Chapter 13 – Weygandt Managerial 7e
Challenge Exercises Solutions
Solution
CE13-1
(a) Payment of interest on notes payable. (6) not separately reported in the statement of
cash flows.
(b) Exchange of land for patent. (5) significant noncash investing and financing
activity.
(c) Sale of building for an amount greater than book value. (3) investing activity, (2) operating activity
(deducted from net income).
(d) Payment of dividends. (4) financing activity.
(e) Depreciation. (1) operating activity (added to net income).
(f) Receipt of dividends on investment in stock. (6) not separately reported in the statement of
cash flows.
(g) Sales. (6) not separately reported in the statement of
cash flows.
(h) Issuance of capital stock. (4) financing activity.
(i) Amortization of patent. (1) operating activity (added to net income).
(j) Issuance of bonds for land. (5) significant noncash investing and financing
activity.
(k) Purchase of land. (3) investing activity.
(l) Conversion of bonds into common stock. (5) significant noncash investing and financing
activity.
(m) Sale of land for an amount less than cost. (3) investing activity, (2) operating activity
(added to net income).
(n) Retirement of bonds. (4) financing activity.
(o) Cost of goods sold. (6) not separately reported in the statement of
cash flows.
(p) Purchase of treasury stock. (4) financing activity.
(q) Increase in accounts receivable. (2) operating activity (deducted from net
income).
Solution
CE13-2
PANCHO COMPANY
Partial Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income………………………………………………………………………….. $245,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense …………………………………………………… $57,000
Loss on disposal of plant assets …………………………………….. 8,000
Solution
CE13-3
BIRMINGHAM INC.
Partial Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income………………………………………………………………………. $193,000
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation expense ……………………………………………….. $25,000 )
Amortization expense ……………………………………………….. 10,000
Solution
CE13-4
MIGITSU COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income ……………………………………………………………. $100,000 )
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation expense …………………………..………… $ 54,000 )
Gain on disposal of equipment ………………………… (6,000)
Cash flows from investing activities
Sale of land …………………………………………………………… 28,000 )
Sale of equipment ………………………………………………….. 36,000
Purchase of equipment …………………………………………… (110,000 )
Net cash used by investing
activities ……………………………………………………. (46,000 )
Solution
CE13-5
Revenues ……………………………………………………….…………………….. $172,000)
Deduct: Increase in accounts receivable …………………………………… (21,000 )
Cash receipts from customers* ………………………………………… $151,000
**
Accounts Receivable
Balance, Beginning of year 39,000
Revenues for the year 172,000
Cash receipts for year 151,000
Balance, End of year 60,000
Payments for the year 80,000
Solution
CE13-6
Cash receipts from customers
Sales revenue ………………………………………………………………… $200,000*
Cash payments for cost of goods sold
Cost of goods sold ………………………………………………………….. $120,000*
Deduct: Increase in accounts payable ………………………………… (4,000)
* Deduct: Decrease in inventory ………………………………………….. (9,000)
Cash payments for cost of goods sold ……………………………….. $107,000*
Cash payments for rentals
Cash payments for salaries
Salaries and wages expense ……………………………………………. $ 48,000*