Financial Accounting, 9/e 12–21
E12–23.
Req. 1
Cash flows from operating activities—direct method
Cash collected from customers1
$151,600
Cash payments to employees
(55,400)
Cash payments for income tax4
(220)
Net cash provided by operating activities
$30,758
1. Cash collected from customers = Revenues + Decrease in Accounts receivable
$150,800 + $800 = $151,600
Req. 2
The primary reason for the net loss was the depreciation and amortization expense.
These represent non-cash expenses. Large depreciation and amortization expense,
Cash payments to suppliers2
(53,520)
Cash payments for other expenses3
(11,702)
E12–24
Req. 1
Panel A: Changes in Cash Account
Operating
(1) Net Income
20,200 7,000 (3) Inventory
(2) Depreciation Expense
3,000 3,000 (4) Accounts Payable
1,500 1,000 (5) Wages Payable
Cash (A)
Contributed Capital (SE)
Accounts Receivable (A)
Merchandise Inventory (A)
Accounts Payable (L)
Wages Payable (L)
Financial Accounting, 9/e 12–23
E12–24 (continued)
Req. 2
GOLF UNIVERSE STORE
Statement of Cash Flows
For the Year Ended December 31, Current Year
Cash flows from operating activities:
Net income
$ 20,200
Depreciation expense
3,000
Cash flows from investing activities:
Purchase of investment
(15,000
)
Proceeds from sale of equipment
6,000
Cash flows provided by (used in) investing activities
(9,000
)
Cash flows from financing activities:
Sale of capital stock
6,000
Dividends paid
(12,000
)
Cash flows provided by (used in) financing activities
(6,000
)
Net increase (decrease) in cash
(1,300
)
Cash, beginning of year
Cash, end of year
$ 19,200
Changes in current assets and current liabilities
Inventory
(7,000
)
Accounts Payable
(3,000
)
Wages Payable
(1,000
)
Income Taxes Payable
1,500
Cash flows provided by operating activities
PROBLEMS
P12–1.
Req.1
Related Cash
Balance sheet at December 31
Flow Section
Current
Year
Prior
Year
Change
Δ in Cash
Cash
$73,250
$63,500
+9,750
10
Net increase in cash
O
Accounts receivable
15,250
21,350
-6,100
3
Add to net income the decrease in A/R
O
Merchandise inventory
23,450
18,000
+5,450
4
Subtract from net income the increase in Inventory
depreciation
Note payable, long-term
56,300
8
Cash used for repayment of note principal
Contributed capital
103,950
65,900
+38,050
9
Issuance of stock for cash
Property and equipment
209,250
160,350
+48,900
7
Payment in cash for equipment
Income statement for Current
Year
Sales
$205,000
Cost of goods sold
123,500
Depreciation expense
Other expenses
Net Income
Financial Accounting, 9/e 12–25
P12-1 (continued)
Sharp Screen Films, Inc.
Statement of Cash Flows
For the Year Ended December 31, Current Year
Cash flows from operating activities:
Net income
$26,800 1
Adjustments to reconcile net income to net
cash provided by operating activities:
Net cash provided by operating activities
35,950
Cash flows from investing activities:
Cash payments to purchase fixed assets
(48,900) 7
Cash flows from financing activities:
Cash payments on long-term note
(14,700)
8
Cash payments for dividends
Cash receipts from issuing stock
9
Net increase in cash during the year
Req. 2
An overall increase in cash of $9,750 came from inflows of $35,950 from operating
activities and a stock issuance of $38,050. A large percentage of the cash inflows were
2
4
5
6
P12–2.
Req. 1
Related
Cash
Balance sheet at December 31
Flow
Section
Curre
nt
Year
Prior
Year
Change
Δ in Cash
Cash
$37,000
$29,000
+8,000
10
Net increase in cash
O
Accounts receivable
32,000
28,000
+4,000
3
Subtract from net income the increase in A/R
O
Merchandise inventory
41,000
38,000
+3,000
4
Subtract from net income the increase in Inventory
I
Property and equipment
132,000
111,000
+21,000
7
Payment in cash for equipment
O
Accounts payable
$27,000
+9,000
5
Add to net income the increase in Accounts Payable
wage expense
F
Note payable, long-term
38,000
44,000
8
Cash used for repayment of note principal
F
Contributed capital
88,600
72,600
+16,000
9
Issuance of stock for cash
O,F
Retained earnings
37,200
25,000
+12,200
1
Increased for net income amount
Income statement for current year
Sales
$120,000
Cost of goods sold
70,000
Other expenses
37,800
Net Income
Financial Accounting, 9/e 12-27
P12–2. (continued)
BG Wholesalers
Statement of Cash Flows
For the Year Ended December 31, Current Year
Cash flows from operating activities:
Net income
$12,200
1
Adjustments to reconcile net income to net
cash provided by operating activities:
2
(4,000)
(3,000)
4
5
6
Net cash provided by operating activities
19,000
Cash flows from investing activities:
Cash payments to purchase fixed assets
(21,000)
7
Cash flows from financing activities:
Cash payments on long-term note
(6,000)
8
Cash receipts from issuing stock
9
Net increase in cash during the year
Req. 2
There was an increase in cash for BG Wholesalers this year of $8,000. Operating
P12–3.
Req.1
Related Cash
Balance sheet at December 31
Flow Section
Current
Year
Prior
Year
Change
Δ in Cash
Cash
$73,250
$63,500
+9,750
10
Net increase in cash
O
Accounts receivable
15,250
21,350
-6,100
3
Add to net income the decrease in A/R
Merchandise inventory
Property and equipment
160,350
7
depreciation
$263,750
$217,450
Wages payable
Note payable, long-term
56,300
Contributed capital
103,950
9
Issuance of stock for cash
4
O,F
Retained earnings
85,000
58,850
+26,150
1
Increased for net income amount of $26,800
Decreased for dividends declared & paid $650
$263,750
$217,450
Income statement for current
year
Sales
$205,000
Cost of goods sold
123,500
Depreciation expense
Other expenses
Net Income
Financial Accounting, 8e 12-29
P12-3. (continued)
Sharp Screen Films Inc.
Statement of Cash Flows
For the Year Ended December 31, Current Year
Cash flows from operating activities:
Collections from customers ($205,000 +
$6,100)
$211,100
3
Cash flows from investing activities:
Cash payments to purchase fixed assets
(48,900) 7
Cash flows from financing activities:
Cash payments on long-term note
(14,700)
8
Cash payments for dividends
Cash receipts from issuing stock
9
Req. 2
An overall increase in cash of $9,750 came from inflows of $35,950 from operating
activities and a stock issuance of $38,050. A large percentage of the cash inflows were
(131,450)
6
P12–4.
Req. 1
OMEGA COMPANY
Cash Flows from Operating Activities
Direct Method
Cash flows from operating activities:
Cash receipts from customers ……………………………………………………….
$22,780
Cash payments to suppliers …………………………………………………………..
(10,512
)
Cash payments for salaries …………………………………………………………..
)
Cash payments for rent…………………………………………………………………
)
Cash payments for insurance ………………………………………………………..
(1,113
)
Cash payments for utilities …………………………………………………………….
)
Cash payments for bond interest ……………………………………………………
)
Req. 2
OMEGA COMPANY
Cash Flows from Operating Activities
Indirect Method
Cash flows from operating activities:
Net loss …………………………………………………………………
$ (220
)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation expense …………………………………………….
$2,000
Loss on sale of investments …………………………………….
Decrease in accounts receivable ……………………………..
Increase in merchandise inventory …………………………..
)
Increase in accounts payable ………………………………….
Increase in salaries payable ……………………………………
Decrease in rent payable ………………………………………..
)
Decrease in prepaid rent…………………………………………
Increase in prepaid insurance ………………………………….
)
Total adjustments …………………………………………………
Financial Accounting, 8e 12-31
P12–5.
Req. 1
Related
Cash
Balance sheet at December 31
Flow
Section
Curre
nt Year
Prior
Year
Change
Δ in Cash
Cash
$ 34,000
$ 29,000
+5,000
10
Net increase in cash
O
Accounts receivable
35,000
28,000
+7,000
3
Subtract from net income the increase in A/R
O
Accounts payable
$ 36,000
$ 27,000
+9,000
5
Add to net income the increase in Accounts payable
O
Wages payable
1,200
1,400
–200
6
Subtract from net income the decrease in Wages
payable
F
Note payable, long-term
38,000
44,000
–6,000
8
Cash used for repayment of note principal
F
Contributed capital
88,600
72,600
+16,000
9
Issuance of stock for cash
Retained earnings
37,200
25,000
+12,200
1
Increased for net income amount
$201,000
Income statement for current year
Sales
$120,000
Gain on sale of equipment
Cost of goods sold
70,000
Other expenses
Net Income
$ 12,200
O
Merchandise inventory
41,000
38,000
+3,000
4
Subtract from net income the increase in Inventory
Property and equipment
100,000
7
$201,000
P12–5. (continued)
XS Supply Company
Statement of Cash Flows
For the Year Ended December 31, Current Year
Cash flows from operating activities:
Net income
$12,200
1
Adjustments to reconcile net income to net
cash provided by operating activities:
2
(1,000)
(7,000)
3
(3,000)
4
5
6
Net cash provided by operating activities
22,000
Cash flows from investing activities:
Cash payments to purchase equipment
(31,000)
7
Cash received from sale of equipment
4,000
Net cash used by investing activities
(27,000)
Cash flows from financing activities:
Cash payments on long-term note
(6,000)
8
Cash receipts from issuing stock
9
Net cash provided by financing activities
Net increase in cash during the year
Cash balance, December 31, Current year
Req. 2
There was an increase in cash for XS Supply Company this year of $5,000. Operating
activities provided a positive cash flow of $22,000. This inflow of cash from operating
Financial Accounting, 8e 12-33
P12–6.
Req.1
Panel A: Changes in Cash Account
Operating
(1) Net Income 7,000 3,000 (4) Inventory
(6) Wages Payable 500
Net cash flow provided by operating activities 16,500
Investing
12,000 (7) Purchased Property, Plant & Equipment
Cash (A)
12-34 Solutions Manual
Panel B: Changes in Non-cash Accounts
Beg. bal. 28,000 Beg. bal. 36,000
Beg. bal. 72,000 Beg. bal. 48,000
(7) Purchases 12,000 (2) Depreciation 4,000 (8) Payments 6,000 Borrowings 0
End. bal. 80,000 End. bal. 42,000
Accounts Receivable (A)
Inventory (A)
Fixed Assets-net (A)
Note Payable Long–Term (L)
Financial Accounting, 8e 12-35
P12–6. (continued)
Req. 2
HANKS COMPANY
Statement of Cash Flows
For the Year Ended December 31, Current Year
Cash flows from operating activities:
Net income …………………………………………………………….
$7,000
Adjustments to reconcile net income to net cash
Cash flows from investing activities:
Cash payments to purchase fixed assets …………………..
(12,000
)
Cash flows from financing activities:
Cash payments on long-term note …………………………….
(6,000
)
Cash receipts from issuing stock ………………………………
18,500
Cash payments for dividends ……………………………………
(2,000
)
Net increase in cash during the year ……………………………….
15,000
Cash balance, January 1, current year …………………………...
Cash balance, December 31, current year ……………………….
Total adjustments …………………………………………………..
16,500