(continued) P 12-67B
Req. 3
Pruitt Motors, Inc.
Statement of Cash Flows
Year Ended December 31, 2016
Cash flows from operating activities:
Net income ………………………………………………………
$ 54,400
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation expense ………………………………
$ 36,000
Increase in accounts receivable ……………….
(97,600)
Increase in inventory ……………………………….
(40,000)
Increase in accounts payable ……………………
Increase in salary payable ………………………..
3,000
Net cash provided by operating activities ……..
Cash flows from investing activities:
Purchase of equipment …………………………………….
Cash flows from financing activities:
Issuance of common stock ………………………………
$ 440,000
Payment of dividend ………………………………………..
(19,000)
Net cash provided by financing activities ………
421,000
Net increase in cash …………………………………………….
Cash balance, January 1, 2016 ……………………………..
Cash balance, December 31, 2016 …………………………
(40 min.) P 12-68B
Req. 1
Sales revenue ……………………………………………………..
$488,000
Cost of goods sold [$203,000 + (1 × $40,000)] ………..
243,000
Salary expense ……………………………………………………
125,000
Income tax expense ……………………………………………..
12,600
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) ………………
97,600
Salary payable …………….
3,000
40,000
Total current liabilities …
Total current assets ………..
Property, plant, and equipment:
Common stock ……………….
Equipment ………….
$180,000
Retained earnings
depreciation …….
144,000
Total equity …………………
475,400
Total liabilities and
Total assets …………………………..
$534,400
stockholders’ equity ……
$534,400
(continued) P 12-68B
Req. 3
Pruitt Motors, Inc.
Statement of Cash Flows
Year Ended December 31, 2016
Cash flows from operating activities:
Receipts:
Collections from customers
($488,000 x .80) ………………………………………
$ 390,400
Total cash receipts …………………………………
390,400
Payments:
To suppliers ($203,000 + $24,000 + $17,000) …..
For income tax ………………………………………….
Total cash payments ………………………………
Net cash provided by operating activities ……
Cash flows from investing activities:
Purchase of equipment …………………………………
$(180,000)
Net cash used for investing activities …………
(180,000)
Cash flows from financing activities:
Issuance of common stock …………………………...
$ 440,000
Payment of dividend …………………………………….
(19,000)
Net cash provided by financing activities ……
Net increase in cash ………………………………………..
$252,800
Cash balance, January 1, 2016 …………………………
0
Cash balance, December 31, 2016 …………………….
$252,800
(35-45 min.) P 12-69B
Johnson Software Corp.
Statement of Cash Flows
Year Ended December 31, 2016
Cash flows from operating activities:
Net income …………………………..……………………
$ 5,700
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation expense …………………………
$ 21,000
Amortization expense………………………….
4,400
Gain on sale of equipment …………………..
Decrease in accounts receivable …………
Decrease in inventories ………………………
Increase in prepaid expenses………………
Decrease in accounts payable …………….
(46,500)
Increase in income tax payable ……………
2,100
Decrease in accrued liabilities …………….
(11,900)
79,500
Net cash provided by operating activities …
85,200
Cash flows from investing activities:
Purchase of building ………………………………….
$(109,000)
Purchase of long-term investment ………………
(45,200)
Proceeds from sale of equipment ……………….
53,000
Collection of loan ……………………………………….
10,100
Net cash used for investing activities ………
Cash flows from financing activities:
Issuance of common stock …………………………
$ 37,000
Issuance of long-term note payable …………….
34,700
Payment of cash dividends …………………………
(18,100)
Purchase of treasury stock …………………………
(10,700)
Net cash provided by financing activities …
42,900
$ 37,000
(continued) P 12-69B
Noncash investing and financing activities:
Acquisition of land by issuing long-term note payable….
$197,000
(35-45 min.) P 12-70B
Req. 1
Barberton Movie Theater Company
Statement of Cash Flows
Year Ended September 30, 2016
Cash flows from operating activities:
Net income ………………………………………………….
$ 58,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation expense …………………………...
$ 15,700
Amortization expense…………………………...
6,000
Decrease in accounts receivable ……………
7,100
Increase in inventories ………………………….
(3,500)
Increase in prepaid expenses ………………..
Increase in accounts payable ………………..
2,000
Increase in accrued liabilities ………………..
10,000
Decrease in income tax payable …………….
14,600
Net cash provided by operating activities ….
72,600
Cash flows from investing activities:
Purchase of building… …………………………………
$(44,000)
Purchase of equipment ………………………………..
Sale of long-term investment ………………………..
Net cash used for investing activities… ……..
Cash flows from financing activities:
Issuance of common stock …………………………..
$ 15,000
Issuance of long-term note payable ………………
45,000
Payment of cash dividends …………………………..
(28,000)
Net cash provided by financing activities …..
32,000
16,000
$ 33,800
Noncash investing and financing activities:
Acquisition of land by issuing note payable ….
(continued) P 12-70B
Req. 2
Barberton’s cash flows look strong. Operations are a significant source
of cash indicating that the company generated sufficient net income to
cover operating activities for the year. Barberton had a negative cash
flow from investing activities from the purchase of equipment and a
(30-40 min.) P 12-71B
Req. 1
Lombardi Supply Corp.
Statement of Cash Flows
Year Ended December 31, 2016
Cash flows from operating activities:
Net income …………………………………………………..
$ 55,900
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation ………………………………………….
$ 16,100
Decrease in accounts receivable …………….
3,300
Decrease in inventories ………………………….
14,500
Decrease in prepaid expenses ………………..
2,200
Increase in accounts payable …………………
4,200
Increase in salary payable ………………………
8,900
Decrease in other accrued liabilities ……….
(1,300)
Net cash provided by operating activities …..
103,800
Cash flows from investing activities:
Purchase of land …………………………………………..
$(47,000)
Purchase of equipment ($49,300 −
depreciation expense of $16,100 = $33,200;
$62,100 − $33,200) …………………………..………..
(28,900)
Net cash used for investing activities…………
(75,900)
Cash flows from financing activities:
Payment of dividends
($23,000 + $55,900 − $16,700) …………………….
$(62,200)
Issuance of note payable ……………………………..
14,000
Issuance of common stock …………………………...
24,200
Net cash used for financing activities ………..
Net increase in cash and cash equivalents …………
$ 17,900
(continued) P 12-71B
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 will thus be able to understand
(30-40 min.) P 12-72B
Req. 1
Lombardi Supply Corp.
Statement of Cash Flows
Year Ended December 31, 2016
Cash flows from operating activities:
Receipts:
Collections from customers
($438,000 + $3,300) …………………………………
$441,300
Total cash receipts ………………………………..
441,300
Payments:
To employees ($76,900 – $8,900)………………..
For interest ………………………………………………
For income tax ………………………………………….
Total cash payments ………………………………
Net cash provided by operating activities …..
Purchase of land …………………………………………..
$ (47,000)
Purchase of equipment ($49,300 −
depreciation expense of $16,100 = $33,200;
$62,100 − $33,200) …………………………………….
(28,900)
Net cash used for investing activities…………
(75,900)
Cash flows from financing activities:
Payment of dividends
($23,000 + $55,900 − $16,700) …………………….
$ (62,200)
Issuance of note payable ……………………………..
14,000
Issuance of common stock …………………………...
24,200
Net cash used for financing activities ………..
Net increase in cash and cash equivalents …………
(continued) P 12-72B
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 will thus be able to understand
the meaning of cash flows from the three basic categories of business
(35-45 min.) P 12-73B
Req. 1
Driscoll Furniture Gallery, Inc.
Statement of Cash Flows
Year Ended December 31, 2016
Cash flows from operating activities:
Receipts:
Collections from customers
($395,000 + $191,300) ……………………………..
$ 586,300
Interest received ……………………………………….
4,300
Dividends received ……………………………………
Total cash receipts ………………………………..
$ 599,500
Payments:
To suppliers ……………………………………………..
$(368,200)
To employees …………………………………………..
(88,800)
For income tax ………………………………………….
(38,000)
For interest ………………………………………………
(13,800)
Total cash payments ………………………………
Net cash provided by operating activities …..
Cash flows from investing activities:
Purchase of plant assets ………………………………
$ (59,200)
Collection of loans ……………………………………….
8,500
Proceeds from sale of plant assets ……………….
Loan to another company …………………………….
Proceeds from sale of investments ……………….
Net cash used for investing activities …………
Cash flows from financing activities:
Proceeds from issuance of common stock ……
$ 20,000
Payments of long-term note payable …………….
(57,000)
Payment of dividends …………………………………..
Proceeds from issuance of note payable ……….
Net cash used for financing activities ………..
Net decrease in cash ………………………………………..
Cash balance, December 31, 2015 …………………….
Cash balance, December 31, 2016 …………………….
(continued) P 12-73B
Noncash investing and financing activities:
Payment of short-term note payable by issuing
long-term note payable ……………………………………………
$ 59,000
Acquisition of equipment by issuing
short-term note payable …………………………………………..
Req. 2
Year 2016 was a good year from a cash-flow standpoint. Operations
provided cash and the company was able to pay off a long-term note
(45-60 min.) P 12-74B
Req. 1
Franklin Electric Company
Statement of Cash Flows
Year Ended December 31, 2016
Cash flows from operating activities:
Receipts:
Collections from customers ………………………
$661,800
Dividends received ……………………………………
16,600
Total cash receipts ……………………………….
$ 678,400
Payments:
To suppliers ($387,000 + $34,300) ………………
$(421,300)
To employees …………………………………………..
(132,800)
For interest …………………………..………………….
For income tax ………………………………………….
Total cash payments …………………………….
Net cash provided by operating activities …..
78,200
Cash flows from investing activities:
Purchase of equipment …………………………………
$ (31,600)
Sale of long-term investments ……………………….
21,000
Net cash used by investing activities …………
(10,600)
Cash flows from financing activities:
Payment of long-term note payable ……………….
$ (41,700)
Issuance of common stock …………………………...
47,100
Purchase of treasury stock …………………………...
(19,000)
Payment of dividends ……………………………………
(27,800)
Net cash used for financing activities ………..
$ 35,300
Noncash investing and financing activities:
Acquisition of land by issuing common stock ……………….
$ 51,000
Retirement of long-term note payable by
issuing common stock …………………………………………….
24,000
(continued) P 12-74B
Req. 2
Franklin Electric Company
Statement of Cash Flows
Year Ended December 31, 2016
Cash flows from operating activities:
Net income ……………………………………………………
$77,300
Adjustments to reconcile net income to net
cash flow provided by operating activities:
Depreciation expense …………………………….
$41,700
Loss on sale of investments……………………
Increase in accounts receivable ………………
Decrease in inventories ………………………….
Decrease in prepaid expenses ………………..
Decrease in interest payable …………………..
Decrease in salary payable ……………………..
Decrease in other accrued liabilities………..
Decrease in income tax payable ……………..
Net cash provided by operating activities ……….
$78,200
(45-60 min.) P 12-75B
Req. 1
Sally Fagan 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 ……………………………..
$ 13,200
Loss on sale of land………………………………..
6,900
Increase in accounts receivable ………………
(17,300)
Increase in inventories …………………………...
Decrease in prepaid expenses …………………
2,000
Decrease in accounts payable …………………
Increase in accrued liabilities ………………….
Decrease in taxes payable ………………………
Increase in interest payable …………………….
1,600
Decrease in salary payable ……………………..
(600)
11,500
Net cash provided by operating activities ……
82,100
Cash flows from investing activities:
Sale of land ………………………………………………….
$ 39,900
Purchase of long-term investments ……………….
(14,600)
Net cash provided by investing activities …….
Cash flows from financing activities:
Payment of cash dividends …………………………...
Issuance of common stock …………………………...
Payment of long-term note payable ……………….
Net cash used for financing activities …………
Net increase in cash ………………………………………….
$ 17,600
Cash balance, June 30, 2015 ……………………………..
Cash balance, June 30, 2016 ……………………………..