Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 12
741
PROBLEM SET B
Problem 12-1B (35 minutes)
SALT LAKE COMPANY
Cash Flows from Operating Activities—Indirect Method
For Year Current Ended December 31
Cash flows from operating activities
Net income …………………………………………………………………….
$ 20,000
Adjustments to reconcile net income to net cash
provided by operating activities
)
)
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 12
742
Problem 12-2BB (35 minutes)
SALT LAKE COMPANY
Cash Flows from Operating Activities—Direct Method
For Current Year Ended December 31
$ 155,400
)
)
)
)
)
)
Supporting calculations
(1) Sales – Increase in receivables = $156,000 – ($3,600 – $3,000) = $155,400
(2) Cost of Decrease in Decrease in
goods sold inventory accounts payable =
$72,000 – ($980 – $860) + ($2,600 – $2,400) = $72,080
–
+
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 12
743
Problem 12-3B (40 minutes)
Part 1
GAZELLE CORPORATION
Statement of Cash Flows
For Current Year Ended December 31
Cash flows from operating activities
Net income ………………………………………………………………………………
$158,100
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation expense ……………………………………………………….
38,600
Decrease in accounts receivable ($80,750 – $77,100) …………….
10,100
Decrease in prepaid expenses ($17,000 – $15,100) ………………..
Decrease in accounts payable ($102,000 – $17,750) ………………
(84,250)
Net cash provided by operating activities …………………………..
Cash flows from investing activities
Cash received from sale of equipment …………………………………..
26,050
Cash paid for equipment ……………………………………………………….
(43,250)
Net cash used in investing activities ………………………………………
(17,200)
Cash flows from financing activities
Cash borrowed on short–term note ………………………………………..
Cash paid on long–term note …………………………………………………..
Cash received from issuing stock (3,000 x $15) ……………………….
45,000
Cash paid for dividends ……………………………………………………….
(53,600)
Net increase in cash…………………………………………………………………..
Noncash investing and financing activities
Purchased equipment for $113,250 by signing a $70,000 long-term note
payable and paying $43,250 in cash.
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 12
744
Problem 12-3B (Continued)
Part 2
Gazelle Corporation’s dividend payments of $53,600 represent 34% of the
$158,100 net income for the year, and 41% of cash inflow provided by
operations of $130,200.
Problem 12-4BA (60 minutes)
GAZELLE CORPORATION
Spreadsheet for Statement of Cash Flows
For Current Year Ended December 31
Dec. 31,
Prior Year
Analysis of Changes
Dec. 31,
Current Year
Debit
Credit
Balance sheet—debits
Cash ………………………………………………….
$ 61,550
$123,450
Accounts receivable …………………………
80,750
(b)
$ 3,650
77,100
Inventory …………………………………………..
250,700
(c)
10,100
240,600
Prepaid expenses ……………………………..
17,000
(d)
1,900
15,100
Equipment ………………………………………..
200,000
(h)
$113,250
(g)
51,000
262,250
$610,000
$718,500
Balance sheet—credits
Accum. depreciation—Equip. …………..
$ 95,000
(g)
22,850
38,600
$110,750
Accounts payable ……………………………..
102,000
84,250
17,750
Short–term notes payable ………………….
10,000
5,000
15,000
Long–term notes payable ………………….
77,500
47,500
70,000
Common stock, $5 par value …………….
200,000
15,000
Paid–in capital in excess of
par value, common stock ……………….
0
(l)
30,000
30,000
Retained earnings …………………………….
125,500
(m)
53,600
(a)
158,100
230,000
$610,000
$718,500
Statement of cash flows
Operating activities
Net income ………………………………………..
Decrease in accounts receivable ………
(b)
Decrease in merch. inventory …………..
(c)
10,100
Decrease in prepaid expenses ………….
(d)
1,900
Decrease in accounts payable ………….
(e)
84,250
Depreciation expense ……………………….
(f)
38,600
Loss on sale of equipment ……………….
(g)
2,100
Investing activities
Receipt from sale of equipment ………..
(g)
26,050
Payment to purchase equipment ……..
(h)
43,250
Financing activities
Borrowed on short–term note ……………
(j)
5,000
Payment on long–term note ………………
(k)
47,500
Issued common stock for cash ………..
(l)
45,000
Payments of cash dividends …………….
(m)
53,600
Noncash investing and financing
activities
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 12
746
Problem 12-4BA (Concluded)
GAZELLE CORPORATION
Statement of Cash Flows
For Current Year Ended December 31
Cash flows from operating activities
Net income ………………………………………………………………………………
$158,100
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation expense ……………………………………………………….
38,600
Decrease in accounts receivable ($80,750 – $77,100) …………….
10,100
Decrease in accounts payable ($102,000 – $17,750) ………………
(84,250)
Net cash provided by operating activities …………………………..
Cash flows from investing activities
Cash received from sale of equipment …………………………………..
26,050
Cash paid for equipment ……………………………………………………….
(43,250)
Net cash used in investing activities ………………………………………
(17,200)
Cash flows from financing activities
Cash borrowed on short–term note ………………………………………..
Cash paid on long–term note …………………………………………………..
Cash received from issuing stock (3,000 x $15) ……………………….
45,000
Cash paid for dividends ……………………………………………………….
(53,600)
Net increase in cash…………………………………………………………………..
Noncash investing and financing activities
Purchased equipment for $113,250 by signing a $70,000 long-term note
payable and paying $43,250 in cash.
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 12
747
Problem 12-5BB (40 minutes)
GAZELLE CORPORATION
Statement of Cash Flows
For Current Year Ended December 31
Cash flows from operating activities
Cash received from customers (Note 1) …………………
$1,188,650
Cash paid for inventory (Note 2) …………………………..
(669,150)
Cash paid for other expenses (Note 3) …………………..
(360,950)
Cash paid for income taxes ………………………………….
Net cash provided by operating activities ……………..
Cash flows from investing activities
Cash received from sale of equipment ………………….
Cash paid for equipment ………………………………………
Net cash used in investing activities …………………….
(17,200)
Cash flows from financing activities
Cash borrowed on short-term note ……………………….
5,000
Cash paid on long-term note ………………………………..
(47,500)
Cash received from issuing stock (3,000 x $15) ………
Net increase in cash …………………………..…………………..
Noncash investing and financing activities
Purchased equipment for $113,250 by signing a $70,000 long-term note payable
and paying $43,250 in cash.
Supporting calculations
(1) Sales + Decrease in receivables = $1,185,000 + ($80,750 – $77,100) = $1,188,650
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Problem 12-6B (35 minutes)
SATU COMPANY
Statement of Cash Flows
For Current Year Ended December 31
Cash flows from operating activities
Net income ……………………………………………………………………..
$202,767
Adjustments to reconcile net income to net
cash provided by operating activities
Income statement items not affecting cash
Depreciation expense …………………………..…………………….
Changes in current assets and current liabilities
Decrease in accounts receivable ($25,860 – $20,222) ……
Increase in inventory ($165,667 – $140,320) …………………..
(25,347)
Decrease in accounts payable ($157,530 – $20,372) ……..
Decrease in taxes payable ($6,100 – $2,100) …………………
Net cash provided by operating activities …………………….
Cash flows from investing activities
Cash paid for equipment ……………………………………………….
(30,250)
Net cash used in investing activities …………………………….
(30,250)
Cash flows from financing activities
Cash received from issuing stock (3,000 x $21) ……………..
Cash paid for dividends ………………………………………………..
Cash balance at December 31, prior year ………………………..
749
Problem 12-7BA (50 minutes)
SATU COMPANY
Spreadsheet for Statement of Cash Flows
For Current Year Ended December 31
Dec. 31,
Prior Year
Analysis of Changes
Dec. 31,
Current Year
Debit
Credit
Balance sheet—debits
Cash ………………………………………………….
$ 28,400
$ 58,750
Accounts receivable …………………………
Inventory …………………………………………..
(c)
Equipment ………………………………………..
$272,080
$352,389
Balance sheet—credits
Accum. depreciation—Equip. …………..
$ 31,000
(f)
15,700
$ 46,700
Accounts payable ……………………………..
(d)
137,158
Income taxes payable ……………………….
(e)
4,000
Common stock, $5 par value …………….
(h)
15,000
48,000
Retained earnings …………………………….
$272,080
$352,389
Statement of cash flows
Operating activities
Net income ………………………………………..
(a)
202,767
Decrease in accounts receivable ……..
(b)
5,638
Increase in merch. inventory …………….
25,347
Decrease in accounts payable ………….
(d)
Decrease in income taxes payable ……
Depreciation expense ……………………….
Investing activities
Payment for equipment …………………….
(g)
30,250
Financing activities
Issued common stock for cash ………..
Paid cash dividends ………………………….
$543,860
$543,860
750
Problem 12-7BA (concluded)
SATU COMPANY
Statement of Cash Flows
For Current Year Ended December 31
Cash flows from operating activities
Net income ……………………………………………………………………..
$202,767
Adjustments to reconcile net income to net
cash provided by operating activities
Net cash provided by operating activities …………………….
Cash flows from investing activities
Cash paid for equipment ……………………………………………….
(30,250)
Net cash used in investing activities …………………………….
(30,250)
Cash flows from financing activities
Cash received from issuing stock (3,000 x $21) ……………..
Cash paid for dividends ………………………………………………..
Cash balance at beginning of the year …………………………….
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 12
751
Problem 12-8BB (35 minutes)
SATU COMPANY
Statement of Cash Flows
For Current Year Ended December 31
Cash flows from operating activities
Cash received from customers (Note 1) ………………
$756,438
Cash paid for inventory (Note 2) …………………………
Cash paid for other operating expenses ……………..
Cash paid for income taxes (Note 3) ……………………
Net cash provided by operating activities ……………
Cash flows from investing activities
Cash paid for equipment ……………………………………………….
(30,250)
Net cash used in investing activities …………………………….
(30,250)
Cash flows from financing activities
Cash received from issuing stock (3,000 x $21) ……
Net cash provided by financing activities ……………
Net increase in cash ………………………………………………
Supporting calculations
(1) Sales + Decrease in receivables = $750,800 + ($25,860 – $20,222) = $756,438
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 12
752
SERIAL PROBLEM — SP 12
Serial Problem — SP 12, Business Solutions (45 minutes)
BUSINESS SOLUTIONS
Statement of Cash Flows (Indirect)
For Quarter Ended March 31, 2020
Cash flows from operating activities
Net income ………………………………………………………………………………
$ 18,833
Adjustments to reconcile net income to net
cash provided by operating activities
Income statement items not affecting cash
Depreciation expense–Office Equipment …………………………..
400
Depreciation expense–Computer Equipment …………………….
1,250
Increase in accounts receivable ($22,867 – $5,668) ……………….
Increase in inventory ($704 – $0) …………………………………………..
Increase in computer supplies ($2,005 – $580) ……………………..
Decrease in prepaid insurance ($1,665 – $1,110) …………………..
555
Increase in wages payable ($875 – $500) …………………………..
375
Decrease in unearned computer service revenue ………………
Net cash used by operating activities …………………………………….
Cash flows from investing activities
Net cash used by investing activities ……………………………………..
0
Cash flows from financing activities
Cash received from stock issuance …………………………..…………..
25,000
Cash paid for dividends ……………………………………………………….
Net cash provided by financing activities …………………………..
Net increase in cash …………………………………………………………………..