FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E12-37B
(10-15 min.)
Solution:
a.
Compute the following items for the statement of cash flows:
a. How much are cash collections from customers?
b. How much are cash payments for inventory?
$3,000 increase in
Accounts Receivable ($42,000 − $35,000)
−
=
Cash
collections
Chapter 12: The Statement of Cash Flows Page 41 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Quiz
Q12-38 c
Q12-39 b
Q12-40 c
Chapter 12: The Statement of Cash Flows Page 42 of 93
Q12-41 a
Q12-47 b
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P12-58A
(40 min.)
Requirements
Solution:
Req. 1
Sales revenue 649,000$
Cost of goods sold [$243,000 + (2 × $39,000)] 321,000
Salary expense 151,000
Klaben Motors, Inc
Income Statement
Year Ended December 31, 2016
1. Prepare Klaben Motors, Inc.’s, income statement for the year ended December 31,
2016.
Use the single-step format, with all revenues listed together and all expenses together.
2. Prepare Klaben’s balance sheet at December 31, 2016.
3. Prepare Klaben’s statement of cash flows for the year ended December 31, 2016.
Format cash flows from operating activities by using the indirect method.
Chapter 12: The Statement of Cash Flows Page 43 of 93
Depreciation expense ($220,000 / 5) 44,000
Rent expense 25,000
Req. 2
Property, plant, and equipment: Common stock 510,000
Klaben Motors, Inc
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
*$510,000 (stock) − $220,000 (equipment) − $243,000 (inventory) − $25,000 (rent)
Chapter 12: The Statement of Cash Flows Page 44 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P12-59A
(40 min.)
Requirements
Solution:
Req. 1
Sales revenue 649,000$
Cost of goods sold [$243,000 + (2 × $39,000)] 321,000
Salary expense 151,000
1. Prepare Klaben’s income statement for the year ended December 31, 2016. Use the
single-step format, with all revenues listed together and all expenses together.
2. Prepare Klaben’s balance sheet at December 31, 2016.
3. Prepare Klaben’s statement of cash flows for the year ended December 31, 2016.
Format cash flows from operating activities by using the direct method.
Klaben Motors, Inc.
Income Statement
Year Ended December 31, 2016
Chapter 12: The Statement of Cash Flows Page 45 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
*$510,000 (stock) − $220,000 (equipment) − $243,000 (inventory) − $25,000 (rent)
–$70,200 (inventory) + $519,200 (sales) – $150,000 (salaries) – $22,000 (taxes) –
$11,000 (dividends) = $288,000
Chapter 12: The Statement of Cash Flows Page 46 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P12-60A
(35-45 min.)
Requirement
Solution:
Cash flows from operating activities:
Net income 58,000$
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation expense
19,000$
Amortization expense
5,500
Loss on sale of equipment 32,000
1. Prepare Carlson Software Corp.’s statement of cash flows using the indirect method to
report operating activities. Include an accompanying schedule of noncash investing and
financing activities.
Carlson Software Corp.
Statement of Cash Flows
Year Ended December 31, 2016
Chapter 12: The Statement of Cash Flows Page 47 of 93
Decrease in accounts receivable
Decrease in inventories
Increase in prepaid expenses (1,300)
Decrease in accounts payable
Increase in income tax payable
Net cash provided by operating activities 190,200
Purchase of building (159,000)$
Net cash used for investing activities (179,600)
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Chapter 12: The Statement of Cash Flows Page 48 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P12-61A
(35-45 min.)
Requirements
Solution:
Req. 1
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
1. Prepare Canton Movie Theater Company’s statement of cash flows for the year
ended June 30, 2016, using the indirect method to report cash flows from operating
activities. Report noncash investing and financing activities in an accompanying
schedule.
2. Evaluate Canton Movie Theater’s cash flows for the year. Mention all three
categories of cash flows, and give the reason for your evaluation
Canton Movie Theater Company
Statement of Cash Flows
Year Ended June 30, 2016
Chapter 12: The Statement of Cash Flows Page 49 of 93
Decrease in accounts receivable
7,700
Increase in inventories
Increase in prepaid expenses (900)
Increase in accounts payable 1,700
Dcrease in accrued liabilities (14,000)
Net cash provided by operating activities
Cash flows from investing activities:
Cash flows from financing activities:
47,000$
Issuance of common stock 10,000
Net increase in cash
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Chapter 12: The Statement of Cash Flows Page 50 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P12-62A
(30-40 min.)
Requirements
Solution:
Req. 1
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
(1,000)
1. Prepare the 2016 statement of cash flows, formatting operating activities by using
the indirect method.
2. How will what you learned in this problem help you evaluate an investment?
King Supply Corp.
Statement of Cash Flows
Year Ended December 31, 2016
Chapter 12: The Statement of Cash Flows Page 51 of 93
Increase in inventories
Decrease in prepaid expenses
Net cash provided by operating activities 77,100
Cash flows from investing activities:
Purchase of land (43,600)$
Cash flows from financing activities:
Net increase in cash 13,300$
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
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 prepare the statement of cash flows and
Chapter 12: The Statement of Cash Flows Page 52 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P12-63A
(30-40 min.)
Requirements
Solution:
Req. 1
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 – $8,500 +
1. Prepare the 2016 statement of cash flows by using the direct method.
2. How will what you learned in this problem help you evaluate an investment?
King Supply Corp.
Statement of Cash Flows
Year Ended December 31, 2016
Chapter 12: The Statement of Cash Flows Page 53 of 93
For interest 24,200
Cash flows from investing activities:
Purchase of land (43,600)$
Cash flows from financing activities:
Net increase in cash 13,300$
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Chapter 12: The Statement of Cash Flows Page 54 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P12-64A
(35-45 min.)
Requirements
Solution:
Req. 1
Cash flows from operating activities:
Receipts:
Collections from customers
($406,000 + $182,700)
588,700$
Interest received 4,500
1. Prepare Crutchfield Furniture Gallery, Inc.’s, statement of cash flows for the year
ended October 31, 2017. Use the direct method for cash flows from operating activities.
Include an accompanying schedule of noncash investing and financing activities.
2. Evaluate 2017 from a cash flows standpoint. Give your reasons.
Crutchfield Furniture Gallery, Inc.
Statement of Cash Flows
Year Ended October 31, 2017
Chapter 12: The Statement of Cash Flows Page 55 of 93
Payments:
Cash flows from investing activities:
Purchase of plant assets
Proceeds from sale of plant assets
Collection of loans 11,200
Loan to another company
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Cash flows from financing activities:
Payments of long-term notes payable (71,000)$
Payment of dividends (48,700)
Chapter 12: The Statement of Cash Flows Page 56 of 93
Net (decrease) in cash (22,200)$
Noncash investing and financing transactions:
Payment of short-term note payable by
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P12-65A
(45-60 min.)
Requirements
Solution:
Req. 1
Cash flows from operating activities:
Receipts:
Collections from customers 661,500$
Dividends received 16,900
Total cash receipts $678,400
Payments:
To suppliers ($446,000 + $34,100)
(480,100)$
To employees
(139,200)
For interest (25,500)
For income tax
(19,100)
1. Prepare the statement of cash flows of Percy Electric Company for the year ended
December 31, 2016, using the direct method to report operating activities. Also prepare
the accompanying schedule of noncash investing and financing activities.
2. Use Percy Electric’s 2016 income statement and information from its selected balance
sheet data to prepare a supplementary schedule of cash flows from operating activities
by using the indirect method
Percy Electric Company
Statement of Cash Flows
Year Ended December 31, 2016
Chapter 12: The Statement of Cash Flows Page 57 of 93
Net cash provided by operating activities 14,500
Cash flows from investing activities:
Purchase of equipment
Net cash used for investing activities (10,400)
Cash flows from financing activities:
Issuance of common stock 47,600$
Payment of long-term note payable
Payment of dividends (27,900)
Net increase in cash (43,000)
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Noncash investing and financing activities:
Acquisition of land by issuing common stock 80,300$
Retirement of note payable by issuing common stock 20,000
Total noncash investing and financing activities 100,300$
Req. 2
Cash flows from operating activities:
Net income 12,200$
Adjustments to reconcile net income to
net cash provided by operating activities:
Year Ended December 31, 2016
Percy Electric Company
Cash Flows from Operating Activities
Chapter 12: The Statement of Cash Flows Page 58 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P12-66A
(45-60 min.)
Requirements
Solution:
Req. 1
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
1. Prepare the statement of cash flows of Donna Dunn Design Studio, Inc., for the year
ended June 30, 2016, using the indirect method to report operating activities. Also prepare
the accompanying schedule of noncash investing and financing activities. All current
accounts except Notes Payable, short-term, result from operating transactions.
2. Prepare a supplementary schedule showing cash flows from operations by the direct
method. The accounting records provide the following: collections from customers,
$239,000; interest received, $1,500; payments to suppliers, $146,900; payments to
employees, $48,100; payments for income tax, $12,000; and payment of interest, $5,000.
Cash flows from operating activitie
Donna Dunn Design Studio, Inc.
Statement of Cash Flows
Year Ended June 30, 2016
Chapter 12: The Statement of Cash Flows Page 59 of 93
Increase in accounts receivable (26,500)
Increase in inventories (35,300)
Decrease in prepaid expenses 1,300
Decrease in accounts payable (11,000)
Decrease in income tax payable (1,000)
Increase in accrued liabilities 8,600
Sale of land 58,200$
Net cash provided by investing activities 44,800
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Cash flows from financing activities:
Payment of long-term note payable (61,500)$
Payment of cash dividends
(7,500)
Issuance of common stock
16,000
Chapter 12: The Statement of Cash Flows Page 60 of 93
Net increase in cash $20,300
Noncash investing and financing activities:
Acquisition of equipment by issuing long-term note payable 14,400$
Interest received
To suppliers (146,900)$
To employees (48,100)
For income tax (12,000)