P13-3A Prepare the operating activities section – indirect method
The income statement of Whitlock Company is presented here.
Sales revenue $7,700,000
Cost of goods sold
Beginning inventory $1,900,000
Purchases 4,400,000
Goods available for sale 6,300,000
Ending inventory 1,400,000
Total cost of goods sold 4,900,000
Gross profit 2,800,000
Operating expenses 1,150,000
Net income 1,650,000
Additional information:
1. Accounts receivable increased $200,000 during the year, and inventory decreased $500,000.
2. Prepaid expenses increased $150,000 during the year.
3. Accounts payable to suppliers of merchandise decreased $340,000 during the year.
4. Accrued expenses payable decreased $100,000 during the year.
5. Operating expenses include depreciation expense of $70,000.
Instructions
Prepare the operating activities section of the statement of cash flows for the year ended November 30, 2017,
for Whitlock Company, using the indirect method.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
Cash flows from operating activities
Net income Value
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation expense Value
Increase in accounts receivable Value
Decrease in inventory Value
Increase in prepaid expenses Value
Decrease in accounts payable Value
Decrease in accrued expenses payable Value ?
Net cash provided by operating activities ?
After you have completed the requirements of P13-3A, consider the additional question.
Answers are on the other tab in this file.
1. Assume that in 2017, accounts receivable increased $180,000, inventory decreased $475,000; prepaid expenses decreased $50,000, and
accrued expenses payable increased $75,000. Show the impact of these changes on the operating activities section of the statement of
cash flows.
For the Year Ended November 30, 2017
WHITLOCK COMPANY
Income Statement
For the Year Ended November 30, 2017
WHITLOCK COMPANY
Partial Statement of Cash Flows
P13-3A Solution
Cash flows from operating activities
Net income $1,650,000
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation expense $70,000
Increase in accounts receivable (200,000)
Decrease in inventory 500,000
WHITLOCK COMPANY
Partial Statement of Cash Flows
For the Year Ended November 30, 2017
P13-3A Solution to additional question
1. Assume that in 2017, accounts receivable increased $180,000, inventory decreased $475,000; prepaid expenses decreased $50,000, and
accrued expenses payable increased $75,000. Show the impact of these changes on the operating activities section of the statement of
cash flows.
Cash flows from operating activities
Net income $1,650,000
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation expense $70,000
Increase in accounts receivable (180,000)
P13-5A Prepare the operating activities section- indirect method
Zumbrunn Company’s income statement contained the condensed information below.
Service revenue $970,000
Operating expenses, excluding depreciation $624,000
Depreciation expense 60,000
Loss on disposal of equipment 16,000 700,000
Income before income taxes
270,000
Income tax expense 40,000
Net income $230,000
Zumbrunn’s balance sheet contained the comparative data at December 31, shown below.
2017 2016
Accounts receivable $75,000 $65,000
Accounts payable 46,000 28,000
Income taxes payable 11,000 7,000
Accounts payable pertain to operating expenses.
Instructions
Prepare the operating activities section of the statement of cash flows using the indirect method.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
Cash flows from operating activities
Net income Value
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation expense Value
Loss on disposal of equipment Value
Increase in accounts receivable Value
Increase in accounts payable Value
Increase in income taxes payable Value ?
Net cash provided by operating activities ?
After you have completed the requirements of P13-5A, consider the additional question.
Answers are on the other tab in this file.
1. Assume that the 2017 balance for accounts receivable, accounts payable and income taxes
payable changed to $100,000, $69,000 and $12,000 respectively. Show the impact of these
changes on the operating activities section of the statement of cash flows.
For the Year Ended December 31, 2017
ZUMBRUNN COMPANY
Income Statement
For the Year Ended December 31, 2017
ZUMBRUNN COMPANY
Partial Statement of Cash Flows
P13-5A Solution
Cash flows from operating activities
Net income $230,000
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation expense $60,000
ZUMBRUNN COMPANY
Partial Statement of Cash Flows
For the Year Ended December 31, 2017
P13-5A Solution to additional question
1. Assume that the 2017 balance for accounts receivable, accounts payable and income taxes
payable changed to $100,000, $69,000 and $12,000 respectively. Show the impact of these
changes on the operating activities section of the statement of cash flows.
Cash flows from operating activities
Net income $230,000
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation expense $60,000
ZUMBRUNN COMPANY
Partial Statement of Cash Flows
For the Year Ended December 31, 2017
P13-6A Prepare the operating activities section- direct method
Zumbrunn Company‘s income statement contained the condensed information below.
Service revenue 970,000$
Operating expenses, excluding depreciation 624,000$
Depreciation expense 60,000
Loss on disposal of equipment 16,000 700,000
Income before income taxes
270,000
Income tax expense 40,000
Net income 230,000$
Zumbrunn’s balance sheet contained the comparative data at December 31, shown below.
2017 2016
Accounts receivable $75,000 $65,000
Accounts payable 46,000 28,000
Income taxes payable 11,000 7,000
Accounts payable pertain to operating expenses.
Instructions
Prepare the operating activities section of the statement of cash flows using the direct method.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
Cash flows from operating activities
Cash receipts from customers Value (1)
Less cash payments:
For operating expenses Value (2)
For income taxes Value (3) ?
Net cash provided by operating activities ?
(1) Computation of cash receipts from customers
Service revenue Value
Deduct: Increase in accounts receivable Value
Cash receipts from customers ?
(2) Computation of cash payments for operating expenses
Operating expenses per income statement Value
Deduct: Increase in accounts payable
Value
Cash payments for operating expenses ?
(3) Computation of cash payments for income taxes
Income tax expense per income statement Value
Deduct: increase in income taxes payable Value
Cash payments for income taxes ?
After you have completed the requirements of P13-6A, consider the additional question.
Answers are on the other tab in this file.
1. Assume that the 2016 balance for accounts receivable, accounts payable and income taxes
payable changed to $50,000, $35,000 and $18,000 respectively. Show the impact of these
changes on the operating activities section of the statement of cash flows.
For the Year Ended December 31, 2017
ZUMBRUNN COMPANY
Income Statement
For the Year Ended December 31, 2017
ZUMBRUNN COMPANY’
Partial Statement of Cash Flows
P13-6A Solution
Cash flows from operating activities
Cash receipts from customers 960,000$ (1)
Less cash payments:
For operating expenses 606,000$ (2)
(1) Computation of cash receipts from customers
Service revenue 970,000$
(2) Computation of cash payments for operating expenses
Operating expenses per income statement 624,000$
Deduct: Increase in accounts payable ($46,000 – $28,000) 18,000
ZUMBRUNN COMPANY’
Partial Statement of Cash Flows
For the Year Ended December 31, 2017
P13-6A Solution to additional question
1. Assume that the 2016 balance for accounts receivable, accounts payable and income taxes
payable changed to $50,000, $35,000 and $18,000 respectively. Show the impact of these
changes on the operating activities section of the statement of cash flows.
Cash flows from operating activities
Cash receipts from customers 945,000$ (1)
Less cash payments:
Computation of cash receipts from customers
Service revenue 970,000$
Computation of cash payments for income taxes
Income tax expense per income statement 40,000$
ZUMBRUNN COMPANY’
Partial Statement of Cash Flows
For the Year Ended December 31, 2017
P13-7A Prepare a statement of cash flows – indirect method, and compute free cash flow.
2017 2016
Assets
Cash $38,000 $20,000
Accounts Receivable 30,000 14,000
Inventory 27,000 20,000
Equipment 60,000 78,000
Accumulated depreciation–equipment (29,000) (24,000)
Total $126,000 $108,000
Liabilities and Stockholders‘ Equity
Accounts payable $24,000 $15,000
Income taxes payable 7,000 8,000
Bonds payable 27,000 33,000
Common stock 18,000 14,000
Retained earnings 50,000 38,000
Total $126,000 $108,000
Sales revenue $242,000
Cost of goods sold 175,000
Gross profit 67,000
Operating expenses 24,000
Income from operations 43,000
Interest expense 3,000
Income before income taxes 40,000
Income tax expense 8,000
Net income $32,000
Additional data:
1. Dividends declared and paid were $20,000.
2. During the year equipment was sold for $8,500 cash. This equipment cost $18,000
originally and had a book value of $8,500 at the time of sale.
3. All depreciation expense, $14,500, is in the operating expenses.
4. All sales and purchases are on account.
Instructions
(a) Prepare a statement of cash flows using the indirect method.
(b) Compute free cash flow.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
(a)
Cash flows from operating activities
Net income Value
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation expense Value
Increase in accounts receivable Value
Increase in inventory Value
Increase in accounts payable Value
Decrease in income taxes payable Value ?
Net cash provided by operating activities ?
NOSKER COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
For the Year ended December 31, 2 017
NOSKER COMPANY
Comparative Balance Sheet
December 31
NOSKER COMPANY
Income Statement
Cash flows from investing activities
Sale of equipment Value
Net cash provided by investing activities Value
Cash flows from financing activities
Issuance of common stock Value
Redemption of bonds Value
Payment of dividends Value
Net cash used by financing activities ?
Net increase in cash ?
Cash at beginning of period Value
Cash at end of period ?
(b) Free Cash Flow:
Net cash provided by operating activities Value
Less: Capital expenditures Value
Cash dividends Value
?
?
After you have completed the requirements of P13-7A, consider the additional question.
Answers are on the other tab in this file.
1. Assume that depreciation changed to $17,500 and the asset was sold for $11,500 cash. Also assume that the
book value of the asset at the time of sale was also $11,500. Show the impact of these changes on the
statement of cash flows and free cash flow.
P13-7A Solution
(a)
Cash flows from operating activities
Net income $32,000
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation expense $14,500
Increase in accounts receivable (16,000)
Cash flows from investing activities
Sale of equipment 8,500
Net cash provided by investing activities 8,500
Cash flows from financing activities
Issuance of common stock 4,000
(b) Free Cash Flow:
Net cash provided by operating activities $31,500
Less: Capital expenditures $0
Cash dividends 20,000
NOSKER COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
P13-7A Solution to additional question
1. Assume that depreciation changed to $17,500 and the asset was sold for $11,500 cash. Also assume that the
book value of the asset at the time of sale was also $11,500. Show the impact of these changes on the
statement of cash flows and free cash flow.
(a)
Cash flows from operating activities
Net income $32,000
Adjustments to reconcile net income to
Cash flows from financing activities
Issuance of common stock 4,000
Redemption of bonds (6,000)
Payment of dividends (20,000)
Net cash used by financing activities (22,000)
NOSKER COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
13-8A Prepare a statement of cash flows – direct method, and compute free cash flow.
Assets 2017 2016
Cash $38,000 $20,000
Accounts Receivable 30,000 14,000
Inventory 27,000 20,000
Equipment 60,000 78,000
Accumulated depreciation–equipment (29,000) (24,000)
Total $126,000 $108,000
Liabilities and Stockholders‘ Equity
Accounts payable $24,000 $15,000
Income taxes payable 7,000 8,000
Bonds payable 27,000 33,000
Common stock 18,000 14,000
Retained earnings 50,000 38,000
Total $126,000 $108,000
Sales revenue $242,000
Cost of goods sold 175,000
Gross profit 67,000
Operating expenses 24,000
Income from operations 43,000
Interest expense 3,000
Income before income taxes 40,000
Income tax expense 8,000
Net income $32,000
Additional data:
1. Dividends declared and paid were $20,000.
2. During the year equipment was sold for $8,500 cash. This equipment cost $18,000
originally and had a book value of $8,500 at the time of sale.
3. All depreciation expense, $14,500, is in the operating expenses.
4. All sales and purchases are on account.
Data for Nosker Company is presented above. Further anlaysis reveals the following.
1. Accounts payable pertain to merchandise suppliers.
2. All operating expenses except for depreciation were paid in cash.
Instructions
(a) Preapare a statement of cash flows using the direct method.
(b) Compute free cash flow.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
For the Year ended December 31, 2017
NOSKER COMPANY
Comparative Balance Sheet
December 31
NOSKER COMPANY
Income Statement
(a)
Cash flows from operating activities
Cash receipts from customers Value
Less cash payments:
To suppliers Value
For operating expenses Value
For income taxes Value
For interest Value Value
Net cash provided by operating activities ?
Cash flows from investing activities
Sale of equipment Value
Net cash provided by investing activities Value
Cash flows from financing activities
Issuance of common stock Value
Redemption of bonds Value
Payment of dividends Value
Net cash used by financing activities ?
Net increase in cash ?
Cash at beginning of period Value
Cash at end of period ?
(b) Free Cash Flow:
Net cash provided by operating activities Value
Less: Capital expenditures Value
Cash dividends Value ?
Free Cash Flow Value
After you have completed the requirements of P13-8A, consider the additional question.
Answers are on the other tab in this file.
1. Assume that the 2017 balances for accounts receivable, inventory, and accounts payable changed to $26,000,
$30,000, and $23,000 respectively. Dividends declared also changed to $28,000. Show the impact on the
statement of cash flows and free cash flow.
NOSKER COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
P13-8A Solution
(a)
Cash flows from operating activities
Cash receipts from customers $226,000 (1)
Less cash payments:
To suppliers $173,000 (2)
Cash flows from investing activities
Sale of equipment 8,500
Net cash provided by investing activities 8,500
Cash flows from financing activities
Computations:
(1) Cash receipts from customers
Sales revenue $242,000
Deduct: Increase in accounts receivable 16,000
Cash receipts from customers $226,000
(2) Cash payments to suppliers
(3) Cash payments for operating expenses
Operating expenses $24,000
(b) Free Cash Flow:
Net cash provided by operating activities $31,500
Less: Capital expenditures $0
NOSKER COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
P13-8A Solution to additional question
1. Assume that the 2017 balances for accounts receivable, inventory, and accounts payable changed to $26,000,
$30,000, and $23,000 respectively. Dividends declared also changed to $28,000. Show the impact on the
statement of cash flows and free cash flow.
(a)
Cash flows from operating activities
For operating expenses 9,500 (3)
For income taxes 9,000 (4)
Cash flows from investing activities
Sale of equipment 8,500
Net cash provided by investing activities 8,500
Cash flows from financing activities
Issuance of common stock 4,000
Redemption of bonds (6,000)
Computations:
(1) Cash receipts from customers
Sales revenue $242,000
(3) Cash payments for operating expenses
Operating expenses $24,000
Deduct: Depreciation 14,500
Cash payments for operating expenses $9,500
(4) Cash payments for income taxes
Income tax expense $8,000
(b) Free Cash Flow:
NOSKER COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017