Cost of Accounts
Cash paid to
Situation goods sold Inventory payable
suppliers
increase increase
(decrease) (decrease)
2 200 6 0 206
4 200 6 14 192
5 200 (6) (14) 208
Exercise 21–6
Bond
interest Bond interest Unamortized Cash paid
Situation expense payable discount for interest
increase increase
(decrease) (decrease)
1 10 0 0 10
2 10 2 0 8
3 10 (2) 0 12
4 10 0 (3) 7
Exercise 21–7
Exercise 21–7 (concluded)
Bond
interest Bond interest Unamortized Cash paid
Situation expense payable discount for interest
increase increase
(decrease) (decrease)
5 10 2 (3) 5
6 10 (2) (3) 9
Bond
interest Bond interest Unamortized Cash paid
Situation expense payable discount for interest
increase increase
(decrease) (decrease)
1 20 0 0 20
2 20 4 0 16
Exercise 21–8
3 20 0 (6) 14
4 20 (4) (6) 18
4. Summary Entry Bond interest expense 20
Bond interest payable 4
Discount on bonds payable 6
Cash (paid to bondholders) 18
Income Deferred
tax Income tax tax Cash paid
Situation expense payable liability for taxes
increase increase
(decrease) (decrease)
1 10 0 0 10
2 10 3 0 7
3 10 (3) 0 13
Exercise 21–9
4 10 0 2 8
5 10 0 (2) 12
Exercise 21–9 (concluded)
Income Deferred
tax Income tax tax Cash paid
Situation expense payable liability for taxes
increase increase
(decrease) (decrease)
6 10 3 2 5
7 10 3 (2) 9
8 10 (3) (2) 15
9 10 (3) 2 11
Income
Deferred
tax Income tax
tax Cash paid
Exercise 21–10
Situation expense payable liability for taxes
increase (decrease) increase (decrease)
1 10 0 0 10
2 10 3 0 7
3 10 0 (2) 12
4 10 3 2 5
5 10 (3) (2) 15
sale of the bonds as a cash inflow from financing activities in its statement of cash
flows.
outflow from operating activities because interest is an income statement
(operating) item. If the direct method is used, interest paid is reported in the
operating activities section. If the indirect method is used, interest paid must be
separately disclosed. Therefore, interest paid is specifically reported regardless of
which method is used for the operating activities section.
June 30, 2018*
December 31, 2018**
Exercise 21–12
Each installment payment includes both an amount that represents interest and an
amount that represents a reduction of principal. In its statement of cash flows,
*December 31, 2018
Requirement 1
Cash Flows from Investing Activities:
Requirement 2
Cash Flows from Financing Activities:
Exercise 21–13
Payment for the early extinguishment of
Requirement 1
Cash Flows from Investing Activities:
Proceeds from sale of equipment
Requirement 2
Cash Flows from Financing Activities:
Payment for the early extinguishment of
long-term notes (book value: $50 million) $ (54)
Exercise 21–14
