PROBLEM SET B
Problem 12-1B (35 minutes)
SALT LAKE COMPANY
Cash Flows from Operating Activities—Indirect Method
For Year Current Ended December 31
Cash flows from operating activities
Net income …………………………………………………………………….
$ 20,000
Adjustments to reconcile net income to net cash
provided by operating activities
Income statement items not affecting cash
Depreciation expense ……………………………………………….
$32,000
Changes in current operating assets and liabilities
)
Decrease in inventory ……………………………………………….
)
Increase in salaries payable ………………………………………
Decrease in prepaid insurance ………………………………….
Decrease in prepaid rent …………………………………………..
Problem 12-2BB (35 minutes)
SALT LAKE COMPANY
Cash Flows from Operating Activities—Direct Method
For Current Year Ended December 31
$ 155,400
(72,080
)
(19,700
)
(4,900
)
Supporting calculations
(1) Sales – Increase in receivables = $156,000 – ($3,600 – $3,000) = $155,400
(2) Cost of Decrease in Decrease in
goods sold inventory accounts payable =
$72,000 – ($980 – $860) + ($2,600 – $2,400) = $72,080
(4) Rent expense – Decrease in prepaid rent
= $5,000 – ($200- $100) = $4,900
(5) Insurance expense – Decrease in prepaid insurance
= $2,600 – ($180- $140) = $2,560
–
+
Problem 12-3B (40 minutes)
Part 1
GAZELLE CORPORATION
Statement of Cash Flows
For Current Year Ended December 31
Cash flows from operating activities
Net income ………………………………………………………………………………
$158,100
Adjustments to reconcile net income to net
cash provided by operating activities
Income statement item not affecting cash
Depreciation expense ……………………………………………………….
38,600
Changes in current assets and current liabilities
Decrease in accounts receivable ($80,750 – $77,100) …………….
Decrease in inventory ($250,700 – $240,600) ……………………
10,100
Decrease in prepaid expenses ($17,000 – $15,100) ………………..
Decrease in accounts payable ($102,000 – $17,750) ………………
(84,250)
Net cash provided by operating activities …………………………..
$130,200
Cash flows from investing activities
Cash received from sale of equipment …………………………………..
26,050
Cash paid for equipment ……………………………………………………….
(43,250)
Net cash used in investing activities ………………………………………
(17,200)
Cash flows from financing activities
Cash borrowed on short–term note ………………………………………..
Cash paid on long–term note …………………………………………………..
Cash received from issuing stock (3,000 x $15) ……………………….
45,000
Cash paid for dividends ……………………………………………………….
(53,600)
Net increase in cash…………………………………………………………………..
$ 61,900
Cash balance at December 31, prior year …………………………………
61,550
Cash balance at December 31, current year …………………………..
$123,450
Noncash investing and financing activities
Purchased equipment for $113,250 by signing a $70,000 long-term note
payable and paying $43,250 in cash.
Problem 12-3B (Continued)
Part 2
Gazelle Corporation’s dividend payments of $53,600 represent 34% of the
$158,100 net income for the year, and 41% of cash inflow provided by
operations of $130,200.
Problem 12-4BA (60 minutes)
GAZELLE CORPORATION
Spreadsheet for Statement of Cash Flows
For Current Year Ended December 31
Dec. 31,
Prior Year
Analysis of Changes
Dec. 31,
Current Year
Debit
Credit
Balance sheet—debits
Cash ………………………………………………….
$ 61,550
$123,450
Accounts receivable …………………………
80,750
(b)
$ 3,650
77,100
Inventory …………………………………………..
250,700
(c)
10,100
240,600
Prepaid expenses ……………………………..
17,000
(d)
1,900
15,100
Equipment ………………………………………..
200,000
(h)
$113,250
(g)
51,000
262,250
$610,000
$718,500
Balance sheet—credits
Accum. depreciation—Equip. …………..
$ 95,000
(g)
22,850
38,600
$110,750
Accounts payable ……………………………..
102,000
(e)
84,250
17,750
Short–term notes payable ………………….
10,000
5,000
15,000
Long–term notes payable ………………….
77,500
(k)
47,500
70,000
Common stock, $5 par value …………….
200,000
15,000
Paid–in capital in excess of
par value, common stock ……………….
0
(l)
30,000
30,000
Retained earnings …………………………….
125,500
(m)
53,600
(a)
158,100
230,000
$610,000
$718,500
Statement of cash flows
Operating activities
Net income ………………………………………..
(a)
158,100
Decrease in accounts receivable ………
(b)
3,650
Decrease in merch. inventory …………..
(c)
10,100
Decrease in prepaid expenses ………….
(d)
1,900
Decrease in accounts payable ………….
(e)
84,250
Depreciation expense ……………………….
(f)
38,600
Loss on sale of equipment ……………….
(g)
2,100
Investing activities
Receipt from sale of equipment ………..
(g)
26,050
Payment to purchase equipment ……..
(h)
43,250
Financing activities
Borrowed on short–term note ……………
(j)
5,000
47,500
Issued common stock for cash ………..
(l)
45,000
Payments of cash dividends …………….
(m)
53,600
Noncash investing and financing
activities
Purchase of equip. financed
by long-term note payable ………
(i)
70,000
(h)
70,000
$681,950
$681,950
Problem 12-4BA (Concluded)
GAZELLE CORPORATION
Statement of Cash Flows
For Current Year Ended December 31
Cash flows from operating activities
Net income ………………………………………………………………………………
$158,100
Adjustments to reconcile net income to net
cash provided by operating activities
Income statement items not affecting cash
Depreciation expense ……………………………………………………….
38,600
Changes in current assets and current liabilities
Decrease in accounts receivable ($80,750 – $77,100) …………….
3,650
Decrease in inventory ($250,700 – $240,600) ……………………
10,100
Decrease in accounts payable ($102,000 – $17,750) ………………
(84,250)
Net cash provided by operating activities …………………………..
Cash flows from investing activities
Cash received from sale of equipment …………………………………..
26,050
Cash paid for equipment ……………………………………………………….
(43,250)
Net cash used in investing activities ………………………………………
(17,200)
Cash flows from financing activities
Cash borrowed on short–term note ………………………………………..
5,000
Cash paid on long–term note …………………………………………………..
Cash received from issuing stock (3,000 x $15) ……………………….
45,000
Cash paid for dividends ……………………………………………………….
(53,600)
Net increase in cash…………………………………………………………………..
Problem 12-5BB (40 minutes)
GAZELLE CORPORATION
Statement of Cash Flows
For Current Year Ended December 31
Cash flows from operating activities
Cash received from customers (Note 1) …………………
$1,188,650
Cash paid for inventory (Note 2) …………………………..
(669,150)
Cash paid for other expenses (Note 3) …………………..
(360,950)
Cash paid for income taxes ………………………………….
Net cash provided by operating activities ……………..
Cash flows from investing activities
Cash received from sale of equipment ………………….
26,050
Cash paid for equipment ………………………………………
Net cash used in investing activities …………………….
(17,200)
Cash flows from financing activities
Cash borrowed on short-term note ……………………….
5,000
Cash paid on long-term note ………………………………..
(47,500)
Cash received from issuing stock (3,000 x $15) ………
45,000
Cash paid for dividends ……………………………………….
(53,600)
Net increase in cash ……………………………………………….
Supporting calculations
(1) Sales + Decrease in receivables = $1,185,000 + ($80,750 – $77,100) = $1,188,650
(2) Cost of Decrease in Decrease in
goods sold inventory payables =
$595,000 – ($250,700 – $240,600) + ($102,000 – $17,750) = $669,150
(3) Other expenses – Decrease in prepaid expenses = $362,850 – ($17,000 – $15,100)
= $360,950
–
+
Problem 12-6B (35 minutes)
SATU COMPANY
Statement of Cash Flows
For Current Year Ended December 31
Cash flows from operating activities
Net income ……………………………………………………………………..
$202,767
Adjustments to reconcile net income to net
cash provided by operating activities
Income statement items not affecting cash
Depreciation expense …………………………………………………
15,700
Changes in current assets and current liabilities
Decrease in accounts receivable ($25,860 – $20,222) ……
Increase in inventory ($165,667 – $140,320) …………………..
(25,347)
Decrease in accounts payable ($157,530 – $20,372) ……..
Decrease in taxes payable ($6,100 – $2,100) …………………
Net cash provided by operating activities …………………….
Cash flows from investing activities
Cash paid for equipment ……………………………………………….
(30,250)
Net cash used in investing activities …………………………….
(30,250)
Cash flows from financing activities
Cash received from issuing stock (3,000 x $21) ……………..
63,000
Cash paid for dividends ………………………………………………..
(60,000)
Cash balance at December 31, prior year ………………………..
Problem 12-7BA (50 minutes)
SATU COMPANY
Spreadsheet for Statement of Cash Flows
For Current Year Ended December 31
Dec. 31,
Prior Year
Analysis of Changes
Dec. 31,
Current Year
Debit
Credit
Balance sheet—debits
Cash ………………………………………………….
$ 28,400
$ 58,750
Accounts receivable …………………………
25,860
20,222
Inventory …………………………………………..
140,320
(c)
165,667
Equipment ………………………………………..
30,250
$272,080
$352,389
Balance sheet—credits
Accum. depreciation—Equip. …………..
$ 31,000
(f)
15,700
$ 46,700
Accounts payable ……………………………..
157,530
(d)
137,158
20,372
Income taxes payable ……………………….
6,100
(e)
4,000
2,100
Common stock, $5 par value …………….
25,000
(h)
15,000
40,000
Paid–in capital in excess of
par value, common stock ……………….
20,000
(h)
48,000
68,000
Retained earnings …………………………….
32,450
(i)
60,000
(a)
202,767
175,217
$272,080
$352,389
Statement of cash flows
Operating activities
Net income ………………………………………..
(a)
202,767
Decrease in accounts receivable ……..
(b)
5,638
Increase in merch. inventory …………….
25,347
Decrease in accounts payable ………….
(d)
137,158
Decrease in income taxes payable ……
(e)
Depreciation expense ……………………….
15,700
Investing activities
Payment for equipment …………………….
(g)
30,250
Financing activities
Issued common stock for cash ………..
63,000
Paid cash dividends ………………………….
Problem 12-7BA (concluded)
SATU COMPANY
Statement of Cash Flows
For Current Year Ended December 31
Cash flows from operating activities
Net income ……………………………………………………………………..
$202,767
Adjustments to reconcile net income to net
cash provided by operating activities
Income statement items not affecting cash
Depreciation expense ……………………………………………….
15,700
Changes in current assets and current liabilities
Net cash provided by operating activities …………………….
Cash flows from investing activities
Cash paid for equipment ……………………………………………….
(30,250)
Net cash used in investing activities …………………………….
(30,250)
Cash flows from financing activities
Cash received from issuing stock (3,000 x $21) ……………..
63,000
Cash paid for dividends ………………………………………………..
(60,000)
Net cash provided by financing activities …………………….
3,000
Cash balance at beginning of the year …………………………….
Problem 12-8BB (35 minutes)
SATU COMPANY
Statement of Cash Flows
For Current Year Ended December 31
Cash flows from operating activities
Cash received from customers (Note 1) ………………
$756,438
Cash paid for inventory (Note 2) …………………………
(431,705)
Cash paid for other operating expenses ……………..
(173,933)
Cash paid for income taxes (Note 3) ……………………
(93,200)
Net cash provided by operating activities ……………
$57,600
Cash flows from investing activities
Cash flows from financing activities
Cash received from issuing stock (3,000 x $21) ……
Cash paid for cash dividends ……………………………..
Net cash provided by financing activities ……………
Net increase in cash ………………………………………………
$30,350
Supporting calculations
(1) Sales + Decrease in receivables = $750,800 + ($25,860 – $20,222) = $756,438
(2) Cost of Increase in Decrease in
goods sold inventory accounts payable =
$269,200 + ($165,667 – $140,320) + ($157,530 – $20,372) = $431,705
(3) Income taxes expense + Decrease in income taxes payable
= $89,200 + ($6,100 – $2,100) = $93,200
+
+
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 12
SERIAL PROBLEM — SP 12
Serial Problem — SP 12, Business Solutions (45 minutes)
BUSINESS SOLUTIONS
Statement of Cash Flows (Indirect)
For Quarter Ended March 31, 2020
Cash flows from operating activities
Net income ………………………………………………………………………………
$ 18,833
Adjustments to reconcile net income to net
cash provided by operating activities
Income statement items not affecting cash
Depreciation expense–Office Equipment …………………………..
400
Depreciation expense–Computer Equipment …………………….
1,250
Changes in current assets and current liabilities
Increase in accounts receivable ($22,867 – $5,668) ……………….
(17,199)
Increase in inventory ($704 – $0) …………………………………………..
(704)
Increase in computer supplies ($2,005 – $580) ……………………..
(1,425)
Decrease in prepaid insurance ($1,665 – $1,110) …………………..
555
Decrease in accounts payable ($1,100 – $0) ………………………….
(1,100)
Increase in wages payable ($875 – $500) …………………………..
375
Decrease in unearned computer service revenue ………………
Net cash used by operating activities …………………………………….
Cash received from stock issuance …………………………..…………..
Cash paid for dividends ……………………………………………………….
Net cash provided by financing activities …………………………..