA adapted)
a) The dividend will not appear in Hoffman’s 2017 statement of
b) The stock repurchase will be listed as a financing outflow for
c) Because depreciation is a noncash expense, it requires no
operating cash and thus is not disclosed in a “direct method”
be listed among the reconciling items.
d) Net income is not an inflow or outflow of cash—nor is the
as well.) The inventory loss is a noncash expense because it
e) Neither the write-off of $20,000 nor the $35,000 bad debt
are reported “net,” the $35,000 will not serve as a reconciling
item as it is already picked up in the reconciling item for “change
in accounts receivable balance.”
f) The $100,000 cash paid for the building and land acquisition
disclosure may be via a separate section in the cash flow
statement.
g) Adding the machine’s book value ($25,000) to the realized gain
cash inflow.
E17-11. Determining cash used in financing activities
(AICPA adapted)
Net cash used in financing activities:
Net cash outflow ($356 ,000)
Note: The conversion of preferred stock to common stock is a
Financial Reporting & Analysis (7th Ed.)
Chapter 17 Solutions
Statement of Cash Flows
Problems
Problems
P17-1. Preparing a statement of cash flows under the indirect
method.
(AICPA adapted)
Requirement 1:
(a) DR Cash (Operations—Net income) $ 234,000
DR Machinery and equipment 463,000
CR Cash (Financing—retirement of
preferred stock $13,200
CR Accounts receivable $3,600
(g) DR Securities held for plant expansion $ 180,000
back) $ 2,400
CR Allowance for uncollectible accounts $2,400
for leaseholds add back) $ 10,800
CR Allowance for amortization $10,800
bonds) $60,000
Requirement 2:
Banciu Corporation
Statement of Cash Flows
For the Year Ending December 31, 2017
Operating:
Decrease in accounts receivable 18,000
Increase in accounts payable 153,360
Purchase securities for plant expansion (180,000)
Purchase machinery (463,000)
Cash Flow from Investing (587,800)
Financing:
Cash Balance, December 31, 2017 $174,000