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CHAPTER 14 Statement of Cash Flows
Prob. 14–2B (Concluded)
Balance Balance
Account Title Dec. 31, 2013 Dec. 31, 2014
Operating activities:
Increase in prepaid expenses (m) 6,440
Decrease in accounts payable (h) 89,600
Decrease in salaries payable (f) 8,120
Investing activities:
Debit Credit
HARRIS INDUSTRIES INC.
Spreadsheet (Work Sheet) for Statement of Cash Flows
For the Year Ended December 31, 2014
Transactions
14-34
CHAPTER 14 Statement of Cash Flows
Prob. 14–3B
Cash flows from operating activities:
Cash flows from investing activities:
Cash received from sale of land $ 456,000
Cash flows from financing activities:
Cash received from issuance of
For the Year Ended December 31, 2014
COULSON INC.
Statement of Cash Flows
14-35
CHAPTER 14 Statement of Cash Flows
Prob. 14–3B (Concluded)
(Optional)
Balance Balance
Account Title Dec. 31, 2013 Dec. 31, 2014
Cash 337,800 (p) 37,200 300,600
Income taxes payable (21,600) (c) 4,800 (26,400)
Bonds payable 0 (n) 330,000 (330,000)
Gain on sale of land (m) 60,000
Increase in accts. receivable (i) 94,800
Increase in inventories (h) 52,800
Decrease in prepaid expenses (g) 7,800
Decrease in accounts payable (d) 37,200
Debit Credit
COULSON INC.
Spreadsheet (Work Sheet) for Statement of Cash Flows
For the Year Ended December 31, 2014
Transactions
14-36
CHAPTER 14 Statement of Cash Flows
Prob. 14–4B
Cash flows from operating activities:
Cash flows from investing activities:
Cash received from sale of investments $ 588,000
Less: Cash paid for land $ 960,000
Cash paid for equipment 240,000 1,200,000
Net cash flow used for investing activities (612,000)
Cash flows from financing activities:
Reconciliation of Net Income with Cash Flows from Operating Activities:
Net income……………………………………………………………………………
…
$ 558,960
Adjustments to reconcile net income to net cash flow
from operating activities:
For the Year Ended December 31, 2014
MARTINEZ INC.
Statement of Cash Flows
14-37
CHAPTER 14 Statement of Cash Flows
Prob. 14–4B (Concluded)
Computations:
1. Sales………………………………………………………………………………… $4,512,000
2. Cost of merchandise sold………………………………………………………
…
$2,352,000
3. Operating expenses other than depreciation………………………………
…
$1,344,840
14-38
CHAPTER 14 Statement of Cash Flows
Prob. 14–5B
Cash flows from operating activities:
Cash received from customers1$2,004,858
Cash flows from investing activities:
Cash received from sale of investments $ 91,800
Less: Cash paid for purchase of land $ 295,800
Cash paid for purchase of
Reconciliation of Net Income with Cash Flows from Operating Activities:
Net income……………………………………………………………………………
…
$141,680
Adjustments to reconcile net income to net cash flow
from operating activities:
For the Year Ended December 31, 2014
MERRICK EQUIPMENT CO.
Statement of Cash Flows
14-39
CHAPTER 14 Statement of Cash Flows
Prob. 14–5B (Concluded)
Computations:
1. Sales…………………………………………………………………………………
…
$2,023,898
2. Cost of merchandise sold………………………………………………………
…
$1,245,476
3. Operating expenses other than depreciation………………………………
…
$ 517,299
14-40
CHAPTER 14 Statement of Cash Flows
CP 14–1
Although this situation might seem harmless at first, it is actually a violation of
generally accepted accounting principles. The operating cash flow per share figure
should not be shown on the face of the income statement. The income statement is
CP 14–2
Start-up companies are unique in that they frequently will have negative retained
earnings and operating cash flows. The negative retained earnings are often due to
losses from high start-up expenses. The negative operating cash flows are typical
because growth requires cash. Growth must be financed with cash before the cash
CASES & PROJECTS
14-41
CP 14–3
a. 1. Normal practice for determining the amount of cash flows from operating
activities during the year is to begin with the reported net income. This net
income must ordinarily be adjusted upward and/or downward to determine the
2. Generally accepted accounting principles require that significant transactions
affecting future cash flows should be reported in a separate schedule to the
3. The $180,000 cash received from the sale of the investments is reported in the
Cash Flows from Investing Activities section. Since the net income included a
4. The balance sheets for the last two years will indicate the increase in cash but
will not indicate the firm’s activities in meeting its financial obligations, paying
dividends, and maintaining and expanding operating capacity. Such information,
as provided by the statement of cash flows, assists creditors in assessing the
CP 14–4
The senior vice president is very focused on profitability but has been bleeding cash.
The increase in accounts receivable and inventory is striking. Apparently, the new
credit card campaign has found many new customers, since the accounts receivable is
growing. Unfortunately, it appears as though the new campaign has done a poor job of
14-43
CHAPTER 14 Statement of Cash Flows
CP 14–5
a. and b.
Recent statements of cash flows for Johnson & Johnson and JetBlue Airways
Johnson & Johnson
Johnson & Johnson (J&J) is a powerful generator of cash flows from operating
activities, with almost $14.3 billion in cash flow from operations. This is enough to
JetBlue Airways Corp.
JetBlue is weaker than J&J. JetBlue had cash flows from operating activities of
14-44
CHAPTER 14 Statement of Cash Flows
CP 14–5 (Continued)
In Millions For Period Ended December 31, 2011 12/31/11
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 9,672
Adjustments to reconcile net earnings to cash flows:
Depreciation and amortization of property and intangibles 3,158
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment $ (2,893)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends to shareholders $ (6,156)
Repurchase of common stock (2,525)
Proceeds from short-term debt 9,729
Retirement of short-term debt (11,200)
Consolidated Statements of Cash Flows
JOHNSON & JOHNSON
14-45
CHAPTER 14 Statement of Cash Flows
CP 14–5 (Concluded)
In Millions For Period Ended December 31, 2011 12/31/11
Cash Flow from Operating Activities:
Changes in certain operating assets and liabilities:
Decrease (increase) in receivables (10)
Cash Flow from Investing Activities:
Capital expenditures, including purchase deposits on flight equipment $(525)
Net decrease in short-term investments 24
Cash Flow from Financing Activities:
Proceeds from:
Issuance of common stock $ 10
Repayment of:
Long-term debt and capital lease obligations (238)
JETBLUE AIRWAYS CORP.
Consolidated Statements of Cash Flows
14-46
