CHAPTER 16 Statement of Cash Flows
Prob. 16–2B (Concluded)
Balance Balance
Account Title Dec. 31, 2013 Dec. 31, 2014
Operating activities:
Increase in accounts
receivable (o) 73,080
Decrease in inventories (n) 134,680
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
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CHAPTER 16 Statement of Cash Flows
Prob. 16–3B
Cash flows from operating activities:
Changes in current operating assets
and liabilities:
Increase in accounts receivable (94,800)
Increase in inventories (52,800)
Cash flows from investing activities:
Cash received from sale of land $ 456,000
Less: Cash paid for acquisition
Cash received from issuance of
common stock 280,000 $ 610,000
For the Year Ended December 31, 2014
COULSON INC.
Statement of Cash Flows
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CHAPTER 16 Statement of Cash Flows
Prob. 16–3B (Concluded)
(Optional)
Balance Balance
Account Title Dec. 31, 2013 Dec. 31, 2014
Equipment 529,800 (j) 196,800 (k) 66,000 660,600
Accum. depr.—equipment (162,000) (k) 66,000 (e) 37,200 (133,200)
Accounts payable (631,200) (d) 37,200 (594,000)
Income taxes payable (21,600) (c) 4,800 (26,400)
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
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CHAPTER 16 Statement of Cash Flows
Prob. 16–4B
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
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CHAPTER 16 Statement of Cash Flows
Prob. 16–4B (Concluded)
Computations:
1. Sales……………………………………………………………………………………
…
$4,512,000
…
2. Cost of merchandise sold…………………………………………………………
…
$2,352,000
y
…
y
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CHAPTER 16 Statement of Cash Flows
Prob. 16–5B
Cash flows from operating activities:
Cash flows from investing activities:
Cash received from sale of investments $ 91,800
Cash flows from financing activities:
Cash received from sale of common stock $ 250,000
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
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CHAPTER 16 Statement of Cash Flows
Prob. 16–5B (Concluded)
Computations:
1. Sales…………………………………………………………………………………
…
$2,023,898
2. Cost of merchandise sold………………………………………………………… $1,245,476
3. Operating expenses other than depreciation…………………………………
…
$ 517,299
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…
CHAPTER 16 Statement of Cash Flows
CP 16–1
Although this situation might seem harmless at first, it is, in fact, 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
constructed under accrual accounting concepts, while operating cash flow “undoes”
CP 16–2
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
16-41
CP 16–3
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
b. The statement of cash flows indicates a strong liquidity position for Argon Inc. The
increase in cash of $291,000 for the past year is more than adequate to cover the
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CP 16–4
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
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CHAPTER 16 Statement of Cash Flows
CP 16–5
a. and b.
Recent statements of cash flows for Johnson & Johnson and JetBlue Airways Corp. are
shown on the following pages. The actual analysis may be different due to updated
information. However, this answer shows the structure for a possible response.
CHAPTER 16 Statement of Cash Flows
CP 16–5 (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)
Retirement of short-term debt (11,200)
Proceeds from long-term debt 4,470
Retirement of long-term debt (16)
Consolidated Statements of Cash Flows
JOHNSON & JOHNSON
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CHAPTER 16 Statement of Cash Flows
CP 16–5 (Concluded)
In Millions For Period Ended December 31, 2011 12/31/11
Changes in certain operating assets and liabilities:
Decrease (increase) in receivables (10)
Increase (decrease) in inventories, prepaid and other 4
Increase (decrease) in air traffic liability 113
Increase (decrease) accounts payable and other accrued liabilities 26
Issuance of common stock $ 10
Issuance of long-term debt 245
Short-term borrowings 128
Other 6
Repayment of:
31-Dec-11
JETBLUE AIRWAYS CORP.
Consolidated Statements of Cash Flows
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