Problem 21–14 (continued)
Spreadsheet for the Statement of Cash Flows
(continued)
Dec.31 Changes Dec. 31
2017 Debits Credits 2018
Statement of Cash Flows
Operating activities:
Net income (1)50
Adjustments for noncash effects:
Depreciation expense (2)22
Bad debt expense (3) 8
Net cash flows 40
Investing activities:
Net cash flows (40)
Financing activities:
Net cash flows (4 )
Totals 468 468
Problem 21–14 (concluded)
SURMISE COMPANY
Statement of Cash Flows
For year ended December 31, 2018 ($ in millions)
Cash flows from operating activities:
Net income $ 50
Adjustments for noncash effects:
Cash flows from investing activities:
Cash flows from financing activities:
Payment of lease liability (9)
Issuance of note payable 35
Net decrease in cash (4)
Noncash investing and financing activities:
Problem 21–15
Requirement 1
Digital would report the cash inflow of $28,329,472 from the sale of the bonds as a
cash inflow from financing activities in its statement of cash flows.
from operating activities because interest is an income statement (operating) item.
June 30, 2018*
December 31, 2018**
Note: By the indirect method of reporting cash flows from operating
discount amortization since net income was reduced by interest
period.
Problem 21–15 (continued)
Requirement 2
Calculation of the present value of lease payments
(rounded)
t Present value of an annuity due of $1: n = 20, i = 3% (from Table 6)
its financing with a lease as a significant noncash investing and financing activity
in the disclosure notes to the financial statements.
the interest portion and the principal portion. The interest portion, $168,254,
from the December 31 payment, is reported as a cash outflow from operating
as a cash outflow from financing activities.
Note: By the indirect method of reporting cash flows from operating
activities, we would add back to net income the $300,000
amortization expense since it didn’t actually reduce cash. The
Calculations:
September 30, 2018*
……………………………Lease payable (calculated in above)
………………………………………………..Cash (lease payment)
December 31, 2018**
………………………………………………..Cash (lease payment)
…………………………………………………..Right-of-use asset
Problem 21–15 (continued)
Requirement 3
In a sales-type lease we assume the lessor is actually selling its product.
Consistent with reporting sales of products under installment sales
agreements rather than lease agreements, the lessor reports cash receipts
Note: By the indirect method of reporting cash flows from operating
activities, the $168,254 interest revenue that increased net income
Calculations:
September 30, 2018*
Lease receivable (PV of lease payments)…………………….. 6,000,000
………………………..Inventory of equipment (lessor’s cost)
……………………………………………………..Lease receivable
December 31, 2018**
……………………………………………………..Lease receivable
Problem 21–15 (concluded)
Requirement 4
In a sales-type lease we assume the lessor is actually selling its product.
Consistent with reporting sales of products under installment sales
Note: By the indirect method of reporting cash flows from operating
activities, the $168,254 interest revenue that increased net income
actually did increase cash. The remaining portion of the $783,096
Calculations:
September 30, 2018*
…………………………………….Sales revenue (present value)
………………………..Inventory of equipment (lessor’s cost)
……………………………………………………..Lease receivable
December 31, 2018**
……………………………………………………..Lease receivable
DUX COMPANY
Spreadsheet for the Statement of Cash Flows
Dec.31 Changes Dec. 31
2017 Debits Credits 2018
Balance Sheet
Assets:
Cash 20 (20)13 33
Accounts receivable 50 (5) 2 48
Less: Allowance (3) (6) 1 (4)
Liabilities:
Accounts payable 20 (9) 7 13
Salaries payable 5 (10)3 2
Shareholders’ Equity:
Common stock 200 (17)10 210
Paid-in capital—ex. of par 20 (17) 4 24
X Noncash investing and financing activity.
Problem 21–16
Problem 21–16 (continued)
Spreadsheet for the Statement of Cash Flows
(continued)
Dec.31 Changes Dec. 31
2017 Debits Credits 2018
Statement of Cash Flows
Net income (1)25
Adjustments for noncash effects:
Depreciation expense (2) 5
Amortization of discount (3) 1
Net cash flows 22
Investing activities:
Net cash flows (13)
Financing activities:
Net cash flows 4
Net increase in cash (20)13 13
___ ___
Totals 216 216
Problem 21–16 (concluded)
DUX COMPANY
Statement of Cash Flows
For year ended December 31, 2018 ($ in 000s)
Cash flows from operating activities:
Net income $25
Adjustments for noncash effects:
Depreciation expense 5
Cash flows from investing activities:
Sale of building 7
Cash flows from financing activities:
Sale of bonds payable 25
Net increase in cash 13
Noncash investing and financing activities: