# Accounting Chapter 11 Homework Purchase Equipment Purchase Patent Net Cash Flows

Page Count
14 pages
Word Count
2998 words
Book Title
Financial Accounting Connect Access Code 4th Edition
Authors
David Spiceland, Don Herrmann, Wayne Thomas
Chapter 11 - Statement of Cash Flows
Chapter 11
Statement of Cash Flows
REVIEW QUESTIONS
Question 11-1 (LO 11-1)
The three categories of cash flows are operating activities, investing activities, and financing
Question 11-2 (LO 11-1)
Question 11-3 (LO 11-1)
Noncash activities are investing and financing activities that do not result in the transfer of cash.
Examples of significant noncash investing and financing activities include:
Question 11-4 (LO 11-1)
The income statement provides important information in determining cash flows from operating
activities. The balance sheet provides changes in asset, liability, and stockholders’ equity accounting
Question 11-5 (LO 11-1)
The heading includes the company name, the title statement of cash flows, and the period
Question 11-6 (LO 11-1)
The four steps are to calculate net cash flows from operating activities using information from
the income statement and changes in current assets and current liabilities, determine the net cash
Chapter 11 - Statement of Cash Flows
Question 11-7 (LO 11-1)
Using the indirect method, we begin with net income and then list adjustments to net income in
order to arrive at operating cash flows. Using the direct method we adjust the items on the income
Question 11-8 (LO 11-2)
The most common adjustments to convert net income to net cash flows are adjustments for
Question 11-9 (LO 11-2)
It is possible to report a loss and still have positive operating cash flows. For example, if
Question 11-10 (LO 11-2)
Depreciation expense is an addition to net income in arriving at net operating cash flows.
Question 11-11 (LO 11-2)
We subtract a gain on sale of assets and add a loss on sale of assets to net income in arriving at
Question 11-12 (LO 11-2)
Question 11-13 (LO 11-2)
Question 11-14 (LO 11-3)
The purchase of land by issuing its own common stock is a noncash activity. Transactions like
Question 11-15 (LO 11-2, 11-3)
Question 11-16 (LO 11-3)
Question 11-17 (LO 11-4)
Return on assets has net income in the numerator while cash return on assets has cash flows from
Question 11-18 (LO 11-4)
Companies have two primary strategies for increasing their cash return on assets. One strategy,
Question 11-19 (LO 11-5)
Question 11-20 (LO 11-5)
Depreciation expense has no effect on cash flows. It is merely an allocation in the current period
Chapter 11 - Statement of Cash Flows
BRIEF EXERCISES
Brief Exercise 11-1 (LO 11-1)
1. Financing activity.
Brief Exercise 11-2 (LO 11-1)
Brief Exercise 11-3 (LO 11-2)
Brief Exercise 11-4 (LO 11-2)
Cash Flows from Operating Activities
Chapter 11 - Statement of Cash Flows
Adjustments to reconcile net income to net cash
flows from operating activities:
Brief Exercise 11-5 (LO 11-2)
Adjustments to reconcile net income to net
cash flows from operating activities:
Brief Exercise 11-6 (LO 11-2)
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation expense
6
Brief Exercise 11-7 (LO 11-2)
Chapter 11 - Statement of Cash Flows
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation expense
6
Gain (on sale of land)
(2)
Brief Exercise 11-8 (LO 11-3)
Cash Flows from Investing Activities
Sale of land
16
Chapter 11 - Statement of Cash Flows
Brief Exercise 11-9 (LO 11-3)
Brief Exercise 11-10 (LO 11-4)
Operating
Cash Flow
÷
Average
Total Assets
=
Cash Return
on Assets
60,000
÷
(500,000 + 800,000)/2
=
9.2%
Brief Exercise 11-11 (LO 11-4)
Operating Cash Flow
=
0.25
(620,000 + 820,000)/2
*Brief Exercise 11-12 (LO 11-5)
Chapter 11 - Statement of Cash Flows
Net sales
\$73
*Brief Exercise 11-13 (LO 11-5)
Cost of goods sold
\$45
*Brief Exercise 11-14 (LO 11-5)
Operating expenses
\$985,000
+ Increase in prepaid rent
30,000
*Brief Exercise 11-15 (LO 11-5)
Income tax expense
\$340,000
Chapter 11 - Statement of Cash Flows
EXERCISES
Exercise 11-1 (LO 11-1, 11-2, 11-3, 11-4, 11-5)
Items
__e__ 1. Operating activities
__f__ 2. Investing activities
__d__ 3. Financing activities
Descriptions
a. Begins with net income and then lists adjustments to net income in order to
arrive at operating cash flows.
b. Item included in net income, but excluded from net operating cash flows.
Exercise 11-2 (LO 11-1)
The \$25,000 increase in notes payable should be properly recorded as an increase in
cash from financing activities. While most changes in current assets and current
liabilities are included in operating activities, borrowing money from a bank is clearly
a financing activity.
Exercise 11-3 (LO 11-1)
1. Investing activities
Chapter 11 - Statement of Cash Flows
Exercise 11-4 (LO 11-1)
1. Financing activities
Exercise 11-5 (LO 11-1)
Exercise 11-6 (LO 11-1)
1. Investing activities
Chapter 11 - Statement of Cash Flows
Exercise 11-7 (LO 11-2, 11-3)
Technology Solutions
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:
List of items adjusting net income to operating
cash flows
Net cash flows from operating activities
\$\$\$
Cash Flows from Investing Activities
List of cash inflows and outflows from investing
activities
Net cash flows from investing activities
\$\$\$
Cash Flows from Financing Activities
List of cash inflows and outflows from
financing activities
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
List of noncash transactions
\$\$\$
Exercise 11-8 (LO 11-2)
Cash Flows from Operating Activities
Net income
\$165,000
Adjustments to reconcile net income to net cash
flows from operating activities:
Exercise 11-9 (LO 11-2)
Cash Flows from Operating Activities
Net income
\$65,000
Adjustments to reconcile net income to net cash
flows from operating activities:
Exercise 11-10 (LO 11-2, 11-3)
Plasma Screens Corporation
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash Flows from Operating Activities
Net income
\$ 79,000
Adjustments to reconcile net income to net
cash flows from operating activities:
Chapter 11 - Statement of Cash Flows
Exercise 11-11 (LO 11-2)
Peach Computer
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash Flows from Operating Activities
Net income
\$130,000
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation expense
60,000
Exercise 11-12 (LO 11-4)
1.
2.
3.
(\$ in millions)
Operating
Cash Flows
÷
Net Sales
=
Cash Flow
to Sales
(\$ in millions)
Net Sales
÷
Average
Total Assets
=
Asset
Turnover
Chapter 11 - Statement of Cash Flows
*Exercise 11-13 (LO 11-5)
Peach Computer
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash Flows from Operating Activities
\$2,058,000
Net sales
\$2,050,000
+ Decrease in accounts receivable
8,000
\$2,058,000
Chapter 11 - Statement of Cash Flows
*Exercise 11-14 (LO 11-5)
Increase in accounts receivable
(55,000)
\$3,145,000
Cost of goods sold
\$2,000,000
*Exercise 11-15 (LO 11-5)
1.
(\$ in millions)
2.
Cost of goods sold
\$69,278
+ Increase in inventory
883

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