Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 12
777
Chapter 12
Reporting Cash Flows
QUICK STUDIES
Quick Study 12-1 (10 minutes)
1. Investing 6. Financing
Quick Study 12-2 (20 minutes)
Statement of cash flow items in sequential order 1 through 13 on left OR
textbook order on right:
1.
d
8.
k
6
a.
5
h.
3.
b
10.
g
4
c.
9
4.
c
11.
i
1
d.
8
k.
5.
h
12.
m
e.
7
6.
a
13.
e
2
7.
l
g.
Quick Study 12-3 (10 minutes)
$20,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 12
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Quick Study 12-4 (10 minutes)
$15,000
Quick Study 12-5 (20 minutes)
Cash Flows from Operating Activities (Indirect)
Twix
Dots
Skor
Net Income ………………………………………………………
$ 4,000
$100,000
$72,000
Adjustments to reconcile net income to net
cash provided by operating activities
Income statement items not affecting cash
(10,000)
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 12
Quick Study 12-6 (15 minutes)
Cash flows from operating activities
Net income …………………………………………………………………..
$18,200
Adjustments to reconcile net income to net cash provided
by operating activities
Quick Study 12-7 (15 minutes)
Cash flows from operating activities
Net income …………………………………………………………………..
$30,000
Adjustments to reconcile net income to net cash provided
Quick Study 12-8 (10 minutes)
Computation of cash inflow from sale of furniture
Cost of furniture sold (given) ……………………………………………..
$52,500
Accumulated depreciation at end of prior year (given) ………..
Increase from depreciation expense (given) ……………………….
Actual accumulated depreciation at end of current yr (given)
Accumulated depreciation on sold furniture …………………….
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 12
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Quick Study 12-9 (10 minutes)
a. Increase of $8,000. The cost, accumulated depreciation, and resulting loss
do not affect investing cash flows. Only cash received of $8,000 affects
Quick Study 12–10 (10 minutes)
1. Reconstructed journal entry for equipment sale:
Cash ………………………………………………………………………. 37,000
2. We reconstruct the T-account for Accumulated Depreciation—Equipment
to determine its Depreciation Expense of $60,000.
Accumulated Depreciation—Equipment
Bal., 2021
3. We reconstruct the T-account for Equipment to determine its purchases of
equipment of $120,000.
Equipment
Bal., 2020
270,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 12
Quick Study 12–11 (10 minutes)
1. Reconstructed journal entry for building sale:
Cash ……………………………………………………………………. 130,000
2. We reconstruct the T-account for Accumulated Depreciation—Building to
determine its Depreciation Expense of $45,000.
Accumulated Depreciation—Building
Depr. Expense
Bal., 2021
3. We reconstruct the T-account for Building to determine its purchases of
buildings of $280,000.
Building
Bal., 2020
Purchases
Quick Study 12–12 (15 minutes)
Investing Activities
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 12
Quick Study 12–13 (15 minutes)
Computation of cash inflow from sale of furniture
Cost of furniture sold (given) ………………………………………..
$55,000
$25,400
Quick Study 12–14 (10 minutes)
a. Decrease of $16,000. The carrying value and loss do not affect financing
Quick Study 12–15 (10 minutes)
Part 1
Computation of cash received from the sale of common stock
Increase in Common stock ($105,000 – $100,000) …………………………...
$ 5,000
Increase in Paid-in capital in excess of par ($567,000-$342,000) ……..
225,000
Cash received from the sale of common stock …………………………….
$230,000
Part 2
Computation of cash paid for dividends
$287,500
48,000
(313,500)
Cash paid for dividends ……………………………………………………………
$ 22,000
Quick Study 12-16 (15 minutes)
Financing Activities
Cash dividends paid ………………………………………………………………….
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 12
783
Quick Study 12-17 (15 minutes)
1. Computation of cash paid for dividends
Beginning retained earnings …………………………………..
$ 8,400
Net income ……………………………………………………………..
Total “expected” retained earnings …………………………
Actual ending retained earnings ……………………………..
(35,600)
$ 2,800
2. Computation of cash payments for notes
Beginning notes payable ………………………………………..
$69,000
Total “expected” notes payable ………………………………
Actual ending notes payable …………………………..………
(29,000)
$40,000
Quick Study 12–18 (20 minutes)
VPI CO.
Statement of Cash Flows (Indirect Method)
For Current Year Ended December 31
Cash flows from operating activities
Net income ……………………………………………………………..
$23,000
Adjustments to reconcile net income to net cash provided
by operating activities
Income statement items not affecting cash
Depreciation expense ……………………………………………
$ 4,000
Gain on sale of machinery ……………………………………..
(2,000)
Decrease in accounts receivable …………………………...
Increase in inventory …………………………………………….
Increase in accounts payable ………………………………..
Cash flows from investing activities
Cash received from sale of machinery …………………….
Cash flows from financing activities
Cash received from issuing stock …………………………...
Cash paid for dividends …………………………………………..
Net increase in cash …………………………………………………..
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Quick Study 12-19 (10 minutes)
1. High to Low: Mancala, $70,000; Yahtzee, $60,000; and Cluedo, $(24,000).
Quick Study 12-20 (10 minutes)
1. 19% = $38,000 cash flow from operations / $200,000 average total assets
2. Better.
Quick Study 12-21A (10 minutes)
a.
Credit
d.
Debit
Quick Study 12-22B (10 minutes)
Cash Receipts from Operations (Direct)
Sales revenue …………………………………………..
$30,000
Interest revenue ……………………………………….
Decrease in accounts receivable ………………
Increase in interest receivable ………………….
Quick Study 12-23B (10 minutes)
Cash Payments to Suppliers (Direct)
Cost of goods sold …………………………………..
$42,000
Decrease in inventory ………………………………
Increase in accounts payable ……………………
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 12
Quick Study 12-24B (10 minutes)
Cash Payments for Operations (Direct)
Operating expenses ………………………………………….
$27,000
Decrease in accrued liabilities …………………………..
6,000
Increase in prepaid expenses …………………………...
Quick Study 12-25B (15 minutes)
Case A:
Interest revenue ……………………………………
$5,000
Interest receivable, beginning of year ……
$ 600
Interest receivable, end of year ……………..
(1,700)
Less increase in interest receivable ………
Case B:
Wages expense …………………………………….
Wages payable, beginning of year …………
Wages payable, end of year …………………..
Plus decrease in wages payable ……………
Alternative Solution:
Interest Receivable†
Wages Payable¥
Beg. Bal.
600
2,200
Beg. Bal.
Interest Revenue
5,000
9,000
Wages Expense
?
Cash Received
Cash Paid
?
End. Bal.
1,700
1,000
End. Bal.
Quick Study 12-26B (10 minutes)
1. Cash received from customers = Sales + Accounts receivable decrease
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Quick Study 12-27B (10 minutes)
1. Cash paid for inventory
Quick Study 12-28B (10 minutes)
Cash flows from operating activities
Receipts from sales to customersa …………………………...
$ 498,000
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EXERCISES
Exercise 12-1 (25 minutes)
Statement of Cash Flows
Noncash
Operating
Activities
Investing
Activities
Financing
Activities
Investing &
Financing
Activities
Not Reported
on Statement
or in Notes
a. Declared and paid a
cash dividend
X
d. Prepaid expenses
increased in the year
X
e. Accounts receivable
decreased in the year
X
f. Purchased land by
issuing common stock
X
g. Inventory increased
in the year
X
h. Sold equipment for
cash, yielding a loss
X
X
X
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 12
Exercise 12-2 (20 minutes)
Cash flows from operating activities—indirect method
Net income …………………………………………………………………………………
$ 24,000
Net cash provided by operating activities ……………………………………
$ 43,000
Exercise 12-3 (30 minutes)
Cash flows from operating activities—indirect method
Net income (loss) ……………………………………………………………………….
$ (16,000
)
Adjustments to reconcile net income to net cash provided by
)
Net cash provided by operating activities ……………………………………
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 12
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Exercise 12-4 (30 minutes)
Cash flows from operating activities
Net income ……………………………………………………………………………
$ 481,540
Adjustments to reconcile net income to net cash
Exercise 12-5 (20 minutes)
Cash flows from operating activities
Net income …………………………………………………………………………….
$374,000
Adjustments to reconcile net income to net cash
provided by operating activities
Income statement items not affecting cash
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 12
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Exercise 12-6 (10 minutes)
Cash flows from operating activities
Net income ………………………………………………………………
$400,000
Adjustments to reconcile net income to net cash provided by
operating activities
Income statement items not affecting cash
$436,000
Exercise 12-7 (20 minutes)
Cash flows from operating activities—indirect method
Net income …………………………………………………………………………………
$ 8,500
)
)
)
Adjustments to reconcile net income to net cash provided by
operating activities
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 12
Exercise 12-8 (20 minutes)
Cash flows from operating activities
Net income ………………………………………………………………
$ ?
Adjustments to reconcile net income to net cash provided
by operating activities
Income statement items not affecting cash
Exercise 12-9 (10 minutes)
Cash flows from investing activities
Cash received from the sale of equipment* …………………………..…
$ 51,300
Cash received from the sale of land …………………………..……………
Net cash provided by investing activities ………………………………..
$221,100
Exercise 12–10 (10 minutes)
Cash flows from financing activities
Sale of common stock ……………………………………………………………..
$ 64,000
Purchased treasury stock ………………………………………………………..
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 12
Exercise 12-11 (20 minutes)
1.
a. Cash ……………………………………………………………………. 8,000
Accumulated Depreciation—Building ……………………. 20,000
2.
a. Machinery ……………………………………………………………. 10,000
3.
a. Cash ……………………………………………………………………. 2,000
4.
a. Notes Payable ………………………………………………………. 40,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 12
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Exercise 12-12 (40 minutes)
Part 1
IKIBAN, INC.
Statement of Cash Flows (Indirect Method)
For Year Ended June 30, 2021
Cash flows from operating activities
Net income ……………………………………………………………
$ 99,510
Adjustments to reconcile net income to net cash
provided by operating activities
Income statement items not affecting cash
58,600
22,700
Net cash provided by operating activities ………………
$151,410
Cash flows from investing activities
Cash received from sale of equip. (Note 1) …………….
10,000
Cash paid for equipment (Note 1—given) ……………….
(57,600)
Net cash used in investing activities………………………
(47,600)
Cash flows from financing activities
Cash received from stock issuance ……………………….
60,000
Cash paid to retire notes (Note 2—given) ……………….
Cash paid for dividends (Note 3) …………………………...
Net cash used in financing activities ……………………..
Net increase in cash …………………………………………………
Cash balance at prior year-end …………………………………
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 12
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Exercise 12-12 (Part 1 continued)
(1)
Cost of equipment sold (given) …………………………..………………………….
$ 48,600
Accumulated depreciation of equipment sold* ………………………………..
(40,600)
Book value of equipment sold ………………………………………………………..
8,000
Gain on sale of equipment (given) ………………………………………………….
2,000
Cash receipt from sale of equipment ………………………………………………
$ 10,000
Cost of equipment sold ………………………………………………………………….
$ 48,600
Plus net increase in the equipment account balance ……………………….
9,000
Cash paid for new equipment (given) ……………………………………………..
$ 57,600
Bal., 6/30/2020
Bal., 6/30/2020
Purchase
Sale 48,600
Sale (plug) *40,600
Depr. Expense
Bal., 6/30/2021
Bal., 6/30/2021
(2)
Carrying value of notes retired ……………………………………………………….
$ 30,000
Cash payment to retire notes …………………………………………………………
$ 30,000
(3)
Retained Earnings
Bal., 6/30/2020
24,100
Dividends (plug)
Net income
99,510
Bal., 6/30/2021
33,300
Part 2
Interpretation: A 49.6% result on the cash flow on total assets ratio is indicative
of very good performance.
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Exercise 12-13 (25 minutes)
MONTGOMERY, INC.
Statement of Cash Flows (Indirect Method)
For Current Year Ended December 31
Cash flows from operating activities
Net income ……………………………………………………………
$ 10,500
Adjustments to reconcile net income to net cash used
in operating activities
Depreciation expense ………………………………………….
Increase in inventory …………………………………………..
Decrease in accounts payable ……………………………..
Decrease in salaries payable ……………………………….
(100)
Cash flows from investing activities
Cash paid for equipment (Note 1) …………………………..
(8,400)
Net cash used in investing activities………………………
(8,400)
Cash flows from financing activities
Cash received from stock issuance ……………………….
Note 1
Equipment
Bal., 12/31/Prior Year
41,500
Bal., 12/31/Current Year
49,900
796
Exercise 12–14 (15 minutes)
a.
Investing Activities
Cash received from equipment sale …………………………………
Cash paid for land …………………………………………………………..
Cash used by investing activities …………………………………….
$(41,000)
b.
Financing Activities
Cash dividends paid ………………………………………………………..
Exercise 12-15 (15 minutes)
a.
b. Yes.
Explanation. The company’s cash flow on total assets ratio improved from