*EXERCISE 12-12
(a) Cash payments to suppliers
Cost of goods sold ……………………. $5,178.0 million
Deduct: Decrease in inventory …. 5.3
(b) Cash payments for operating expenses
Operating expenses exclusive
of depreciation
*EXERCISE 12-13
Cash flows from operating activities
Cash receipts from
Customers …………………………………………. $243,000*
Dividend revenue ……………………………….. 18,000*
261,000*
*EXERCISE 12-14
TALIAFERRO CORP.
Statement of Cash Flows—Direct Method
For the Year Ended December 31, 2014
Cash flows from operating activities
Cash receipts from customers ……………………… $566,100
Less: Cash payments:
Cash flows from investing activities
Sale of building ……………………………………… 197,600
Cash flows from financing activities
Issuance of common stock …………………….. 355,000
Payment of cash dividend ………………………. (21,800)
Net increase in cash ………………………………………….. 258,100
*EXERCISE 12-15
Cash payments for rent
Rent expense ……………………………………………………… $ 30,000*
Cash payments for salaries
Salaries and wages expense ……………………………….. $ 54,000*
Cash receipts from customers
Revenue from sales …………………………………………….. $160,000*
SOLUTIONS TO PROBLEMS
PROBLEM 12-1A
Transaction
SCF Activity
Affected
Cash Inflow,
Outflow, or No
Effect?
(a) Recorded depreciation
expense on the plant assets. O No cash flow effect
common stock. NC No cash flow effect
(e) Paid a cash dividend
to preferred stockholders. F Cash outflow
(f) Paid a cash dividend
to common stockholders. F Cash outflow
PROBLEM 12-2A
(a) Net income can be determined by analyzing the retained earnings
account.
Retained earnings beginning of year ……………………… $270,000
Add: Net income (plug) …………………………………………. 58,800*
(b) Cash inflow from the issue of stock was $12,000 ($160,800 – $140,000 –
$8,800).
Common Stock
140,000
(c) Both of the above activities (issue of common stock and payment of
PROBLEM 12-3A
PAXSON COMPANY
Partial Statement of Cash Flows
For the Year Ended November 30, 2014
Cash flows from operating activities
Net income ……………………………………………………. $1,750,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation expense ………………………… $ 110,000
Decrease in accounts receivable …………… 380,000
*PROBLEM 12-4A
PAXSON COMPANY
Partial Statement of Cash Flows
For the Year Ended November 30, 2014
Cash flows from operating activities
Cash receipts from customers ……… $7,980,000 (1)
Less cash payments:
Computations:
(1) Cash receipts from customers
Sales …………………………………………………………. $7,600,000
Add: Decrease in accounts receivable ………. 380,000
(3) Cash payments for operating expenses
Operating expenses, exclusive
of depreciation …………………………. $1,040,000*
Add: Increase in prepaid
PROBLEM 12-5A
THORNTON COMPANY
Partial Statement of Cash Flows
For the Year Ended December 31, 2014
Cash flows from operating activities
Net income ………………………………………………… $229,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
*PROBLEM 12-6A
THORNTON COMPANY
Partial Statement of Cash Flows
For the Year Ended December 31, 2014
Cash flows from operating activities
Cash receipts from customers ……… $960,000 (1)
Less cash payments:
(1) Cash receipts from customers
Revenues ………………………………………………………………. $970,000
Deduct: Increase in accounts receivable
(2) Cash payments for operating expenses
Operating expenses per income statement …………….. $614,000
(3) Cash payments for income taxes
Income tax expense per income statement……………… $ 56,000
Deduct: Increase in income taxes payable
PROBLEM 12-7A
(a) KURTZEL COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2014
Cash flows from operating activities
Net income …………………………………………… $32,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation expense ……………………… $17,500
Cash flows from investing activities
Sale of equipment ………………………………… 8,500
Cash flows from financing activities
Issuance of common stock …………………… 4,000
Net increase in cash …………………………………… 15,000
PROBLEM 12-7A (Continued)
(b) 1. $38,500
[Per Part (a)] ÷$23,000* + $ 26,000**
2 = 1.57 times
*$15,000 + $8,000 **$19,000 + $7,000
*PROBLEM 12-8A
(a) KURTZEL COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2014
Cash flows from operating activities
Cash receipts from customers …… $236,000 (1)
Less cash payments:
To suppliers ………………………. $179,000 (2)
Cash flows from investing activities
Sale of equipment ……………………… 8,500
Cash flows from financing activities
Net increase in cash ………………………… 15,000
Computations:
(1) Cash receipts from customers
Sales ………………………………………………………………. $242,000
*PROBLEM 12-8A (Continued)
(2) Cash payments to suppliers
Cost of goods sold ……………………………………………….. $175,000
(3) Cash payments for operating expenses
Operating expenses ……………………………………………… $ 24,000
(4) Cash payments for income taxes
Income tax expense ……………………………………………… $ 8,000
(b) 1. $38,500
[Per Part (a)] ÷$23,000**+ $26,000***
2 = 1.57 times
PROBLEM 12-9A
ODGERS INC.
Statement of Cash Flows
For the Year Ended December 31, 2014
Cash flows from operating activities
Net income ………………………………………………… $154,580
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation expense …………………………. $46,500
Loss on disposal of plant assets …………. 7,500
Cash flows from investing activities
Sale of plant assets ……………………………………. 1,500
Cash flows from financing activities
Sale of common stock ……………………………….. 45,000
Net increase in cash …………………………………………. 32,400
*PROBLEM 12-10A
ODGERS INC.
Statement of Cash Flows
For the Year Ended December 31, 2014
Cash flows from operating activities
Cash receipts from customers …………. $338,660 (1)
Less cash payments:
Cash flows from investing activities
Sale of plant assets …………………………. 1,500
Cash flows from financing activities
Sale of common stock ……………………… 45,000
Net increase in cash ……………………………….. 32,400
Computations:
(1) Cash receipts from customers
Sales ………………………………………………………… $388,460
*PROBLEM 12-10A (Continued)
(2) Cash payments to suppliers
Cost of goods sold ………………………………………………… $135,460
Add: Increase in inventory ……………………………………. 9,650
(3) Cash payments for operating expenses
Operating expenses exclusive of
depreciation ………………………………………. $12,410
Add: Increase in prepaid expenses …………… $2,400
Decrease in accrued expenses
PROBLEM 12-11A
YANIK COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2014
Cash flows from operating activities
Net income …………………………………………………… $ 37,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation expense …………………………….. $42,000
Loss on disposal of plant assets …………….. 2,000
Cash flows from investing activities
Sale of land ($130,000 + $40,000 – $145,000) ….. 25,000
Net increase in cash …………………………………………….. 23,000
PROBLEM 12-12A
Transaction
Free Cash
Flow
($125,000)
Current
Cash Debt
Coverage
Ratio
(0.5 times)
Cash Debt
Coverage
Ratio
(0.3 times)
(a) Recorded credit sales
$2,500. NE NE NE
(b) Collected $1,900 owed by
customers. I I I
(e) Purchased new
equipment $5,000;
PROBLEM 12-1B
Transaction SCF Activity
Affected
Cash Inflow,
Outflow, or No
Effect?
(a) Purchased shares of common
treasury stock. F Cash outflow
(e) Recorded prepayment of
insurance expense. O Cash outflow
(f) Purchased supplies on
account. O No cash flow effect
a note payable. NC No cash flow effect
PROBLEM 12-2B
(a) Cash inflows (outflows) related to plant assets 2014:
Equipment purchase ……………………… ($85,000)
Accumulated depreciation removed from accounts for sale of equipment
Accumulated Depreciation—
Equipment
96,000
Note to instructor—some students may find journal entries helpful in under-
standing this exercise.
Equipment ……………………………………………………………. 85,000
Cash ……………………………………………………………… 85,000
(b) Equipment purchase Investing activities (outflow)