FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Nyman’s cash flows look strong. Operations are the main source of cash. The
Chapter 12: The Statement of Cash Flows Page 21 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E12-21A
(5-10 min.)
Solution:
Case A —
A combination of operations and issuing stock generated most of the cash
for acquisition of plant assets. The company also sold plant assets for
cash.
For each case, identify from the statement of cash flows how Sharma Merchandising
Corp. generated the cash to acquire new plant assets. Rank the three cases from the
most healthy financially to the least healthy.
Chapter 12: The Statement of Cash Flows Page 22 of 93
Case C —
The sale of plant assets generated the cash needed to acquire new plant
assets. Operations provided a positive cash flow.
Issuing stock and the sale of plant assets generated the cash to acquire
plant assets. Operations did not provide a positive cash flow.
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E12-22A
(10-15 min.)
Solution:
a.
Cash proceeds of sale = Book value of asset sold, $7,000* – Loss on sale, $5,000
= $2,000
Chapter 12: The Statement of Cash Flows Page 23 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E12-23A
(10-15 min.)
Requirement
Solution:
Cash flows from operating activities:
Receipts:
Collections from customers ($90,000 + $45,000) 135,000$
Collection of dividend revenue 9,000
Total cash receipts 144,000
1. Prepare cash flows from operating activities using the direct method. Also evaluate
Pelham’s operating cash flow. Give the reason for your evaluation.
Chapter 12: The Statement of Cash Flows Page 24 of 93
Payments:
To suppliers (54,000)$
For interest (20,000)
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E12-24A
(5-10 min.)
Requirement
Solution:
1. For each account, identify the item or items that should appear on a statement
of cash flows prepared by the direct method. State where to report the item.
Salary Payable — Report cash payments to employees as operating cash flows.
Chapter 12: The Statement of Cash Flows Page 25 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E12-25A
(20-30 min.)
Requirements
Solution:
Req. 1
Cash flows from operating activities:
Receipts:
Collections from customers
($275,000 − $12,000)
263,000$
Dividends received 8,500
Total cash receipts 271,500
1. Prepare Value World, Inc.’s, statement of cash flows and accompanying schedule of
noncash investing and financing activities. Report operating activities by the direct
method.
2. Evaluate Value World’s cash flows for the year. In your evaluation, mention all three
categories of cash flows and give the reason for your evaluation.
Value World, Inc.
Statement of Cash Flows
Year Ended June 30, 2016
Chapter 12: The Statement of Cash Flows Page 26 of 93
Payments:
To suppliers ($110,000 + $13,000 – $2,300)
Net cash provided by operating activities 79,100
Cash flows from investing activities:
Net cash used for investing activities (81,000)
Cash flows from financing activities:
Proceeds from issuance of common stock 31,000$
Net increase in cash (400)$
Noncash investing and financing activities:
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Chapter 12: The Statement of Cash Flows Page 27 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E12-26A
(10-15 min.)
Solution:
$6,000 decrease in
= $141,000 +
= $135,000
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?
Cash
collections
Accounts Receivable
($53,000 − $47,000)
a.
Chapter 12: The Statement of Cash Flows Page 28 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E12-27B
(10-15 min.)
Solution:
O+ a. Increase in salary payable O+ k. Net Income
O+ b. Depreciation of equipment O+ l. Loss on sale of
equipment
Identify each of McDowell’s transactions as operating (O), investing (I), financing (F),
noncash investing and financing (NIF), or a transaction that is not reported on the
statement of cash flows (N). Indicate whether each item increases (+) or decreases (−)
cash. The indirect method is used for operating activities.
Chapter 12: The Statement of Cash Flows Page 29 of 93
for cash issuance of note payable
cash payment
payable to borrow cash
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E12-28B
(5-10 min.)
Solution:
a. Financing h. Investing
b. Financing i. Investing
Indicate whether each of the following transactions affects an operating activity, an
investing activity, a financing activity, or a noncash investing and financing activity.
Chapter 12: The Statement of Cash Flows Page 30 of 93
d. Noncash investing
e. Financing
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E12-29B
(10-15 min.)
Requirement
Solution:
Cash flows from operating activities:
Net income 13,000$
Adjustments to reconcile net income to
1. Prepare the cash flows from operating activities section of the statement of cash
flows using the indirect method. Use the format of the operating activities section of
Exhibit 12-6. Also evaluate the operating cash flow of Central Distributors. Give the
reason for your evaluation.
Chapter 12: The Statement of Cash Flows Page 31 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E12-30B
(15-20 min.)
Requirement
Solution:
Cash flows from operating activities:
Net income 35,000$
Adjustments to reconcile net income to
net cash used for operating activities:
1. Prepare the company’s net cash provided by (used for) operating activities section
of the statement of cash flows for the month of October. Use the indirect method. Do
you see any potential problems in the company’s cash flows from operations? How
can you tell?
Chapter 12: The Statement of Cash Flows Page 32 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E12-31B
(20-30 min.)
Requirements
Solution:
Req. 1
Cash flows from operating activities:
Net income 46,900$
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation expense
26,000$
Decrease in accounts receivable
17,000
Increase in inventory
(13,000)
Req. 2
1. Prepare Norman’s statement of cash flows for the year ended December 31, 2016,
using the indirect method.
2. Evaluate Norman’s cash flows for the year. In your evaluation, mention all three
categories of cash flows and give the reason for your evaluation.
Norman Travel Products, Inc.
Statement of Cash Flows
Year Ended December 31, 2016
Chapter 12: The Statement of Cash Flows Page 33 of 93
Net cash provided by operating activities
Cash flows from investing activities:
Acquisition of plant assets (99,000)$
Cash flows from financing activities:
Proceeds from issuance of common stock
47,000$
Payment of long-term note payable
(17,000)
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Chapter 12: The Statement of Cash Flows Page 34 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E12-32B
(5-10 min.)
Solution:
Case A —
A combination of operations and issuing stock generated most of the
cash for acquisition of plant assets. The company also sold plant
assets for cash. Operations provided more cash than did cases B or C.
Consider three independent cases for the cash flows of Loader Company. For each
case, identify from the statement of cash flows how Loader Company generated the
cash to acquire new plant assets. Rank the three cases from the most healthy
financially to the least healthy.
Chapter 12: The Statement of Cash Flows Page 35 of 93
Case C —
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E12-33B
(10-15 min.)
Solution:
a.
Cash proceeds of sale = Book value of asset sold, $18,000* + Gain on sale, $8,000
= $10,000
*$120,000 + $26,000 − $16,000 − Book value sold (X) = $112,000
Book value sold = $18,000
Compute the following items for the statement of cash flows:
a. What were the cash proceeds of the sale?
b. How much were cash dividends?
Chapter 12: The Statement of Cash Flows Page 36 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E12-34B
(10-15 min.)
Requirement
Solution:
Cash flows from operating activities:
Receipts:
Collections from customers
($125,000 + $34,000)
159,000$
Collection of dividend revenue 8,000
1. Prepare cash flows from operating activities using the direct method. Also evaluate
Stanley’s operating cash flow. Give the reason for your evaluation.
Chapter 12: The Statement of Cash Flows Page 37 of 93
Total cash receipts 167,000
Payments:
To suppliers (53,000)$
For interest (18,000)
Operating cash flow is strong, as shown by the net cash provided by
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E12-35B
(5-10 min.)
Requirement
Solution:
1. For each account, identify the item or items that should appear on a statement
of cash flows prepared by the direct method. State where to report the item.
Salary Payable — Report cash payments to employees as operating cash flows.
Chapter 12: The Statement of Cash Flows Page 38 of 93
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E12-36B
(20-30 min.)
Requirements
Solution:
Req. 1
Cash flows from operating activities:
Receipts:
Collections from customers
($265,000 + $15,000)
280,000$
Dividends received 11,000
1. Prepare One Stop, Inc.’s, statement of cash flows and accompanying schedule of
noncash investing and financing activities. Report operating activities by the direct
method.
2. Evaluate One Stop’s cash flows for the year. In your evaluation, mention all three
categories of cash flows and give the reason for your evaluation.
One Stop, Inc.
Statement of Cash Flows
Year Ended June 30, 2016
Chapter 12: The Statement of Cash Flows Page 39 of 93
Payments:
To suppliers ($109,000 + $7,000 + $2,300) (118,300)$
For income tax
Net cash provided by operating activities 109,000
Acquisition of plant assets
Proceeds from issuance of common stock 93,000$
Payment of long-term note payable
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Chapter 12: The Statement of Cash Flows Page 40 of 93