Chapter 11 – Statement of Cash Flows
PROBLEMS: SET A
Problem 11-1A (LO 11-1)
Type of
Activity
Cash Inflow
or Outflow
Transaction
O
CO
1. Payment of employee salaries
I
CI
2. Sale of land for cash
O
CO
3. Purchase of rent in advance
O
CI
4. Collection of an account receivable
F
CI
5. Issuance of common stock
O
CO
6. Purchase of inventory
I
CI
7. Collection of notes receivable
O
CO
8. Payment of income taxes
NC
NE
9. Sale of equipment for a note receivable
F
CI
10. Issuance of bonds
I
CO
11. Loan to another firm
F
CO
12. Payment of a long-term note payable
F
CO
13. Purchase of treasury stock
O
CO
14. Payment of an account payable
I
CI
15. Sale of equipment for cash
Chapter 11 – Statement of Cash Flows
Problem 11-2A (LO 11-2, 11-3)
ATM Software Developers
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash Flows from Operating Activities
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation expense
5,465
Increase in accounts receivable
(4,090)
Decrease in accounts payable
Cash Flows from Investing Activities
Cash received from sale of land
8,650
Purchase of equipment
Cash Flows from Financing Activities
Issuance of common stock
Issuance of long-term notes payable
Purchase of treasury stock
Net increase (decrease) in cash
Cash at the beginning of the period
Cash at the end of the period
Problem 11-3A (LO 11-2)
Alliance Technologies
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash Flows from Operating Activities
Net income
$56,000
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation expense
17,000
Decrease in accounts receivable
Decrease in prepaid rent
Increase in salaries payable
Decrease in accounts payable
Increase in income tax payable
24,000
Problem 11-4A (LO 11-2, 11-3)
Video Phones, Inc.
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash Flows from Operating Activities
Net income
$104,000
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation expense
37,000
Loss (on sale of land)
9,000
Increase in accounts receivable
(22,000)
40,000
Increase in prepaid rent
Net cash flows from operating activities
Cash Flows from Investing Activities
Purchase investment in bonds
Sale of land
Net cash flows from investing activities
Cash Flows from Financing Activities
Payment of cash dividends
(30,000)
Net cash flows from financing activities
Net increase (decrease) in cash
Cash at the beginning of the period
Cash at the end of the period
Note: Noncash Activities
Purchase equipment issuing a note payable
Chapter 11 – Statement of Cash Flows
Problem 11-5A (LO 11-4)
1.
($ in millions)
Net Income
÷
Average
Total Assets
=
Return
on Assets
Cyberdyne
9,737
÷
(57,851 + 72,574)/2
=
14.9%
Virtucon
1,049
2.
($ in millions)
Operating
Cash Flows
÷
Average
Total Assets
=
Cash Return
on Assets
Cyberdyne
÷
(57,851 + 72,574)/2
=
22.3%
Virtucon
1,324
(14,928 + 14,783)/2
Operating
Virtucon
1,324
26.6%
($ in millions)
÷
Average
Total Assets
=
Cyberdyne
÷
(57,851 + 72,574)/2
=
Virtucon
(14,928 + 14,783)/2
Chapter 11 – Statement of Cash Flows
*Problem 11-6A (LO 11-5)
Alliance Technologies
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash Flows from Operating Activities
Cash received from customers
$412,000
Cash paid to suppliers
(258,000)
Cash paid for operating expenses
Cash paid for income taxes
Net sales
$405,000
+ Decrease in accounts receivable
7,000
= Cash received from customers
$412,000
+ Increase in inventory
= Purchases
249,000
9,000
= Cash paid to suppliers
Operating expenses
$70,000
− Decrease in prepaid rent
(10,000)
− Increase in salaries payable
(6,000)
= Cash paid for operating expenses
$54,000
Income tax expense
$27,000
= Cash paid for income taxes
$ 3,000
Chapter 11 – Statement of Cash Flows
*Problem 11-7A (LO 11-5)
Video Phones, Inc.
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash Flows from Operating Activities
Cash received from customers
$3,614,000
Cash paid to suppliers
(2,426,000)
Cash paid for operating expenses
Cash paid for interest
(25,000)
Cash paid for income taxes
Net cash flows from operating activities
Cash Flows from Investing Activities
Purchase investment in bonds
(115,000)
Sale of land
Net cash flows from investing activities
Cash Flows from Financing Activities
Payment of cash dividends
(30,000)
Net cash flows from financing activities
Net increase (decrease) in cash
Cash at the end of the period
Note: Noncash Activities
Purchase equipment issuing a note payable
Chapter 11 – Statement of Cash Flows
Net sales
$3,636,000
= Cash received from customers
$3,614,000
Cost of goods sold
= Purchases
= Cash paid to suppliers
Operating expenses
$958,000
+ Increase in prepaid rent
7,200
= Cash paid for operating expenses
$965,200
Interest expense
+ Decrease in interest payable
= Cash paid for interest
Income tax expense
= Cash paid for income taxes
Chapter 11 – Statement of Cash Flows
*Problem 11-8A (LO 11-2, 1-5)
Reverse Logic
Income Statement
For the Year Ended December 31, 2018
Net sales
$4,108
Expenses:
Cost of goods sold
2,624
Operating expenses
1,158
Depreciation expense
Income tax expense
Net Income
Net sales
$4,108
− Increase in accounts receivable
(38)
= Cash received from customers
Cost of goods sold
− Decrease in inventory
(50)
= Purchases
2,574
= Cash paid to suppliers
Operating expenses
= Cash paid for operating expenses
Income tax expense
= Cash paid for income taxes
Chapter 11 – Statement of Cash Flows
PROBLEMS: SET B
Problem 11-1B (LO 11-1)
Type of
Activity
Cash Inflow
or Outflow
Transaction
F
CI
1. Issue common stock
I
CI
2. Sale of land for cash
F
CO
3. Purchase of treasury stock
O
CI
4. Collection of an account receivable
F
CI
5. Issuance of a note payable
O
CO
6. Purchase of inventory
F
CO
7. Repayment of note payable
O
CO
8. Payment of employee salaries
NC
NE
9. Sale of equipment for a note receivable
F
CI
10. Issuance of bonds
I
CO
11. Investment in bonds
O
CO
12. Payment of interest on bonds payable
F
CO
13. Payment of a cash dividend
I
CO
14. Purchase of a building
I
CI
15. Collection of a note receivable
Chapter 11 – Statement of Cash Flows
Problem 11-2B (LO 11-2, 11-3)
CPU Hardware Designers
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash Flows from Operating Activities
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation expense
30,000
Loss (on sale of land)
8,000
Increase in inventory
Increase in prepaid rent
Increase in accounts payable
11,000
Cash Flows from Investing Activities
Cash received from sale of land
4,000
Purchase of equipment
Cash Flows from Financing Activities
Issuance of common stock
300,000
Repayment of notes payable
Net increase (decrease) in cash
Cash at the end of the period
Problem 11-3B (LO 11-2)
Software Associates
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash Flows from Operating Activities
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation expense
33,000
Decrease in accounts receivable
Increase in accounts payable
Chapter 11 – Statement of Cash Flows
Problem 11-4B (LO 11-2, 11-3)
Virtual Gaming Systems
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation expense
33,000
Gain (on sale of land)
(7,000)
Increase in inventory
Cash Flows from Investing Activities
Purchase investment in stock
(95,000)
Sale of land
62,000
Cash Flows from Financing Activities
Issue common stock
60,000
Payment of cash dividends
Net increase (decrease) in cash
Cash at the beginning of the period
Cash at the end of the period
Note: Noncash Activities
Purchase equipment issuing a note payable
Problem 11-5B (LO 11-4)
1.
($ in millions)
Net Income
÷
Average
Total Assets
=
Return
on Assets
InGen
÷
=
RDA
15,855
2.
($ in millions)
Operating
Cash Flows
÷
Average
Total Assets
=
Cash Return
on Assets
InGen
12,639
÷
(124,503 + 129,517)/2
=
10.0%
RDA
19,846
(113,452 + 116,433)/2
17.3%
3.
($ in millions)
Operating
Cash Flows
÷
Net Sales
=
Cash Flow
to Sales
RDA
19,846
($ in millions)
Net Sales
÷
Average
Total Assets
=
Asset
Turnover
InGen
÷
(124,503 + 129,517)/2
=
RDA
(113,452 + 116,433)/2