Quiz
Q12–38
c
Q12–39
b
Q12–40
c
Q12-42
c
Q12-43
b
Q12-46
Q12-47
b
Q12–48
d
Q12–49
a
Q12-50
Q12-53
a
Q12-54
b
Q12-56
Q12-57
Problems
(40 min.) P 12-58A
Req. 1
Klaben Motors, Inc.
Income Statement
Year Ended December 31, 2016
Sales revenue ………………………………………………………………
$649,000
Salary expense …………………………………………………………….
Depreciation expense ($220,000 / 5) ………………………………
Income tax expense ……………………………………………………..
Net income ………………………………………………………………….
Req. 2
Klaben Motors, Inc.
Balance Sheet
December 31, 2016
ASSETS
LIABILITIES
Current:
Current:
Cash ………………………………….
$288,000*
Accounts payable
Accounts receivable
($117,000 − $70,200) …..
$ 46,800
($649,000 × .20) ………………..
129,800
Salary payable …………….
1,000
39,000
Total current liabilities …
Total current assets …………..
456,800
STOCKHOLDERS’ EQUITY
Property, plant, and equipment:
Common stock ……………….
510,000
Equipment ………….
$220,000
Retained earnings
Less:Accumulated
($86,000 − $11,000) ………..
75,000
depreciation …….
(44,000)
176,000
Total equity …………………
585,000
Total liabilities and
Total assets …………………………..
$632,800
stockholders’ equity ………
(continued) P 12-58A
Req. 3
Klaben Motors, Inc.
Statement of Cash Flows
Year Ended December 31, 2016
Cash flows from operating activities:
Net income ………………………………………………….
$ 86,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation expense ………………………….
Increase in accounts receivable …………..
Increase in inventory …………………………..
Increase in accounts payable ……………….
46,800
Increase in salary payable ……………………
1,000
(77,000)
Net cash provided by operating activities …
9,000
Cash flows from investing activities:
Purchase of equipment ………………………………..
$(220,000)
Net cash used for investing activities ……….
Cash flows from financing activities:
Issuance of common stock ………………………….
$510,000
Payment of dividend ……………………………………
(11,000)
Net cash provided by financing activities ….
499,000
Net increase in cash ………………………………………..
$ 288,000
Cash balance, January 1, 2016 …………………………
Cash balance, December 31, 2016 …………………….
$ 288,000
(40 min.) P 12-59A
Req. 1
Klaben Motors, Inc.
Income Statement
Year Ended December 31, 2016
Sales revenue ………………………………………………………………
$649,000
Cost of goods sold [$243,000 + (2 × $39,000)] ………………..
321,000
Salary expense …………………………………………………………….
Rent expense……………………………………………………………….
Income tax expense ……………………………………………………..
Net income ………………………………………………………………….
Req. 2
Klaben Motors, Inc.
Balance Sheet
December 31, 2016
ASSETS
LIABILITIES
Current:
Current:
Cash ………………………………….
$288,000*
Accounts payable
Accounts receivable
($117,000 − $70,200) …..
$ 46,800
($649,000 × .20) ………………..
Salary payable …………….
39,000
Total current liabilities …
Total current assets …………..
Property, plant, and equipment:
Common stock ……………….
Equipment ………….
Retained earnings
Less:Accumulated
depreciation …….
(44,000)
176,000
Total equity …………………
Total liabilities and
Total assets …………………………..
$632,800
$632,800
____
*$510,000 (stock) − $220,000 (equipment) − $243,000 (inventory) − $25,000 (rent) –
(continued) P 12-59A
Req. 3
Klaben Motors, Inc.
Statement of Cash Flows
Year Ended December 31, 2016
Cash flows from operating activities:
Receipts:
Collections from customers
($649,000 x 80%) …………………………………….
$ 519,200
Total cash receipts …………………………………………
519,200
Payments:
To suppliers ($243,000 + $70,200 +$25,000) ……
For income tax …………………………………………..
Total cash payments ………………………………
Net cash provided by operating activities ……
Cash flows from investing activities:
Purchase of equipment …………………………………..
$(220,000)
Net cash used for investing activities ………….
(220,000)
Cash flows from financing activities:
Issuance of common stock …………………………….
Payment of dividend ………………………………………
Net cash provided by financing activities …….
Net increase in cash …………………………………………..
Cash balance, December 31, 2016 ……………………….
(35-45 min.) P 12-60A
Carlson Software Corp.
Statement of Cash Flows
Year Ended December 31, 2016
Cash flows from operating activities:
Net income …………………………..……………………….
$ 58,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation expense …………………………..….
$ 19,000
Amortization expense ………………………………
Loss on sale of equipment ……………………….
Decrease in accounts receivable ………………
Decrease in inventories …………………………...
Increase in prepaid expenses …………………..
(1,300)
Decrease in accounts payable ………………….
(46,100)
Increase in income tax payable …………………
12,000
Decrease in accrued liabilities ………………….
(12,400)
132,200
Net cash provided by operating activities …….
190,200
Cash flows from investing activities:
Purchase of building………………………………………
$(159,000)
Purchase of long-term investment ………………….
(45,300)
Proceeds from sale of equipment ……………………
Collection of loan …………………………………………..
Net cash used for investing activities …………..
Cash flows from financing activities:
Issuance of common stock …………………………....
$ 83,100
Issuance of long-term note payable ………………..
52,200
Payment of cash dividends …………………………….
(46,000)
Purchase of treasury stock …………………………….
(14,100)
Net cash provided by financing activities……..
75,200
20,000
(continued) P 12-60A
Noncash investing and financing activities:
Acquisition of land by issuing long-term note payable ……
$202,000
Retirement of bonds payable by issuing common stock …
(35-45 min.) P 12-61A
Req. 1
Canton Movie Theater Company
Statement of Cash Flows
Year Ended June 30, 2016
Cash flows from operating activities:
Net income ………………………………………………….
$ 54,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation expense ……………………………..
$15,200
Amortization expense ……………………………..
5,000
Decrease in accounts receivable ……………..
Increase in inventories …………………………...
Increase in prepaid expenses ………………….
Increase in accounts payable …………………..
Decrease in accrued liabilities …………………
(14,000)
Decrease in income tax payable ………………
(1,100)
11,000
Net cash provided by operating activities ……
65,000
Cash flows from investing activities:
Purchase of equipment ………………………………..
$(34,600)
Purchase of building ……………………………………
Sale of long-term investment ………………………..
Net cash used for investing activities ………….
Cash flows from financing activities:
Issuance of long-term note payable ………………
$ 47,000
Issuance of common stock …………………………..
Payment of cash dividend …………………………….
Net cash provided by financing activities…….
29,000
Net increase in cash and cash equivalents ……….
$ 30,900
Cash and cash equivalents balance, June 30, 2015
(continued) P 12-61A
Req. 2
Evaluation: Canton Movie Theater Company’s cash flows look strong.
Operations are the main source of cash. The company is
investing in new plant assets and therefore had a negative
cash flow from investing activities. Canton generated a
(30-40 min.) P 12-62A
Req. 1
King Supply Corp.
Statement of Cash Flows
Year Ended December 31, 2016
Cash flows from operating activities:
Net income ………………………………………………………
$61,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation expense ………………………………….
$ 15,000
Increase in accounts receivable …………………..
Increase in inventories ………………………………..
Decrease in prepaid expenses ……………………..
Increase in accounts payable ……………………….
Increase in salary payable………………………..
Decrease in other accrued liabilities …………….
Net cash provided by operating activities ……….
Cash flows from investing activities:
Purchase of land …………………………..………………….
$(43,600)
Purchase of equipment ($49,900 − depreciation
expense of $15,000 = $34,900; $53,100 −
$34,900) ………………………………………………………
(18,200)
Net cash used for investing activities ……………..
Cash flows from financing activities:
Payment of dividends ($27,000 + $61,000 − $39,800)..
$(48,200)
Issuance of note payable ………………………………….
24,000
Issuance of common stock ……………………………….
22,200
Net cash used for financing activities …………….
(2,000)
Net increase in cash and cash equivalents …………….
$ 13,300
4,000
$ 17,300
(continued) P 12-62A
Req. 2
This problem will help students learn how operating activities, investing
activities, and financing activities generate cash receipts and cash
payments. By solving this problem, students will learn how companies
(30-40 min.) P 12-63A
Req. 1
King Supply Corp.
Statement of Cash Flows
Year Ended December 31, 2016
Cash flows from operating activities:
Receipts:
Collections from customers
($442,000 – $1,000) …………………………………..
$441,000
Total cash receipts ………………………………….
441,000
Payments:
To suppliers ($186,500 + $14,400 – $8,500 +
$50,300 – $2,100 + $2,100) ………………………..
$242,700
To employees ($76,000 – $8,000)………………….
68,000
For interest ………………………………………………..
For income tax ……………………………………………
Total cash payments ………………………………..
(363,900)
Net cash provided by operating activities …….
77,100
Cash flows from investing activities:
Purchase of land …………………………..………………….
$(43,600)
Purchase of equipment ($49,900 − depreciation
expense of $15,000 = $34,900; $53,100 −
$34,900) ………………………………………………………
(18,200)
Net cash used for investing activities ……………..
(61,800)
Cash flows from financing activities:
Payment of dividends ($27,000 + $61,000 − $39,800)
$(48,200)
Issuance of note payable ………………………………….
24,000
Issuance of common stock ……………………………….
Net cash used for financing activities …………….
(2,000)
Net increase in cash and cash equivalents …………….
$ 13,300
4,000
(continued) P 12-63A
Req. 2
This problem will help students learn how operating activities, investing
activities, and financing activities generate cash receipts and cash
payments. By solving this problem, students will learn how companies
(35-45 min.) P 12-64A
Req. 1
Crutchfield Furniture Gallery, Inc.
Statement of Cash Flows
Year Ended October 31, 2017
Cash flows from operating activities:
Receipts:
Collections from customers
($406,000 + $182,700) …………………………...
$588,700
Interest received ……………………………………..
Dividends received ………………………………….
Total cash receipts ……………………………….
Payments:
To suppliers ……………………………………………
$(368,000)
To employees …………………………………………
(93,700)
For interest ……………………………………………..
For income tax ………………………………………..
Total cash payments …………………………….
Net cash provided by operating activities …
84,500
Cash flows from investing activities:
Purchase of plant assets …………………………….
$ (44,400)
Sale of plant assets ……………………………………
22,300
Collection of loans …………………………..…………
Loan to another company …………………………..
(12,800)
Sale of investments ……………………………………
Net cash used for investing activities ……….
(14,200)
Cash flows from financing activities:
Payments of long-term notes payable ………….
$ (71,000)
Payment of dividends …………………………………
(48,700)
Issuance of note payable …………………………...
20,200
Issuance of common stock …………………………
Net cash used for financing activities ……….
(92,500)
Net (decrease) in cash …………………………………..
$ (22,200)
Cash balance, October 31, 2016 ……………………..
40,200
Cash balance, October 31, 2017 ……………………..
$ 18,000
(continued) P 12-64A
Noncash investing and financing transactions:
Payment of short-term note payable by
issuing long-term note payable …………………………….
$41,000
Acquisition of equipment by issuing
short-term note payable ……………………………………….
Total noncash investing and financing transactions ………
$57,300
Req. 2
Year 2017 was a strong year from a cash-flow standpoint. Operations
provided the bulk of the company’s cash and the company was able to
(45-60 min.) P 12-65A
Req. 1
Percy Electric Company
Statement of Cash Flows
Year Ended December 31, 2016
Cash flows from operating activities:
Receipts:
Collections from customers …………………………….
$661,500
Dividends received ………………………………………….
Total cash receipts ………………………………………
Payments:
To suppliers ($446,000 + $34,100) ……………………
$(480,100)
To employees ………………………………………………….
(139,200)
For interest ……………………………………………………..
For income tax ………………………………………………..
Total cash payments ……………………………………
(663,900)
Net cash provided by operating activities ………..
14,500
Cash flows from investing activities:
Purchase of equipment …………………………..………….
$ (31,700)
Sale of long-term investments …………………………….
21,300
Net cash used for investing activities ………………
(10,400)
Cash flows from financing activities:
Issuance of common stock …………………………………
Payment of long-term note payable …………………….
Payment of dividends …………………………………………
Purchase of treasury stock …………………………………
Net cash used for financing activities ………………
(47,100)
Net decrease in cash ……………………………………………..
$ (43,000)
Cash balance, December 31, 2015 ………………………….
71,500
Cash balance, December 31, 2016 ………………………….
Noncash investing and financing activities:
Acquisition of land by issuing common stock
Retirement of note payable by issuing common stock
(continued) P 12-65A
Req. 2
Percy Electric Company
Cash Flows from Operating Activities
Year Ended December 31, 2016
Cash flows from operating activities:
Net income …………………………………………………….
$12,200
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation expense ……………………………….
$ 19,900
Loss on sale of investments ……………………..
Increase in accounts receivable ………………..
Decrease in inventories …………………………...
Decrease in prepaid expenses ………………….
5,000
Decrease in accounts payable …………………..
(7,800)
Increase in interest payable ………………………
2,300
Decrease in salary payable ……………………….
Increase in other accrued liabilities …………..
Decrease in income tax payable ………………..
(45-60 min.) P 12-66A
Req. 1
Donna Dunn Design Studio, Inc.
Statement of Cash Flows
Year Ended June 30, 2016
Cash flows from operating activities:
Net income …………………………..……………………….
$ 70,600
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation expense …………………………..….
$ 13,500
Loss on sale of land …………………………………
7,200
Increase in accounts receivable ……………….
(26,500)
Increase in inventories …………………………….
Decrease in prepaid expenses ………………….
Decrease in accounts payable ………………….
Decrease in income tax payable ……………….
(1,000)
Increase in accrued liabilities ……………………
8,600
Increase in interest payable ……………………..
800
Increase in salary payable ………………………..
Net cash provided by operating activities …….
28,500
Cash flows from investing activities:
Sale of land ……………………………………………………
$ 58,200
Purchase of long-term investment ………………….
(13,400)
Net cash provided by investing activities ……..
44,800
Cash flows from financing activities:
Payment of long-term note payable …………………
Payment of cash dividends …………………………….
Issuance of common stock …………………………….
Net cash used for financing activities …………..
Net increase in cash ………………………………………….
Cash balance, June 30, 2016 ……………………………..
(continued) P 12-66A
Req. 1
Noncash investing and financing activities:
Acquisition of equipment by issuing
long-term note payable …………………………………………
Payment of short-term note payable by
Req. 2
Donna Dunn Design Studio, Inc.
Statement of Cash Flows
Year Ended June 30, 2016
Cash flows from operating activities:
Receipts:
Collections from customers …………………….
$ 239,000
Total cash receipts ………………………………
Payments:
To suppliers ……………………………………………
To employees ………………………………………….
For income tax ………………………………………..
For interest ……………………………………………..
Net cash provided by operating activities ……..
(40 min.) P 12-67B
Req. 1
Pruitt Motors, Inc.
Income Statement
Year Ended December 31, 2016
Sales revenue ……………………………………………………..
$488,000
Cost of goods sold [$203,000 + (1 × $40,000)] ………..
Salary expense ……………………………………………………
Income tax expense ……………………………………………..
Net income ………………………………………………………….
Req. 2
Pruitt Motors, Inc.
Balance Sheet
December 31, 2016
ASSETS
LIABILITIES
Current:
Current:
Cash ………………………………….
$252,800*
Accounts payable
Accounts receivable
($80,000 − $24,000) …..
$ 56,000
($488,000 × .20) ………………
Salary payable …………….
40,000
Total current liabilities …
Total current assets ………..
STOCKHOLDERS’ EQUITY
Property, plant, and equipment:
Common stock ……………….
440,000
Equipment ………….
$180,000
Retained earnings
Less:Accumulated
($54,400 − $19,000) ………
35,400
depreciation …….
144,000
Total equity …………………
Total liabilities and
Total assets …………………………..
$534,400
stockholders’ equity ……
$534,400