4. The $30,000 increase must be added to income from operations because the amount of cash
6. a. $100,000 gain
activities.
10. Five common classes of operating cash receipts and case payments under the direct method
CHAPTER 14
STATEMENT OF CASH FLOWS
DISCUSSION QUESTIONS
14-1
CHAPTER 14 Statement of Cash Flows
PE 14–1A
PE 14–1B
PE 14–2A
Net income…………………………………………………………………………………
…
$107,500
PE 14–2B
Net income…………………………………………………………………………………
…
$175,000
PRACTICE EXERCISES
CHAPTER 14 Statement of Cash Flows
PE 14–3A
Net income…………………………….……………………………………………………
…
$253,000
Adjustments to reconcile net income to net cash flow from
operating activities:
PE 14–3B
Net income…………………………………..………………………………………………
…
$160,000
Adjustments to reconcile net income to net cash flow from
operating activities:
PE 14–4A
Cash flows from operating activities:
Net income……………………………………….……………………
…
$270,000
Adjustments to reconcile net income to net cash flow
from operating activities:
14-3
CHAPTER 14 Statement of Cash Flows
PE 14–4B
Cash flows from operating activities:
Net income…………………………………….………………………… $280,000
PE 14–5A
The loss on the sale of land is added to net income in the Operating Activities section.
PE 14–5B
The gain on the sale of land is subtracted from net income in the Operating Activities
section.
PE 14–6A
Sales…………………………………………………………………………………………
…
$480,000
…
PE 14–6B
Sales…………………………………………………………………………………………
…
$112,000
14-4
CHAPTER 14 Statement of Cash Flows
PE 14–7A
Cost of merchandise sold…………………………………………………………
…
$770,000
PE 14–7B
Cost of merchandise sold…………………………………………………………
…
$240,000
PE 14–8A
a. Net cash flow from operating activities……………
…
$ 294,000 $ 280,000
PE 14–8B
a. Net cash flow from operating activities……………
…
$ 476,000 $ 455,000
14-5
CHAPTER 14 Statement of Cash Flows
Ex. 14–1
There were net additions to the net loss reported on the income statement to convert
the net loss from the accrual basis to the cash basis. For example, depreciation is
The cash flows from operating activities detail is provided as follows for class discussion:
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (471)
Adjustments to reconcile net income (loss) to net cash flow
(in millions)
EXERCISES
CONTINENTAL AIRLINES, INC.
Cash Flows from Operating Activities
(Selected from Statement of Cash Flows)
14-6
CHAPTER 14 Statement of Cash Flows
Ex. 14–2
a. Cash receipt, $94,000 e. Cash receipt, $200,000
Ex. 14–3
a. financing g. financing
Ex. 14–4
14-7
CHAPTER 14 Statement of Cash Flows
Ex. 14–5
a. Net income……………………………………………………………… $600,000
Adjustments to reconcile net income to net cash
flow from operating activities:
b. Cash flows from operating activities shows the cash inflow or outflow from a
company’s day-to-day operations. Net income reports the excess of revenues over
Ex. 14–6
a. Cash flows from operating activities:
Net income……………………………………………………………… $240,000
Adjustments to reconcile net income to net cash
flow from operating activities:
14-8
CHAPTER 14 Statement of Cash Flows
Ex. 14–7
a. Cash flows from operating activities:
Net income……………………………………………………………
…
$635,000
Adjustments to reconcile net income to net cash
b. Cash flows from operating activities reports the cash inflow or outflow from a
Ex. 14–8
14-9
CHAPTER 14 Statement of Cash Flows
Ex. 14–9
Cash flows from investing activities:
Cash received from sale of equipment…………………………………………… $72,000
Ex. 14–10
Cash flows from investing activities:
Ex. 14–11
Cash flows from investing activities:
Ex. 14–12
Cash flows from financing activities:
14-10
CHAPTER 14 Statement of Cash Flows
Ex. 14–13
Cash flows from investing activities:
Cash paid for purchase of land………………………………………………………
…
$246,000
Ex. 14–14
Cash flows from financing activities:
Ex. 14–15
a. Net cash flow from operating activities…………………………… $357,500
14-11
CHAPTER 14 Statement of Cash Flows
Ex. 14–15 (Concluded)
b. Curwen’s net income differed from cash flows from operations because of:
●$29,480 of depreciation expense which has no effect on cash flows from
Ex. 14–16
a.
Cash flows from operating activities:
Net loss $(6,106)
Adjustments to reconcile net loss to net
cash flow from operating activities:
b. Jones Soda is struggling financially. The company has negative earnings and negative
(in thousands)
JONES SODA CO.
Cash Flows from Operating Activities
14-12
CHAPTER 14 Statement of Cash Flows
Ex. 14–17
a.
Cash flows from operating activities:
Net income $260
Cash flows from investing activities:
Cash received from sale of land $100
b. Wedge Industries Inc.’s net income was more than the cash flows from operations
because of:
●$24 of depreciation expense which has no effect on cash.
●A $60 gain on the sale of land. The proceeds from this sale of $100, which include
the gain, are reported in the Investing Activities section of the statement of cash
For the Year Ended December 31, 2014
WEDGE INDUSTRIES INC.
Statement of Cash Flows
14-13
CHAPTER 14 Statement of Cash Flows
Ex. 14–18
1. The increase in accounts receivable should be deducted from net income in the
Cash Flows from Operating Activities section.
14-14
CHAPTER 14 Statement of Cash Flows
Ex. 14–18 (Concluded)
A correct statement of cash flows would be as follows:
Cash flows from operating activities:
Net income $360,000
Adjustments to reconcile net income to
For the Year Ended December 31, 2014
SHASTA INC.
Statement of Cash Flows
14-15
CHAPTER 14 Statement of Cash Flows
Ex. 14–19
a. Sales…………………………………………………………………………………
…
$753,500
Ex. 14–20
Ex. 14–21
a. Cost of merchandise sold………………………………………………………
…
$1,031,550
14-16
…
…
CHAPTER 14 Statement of Cash Flows
Ex. 14–22
a. Cash flows from operating activities:
Computations:
1. Sales……………………………………………………………
…
$511,000
…
…
b. The direct method directly reports cash receipts and payments. The cash received
14-17
CHAPTER 14 Statement of Cash Flows
Ex. 14–23
Cash flows from operating activities:
Computations:
1. Sales…………………………………………………………………………………
…
$445,500
…
Ex. 14–24
a. Cash flows from investment in PPE……………………………………………
…
$210,000
…
1
14-18
CHAPTER 14 Statement of Cash Flows
Ex. 14–25
a.
Cash flows from investment in PPE…………………………… $432
b. Free cash flow is often used to measure the financial strength of a business. The
Ex. 14–26
Cash flows from investment in PPE……………………………………………
…
$440,000
Recent Fiscal Year End
(all numbers in thousands)
14-19
CHAPTER 14 Statement of Cash Flows
Prob. 14–1A
Cash flows from operating activities:
Net income $ 190,280
Adjustments to reconcile net income to
net cash flow from operating activities:
Depreciation 13,800
Cash flows from investing activities:
Cash received from sale of investments $ 210,000
For the Year Ended December 31, 2014
CHARLES INC.
Statement of Cash Flows
PROBLEMS
14-20