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Problem 16-3B (Continued)
Part 2
Gazelle Corporation's dividend payments of $53,600 represent 34% of the
$158,100 net income for the year, and 41% of cash inflow provided by
978
Problem 16-4BA (60 minutes)
GAZELLE CORPORATION
Spreadsheet for Statement of Cash Flows
For Year Ended December 31, 2017
December
31, 2016
Analysis of Changes
December
31, 2017
Debit
Credit
Balance sheet--debits
Cash ..........................................................
$ 61,550
$123,450
Accounts receivable ..............................
80,750
(b)
$ 3,650
77,100
Balance sheet--credits
Accum. depreciation—Equip. ..............
$ 95,000
(g)
22,850
(f)
38,600
$110,750
Accounts payable ...................................
102,000
(e)
84,250
17,750
Statement of cash flows
Operating activities
Noncash investing and financing
activities
979
Problem 16-4BA (Concluded)
GAZELLE CORPORATION
Statement of Cash Flows
For Year Ended December 31, 2017
Cash flows from operating activities
Adjustments to reconcile net income to net
cash provided by operating activities
Income statement items not affecting cash
Cash flows from investing activities
Cash received from sale of equipment .........................................
26,050
980
Problem 16-5BB (40 minutes)
GAZELLE CORPORATION
Statement of Cash Flows
For Year Ended December 31, 2017
Cash flows from operating activities
Cash received from customers (Note 1) .....................
$1,188,650
Noncash investing and financing activities
Supporting calculations
981
Problem 16-6B (35 minutes)
SATU COMPANY
Statement of Cash Flows
For Year Ended December 31, 2017
Cash flows from operating activities
Net income ................................................................................
$202,767
Adjustments to reconcile net income to net
cash provided by operating activities
Income statement items not affecting cash
Cash flows from investing activities
Problem 16-7BA (50 minutes)
SATU COMPANY
Spreadsheet for Statement of Cash Flows
For Year Ended December 31, 2017
December
31, 2016
Analysis of Changes
December
31, 2017
Debit
Credit
Balance sheet--debits
Cash ..........................................................
$ 28,400
$ 58,750
Accum. depreciation—Equip. ..............
$ 31,000
(f)
15,700
$ 46,700
Accounts payable ...................................
157,530
(d)
137,158
20,372
Net income ...............................................
(a)
202,767
983
Problem 16-7BA (concluded)
SATU COMPANY
Statement of Cash Flows
For Year Ended December 31, 2017
Cash flows from operating activities
Net income ................................................................................
$202,767
Adjustments to reconcile net income to net
cash provided by operating activities
Income statement items not affecting cash
984
Problem 16-8BB (35 minutes)
SATU COMPANY
Statement of Cash Flows
For Year Ended December 31, 2017
Cash flows from operating activities
Cash received from customers (Note 1) ..................
$756,438
Cash flows from investing activities
Supporting calculations
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 16
985
SERIAL PROBLEM — SP 16
Serial Problem — SP 16, Business Solutions (45 minutes)
BUSINESS SOLUTIONS
Statement of Cash Flows (Indirect)
For Quarter Ended March 31, 2018
Cash flows from operating activities
Net income ..........................................................................................
$ 18,833
Adjustments to reconcile net income to net
cash provided by operating activities
Income statement items not affecting cash
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 16
986
Reporting in Action — BTN 16-1
1. Apple uses the indirect method of reporting operating cash flows. We
2. In all three fiscal years, Apple’s cash flows from operating activities
markedly exceed its cash dividends paid, as shown in the table below:
3. In fiscal 2015, the largest item in reconciling the difference between net
income and cash flow from operations was depreciation and amortization
4. In fiscal 2015, the largest cash inflow from investing activities was $107,447
million from proceeds from sales of marketable securities. The largest cash
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 16
987
Comparative Analysis — BTN 16-2
1. Apple’s cash flow on total assets ratio ($ millions)
Current Year = Operating cash flows/Average total assets
Google’s cash flow on total assets ratio ($ millions)
Current Year = Operating cash flows/Average total assets
2. The cash flow on total assets ratio reflects the return on average assets by
using actual operating cash flows instead of net income. This return
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 16
988
Ethics Challenge — BTN 16-3
1. The business actions available include
2. As a business owner, Katie Murphy certainly can exercise discretion over
business actions. However, the underlying economic realities should
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 16
989
Communicating in Practice — BTN 16-4
Here is a sample of what the body of the memorandum might include:
TO: Diana Wood
FROM: (Your Name)
SUBJECT: Statement of Cash Flows
DATE: _________________
I am pleased to hear your business is more profitable this year than last.
However, I have been thinking about what you said regarding the statement of
cash flows and have some thoughts as to why you found it confusing.
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 16
990
Taking It to the Net — BTN 16-5
3. The following table shows the net income (or net loss) and the cash flows
from operations for Mendocino Brewing for 2014 and 2015. Over this two-
year period, Mendocino has generated consistently positive cash flows
4. For the recent period, the largest cash outflow for investing was $642,400
for purchases of property, equipment and leasehold improvements.
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 16
991
Teamwork in Action — BTN 16-6
Part 1
a. The reporting objective of the statement of cash flows is to provide
information about important cash inflows and outflows for business
decision makers. It answers specific questions such as:
• How does a company obtain its cash?
• Where does a company spend its cash?
• What is the change in the cash balance?
b. The statement can be prepared using the direct method or the indirect
method for reporting cash flows from operating activities.
Similarities
• Both methods report the same net cash flow from operating activities.
• Both methods classify cash flows into operating, financing, and
investing categories.
Differences
• Cash flow from operating activities is determined differently. The direct
method determines all operating cash inflows and outflows, and then
subtracts total operating outflows from inflows. The indirect method
starts with net income and applies a series of adjustments to reconcile
this accrual basis number to a cash basis number.
• The direct method requires an extra section reconciling net income to
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 16
992
Teamwork in Action (Continued)
c. Steps to prepare the statement of cash flows:
(i) Compute the net increase or decrease in cash using comparative
balance sheet data. This is the target number or the number the
statement will explain and prove.
d. Common analyses made from information in the statement of cash flows
include assessing a company’s:
• Ability to generate future cash flows.
• Ability to pay dividends.
Part 2
Adjusting Net Income to Cash Flow from Operating Activities
Items to Add
Items to Subtract
a.
Noncash expenses
Noncash revenues
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 16
993
Teamwork in Action (Concluded)
Part 3
a. Cash receipts from customers = Sales - Increase in Accounts Receivable,
or, + Decrease in Accounts Receivable.
b. Cash paid for inventory requires a two-step computation.
c. Cash paid for wages and operating expenses = Wages and other operating
d. Cash paid for interest and taxes = Interest and tax expense + Decrease in
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 16
994
Entrepreneurial Decision — BTN 16-7
1. It is common that small businesses must pay cash in advance for items such
as rent, advertising, supplies, and facilities expansion. Consequently, those
2. As a privately owned company, it can potentially raise cash financing for
Entrepreneurial Decision — BTN 16-8
Memorandum
To: Jenna and Matt Wilder
From: Your name
Subject: Performance evaluation of Mountain High
Date: Current Date
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 16
995
Hitting the Road — BTN 16-9
1. The Motley Fool’s Website defines cash flow as earnings before interest,
taxes, depreciation, and amortization (EBITDA). The school’s justification
for this definition includes: “Interest income and expense, as well as taxes, are
all tossed aside because cash flow is designed to focus on the operating business
2. Some analysts tend to focus on this particular earnings definition
(earnings before interest and taxes or EBIT) as it purportedly allows a
3. Answer depends on the links visited and chosen for the report.
Global Decision — BTN 16-10
1. Samsung’s cash flow on total assets ratio follows (in KRW millions):
Current Year = Operating cash flows / Average total assets
2. For the current and prior years, Samsung’s ratios (17.0% and 16.6%,
