2. It focuses on the differences between net income and cash flows from operating activities,
4. The $30,000 increase must be added to income from operations because the amount of cash
5. The $25,000 decrease in salaries payable should be deducted from income to determine the
8. a. Cash flows from investing activities—Cash received from the disposal of fixed assets,
CHAPTER 16
STATEMENT OF CASH FLOWS
DISCUSSION QUESTIONS
16-1
CHAPTER 16 Statement of Cash Flows
PE 16–1A
PE 16–1B
PE 16–2A
Net income…………………………………………………………………………………
…
$107,500
PE 16–2B
Net income…………………………………………………………………………………
…
$175,000
PRACTICE EXERCISES
16-2
CHAPTER 16 Statement of Cash Flows
PE 16–3A
Net income…………………………….………………………………………………………
…
$253,000
Adjustments to reconcile net income to net cash flow from
PE 16–3B
Net income…………………………………..………………………………………………… $160,000
Adjustments to reconcile net income to net cash flow from
PE 16–4A
Cash flows from operating activities:
Net income……………………………………….………………………
…
$270,000
PE 16–4B
Cash flows from operating activities:
Net income…………………………………….…………………………
…
$280,000
PE 16–5A
The loss on the sale of land is added to net income in the Operating Activities section.
…
PE 16–5B
The gain on the sale of land is subtracted from net income in the Operating Activities
PE 16–6A
Sales…………………………………………………………………………………………
…
$480,000
…
PE 16–6B
Sales…………………………………………………………………………………………
…
$112,000
…
16-4
CHAPTER 16 Statement of Cash Flows
PE 16–7A
Cost of merchandise sold………………………………………………………………
…
$770,000
…
PE 16–7B
Cost of merchandise sold………………………………………………………………
…
$240,000
…
PE 16–8A
a. Net cash flow from operating activities…………………
…
$ 294,000 $ 280,000
PE 16–8B
a. Net cash flow from operating activities…………………
…
$ 476,000 $ 455,000
16-5
CHAPTER 16 Statement of Cash Flows
Ex. 16–1
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)
16-6
CHAPTER 16 Statement of Cash Flows
Ex. 16–2
a. Cash receipt, $94,000 e. Cash receipt, $200,000
Ex. 16–3
a. financing g. financing
Ex. 16–4
a. added g. deducted
16-7
CHAPTER 16 Statement of Cash Flows
Ex. 16–5
a. Net income……………………………………………………………
…
$600,000
Adjustments to reconcile net income to net cash
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. 16–6
a. Cash flows from operating activities:
Net income……………………………………………………………
…
$240,000
Adjustments to reconcile net income to net cash
flow from operating activities:
16-8
CHAPTER 16 Statement of Cash Flows
Ex. 16–7
a. Cash flows from operating activities:
Net income……………………………………………………………… $635,000
Adjustments to reconcile net income to net cash
flow from operating activities:
b. Cash flows from operating activities reports the cash inflow or outflow from a
Ex. 16–8
16-9
CHAPTER 16 Statement of Cash Flows
Ex. 16–9
Cash flows from investing activities:
Cash received from sale of equipment…………………………………………… $72,000
Ex. 16–10
Cash flows from investing activities:
Ex. 16–11
Cash flows from investing activities:
Ex. 16–12
Cash flows from financing activities:
16-10
CHAPTER 16 Statement of Cash Flows
Ex. 16–13
Cash flows from investing activities:
Cash paid for purchase of land………………………………………………………
…
$246,000
Ex. 16–14
Cash flows from financing activities:
Ex. 16–15
a. Net cash flow from operating activities…………………………… $357,500
Add: Increase in accounts receivable…………………………
…
$14,300
16-11
CHAPTER 16 Statement of Cash Flows
Ex. 16–15 (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. 16–16
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
net cash flow from operating activities. The company had grown quickly in prior years,
(in thousands)
JONES SODA CO.
Cash Flows from Operating Activities
16-12
CHAPTER 16 Statement of Cash Flows
Ex. 16–17
a.
Cash flows from operating activities:
Net income $260
Adjustments to reconcile net income to net
cash flow from operating activities:
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:
For the Year Ended December 31, 2014
WEDGE INDUSTRIES INC.
Statement of Cash Flows
16-13
CHAPTER 16 Statement of Cash Flows
Ex. 16–18
16-14
CHAPTER 16 Statement of Cash Flows
Ex. 16–18 (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
net cash flow from operating activities:
Decrease in accrued expenses
payable (2,400)
For the Year Ended December 31, 2014
SHASTA INC.
Statement of Cash Flows
16-15
CHAPTER 16 Statement of Cash Flows
Ex. 16–19
a. Sales……………………………………………………………………………………
…
$753,500
Ex. 16–20
Ex. 16–21
a. Cost of merchandise sold……………………………………………………………
…
$1,031,550
16-16
…
…
CHAPTER 16 Statement of Cash Flows
Ex. 16–22
a. Cash flows from operating activities:
Cash received from customers………………
…
$522,760
Computations:
1. Sales……………………………………………………………
…
$511,000
…
3. Operating expenses other than depreciation……………
…
$105,000
…
b. The direct method directly reports cash receipts and payments. The cash received
less the cash payments is the net cash flow from operating activities. Individual
1
16-17
CHAPTER 16 Statement of Cash Flows
Ex. 16–23
Cash flows from operating activities:
Computations:
1. Sales……………………………………………………………………………………… $445,500
2. Cost of merchandise sold……………………………………………………………
…
$154,000
3. Operatin
g
expenses other than depreciation……………………………………
…
$115,280
Add decrease in accrued expenses pa
y
able……………………………………
…
1,760
…
…
Ex. 16–24
a. Cash flows from investment in PPE………………………………………………
…
$210,000
…
…
…
1
16-18
CHAPTER 16 Statement of Cash Flows
Ex. 16–25
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. 16–26
Recent Fiscal Year End
(all numbers in thousands)
16-19
CHAPTER 16 Statement of Cash Flows
Prob. 16–1A
Cash flows from operating activities:
Net income $ 190,280
Adjustments to reconcile net income to
net cash flow from operating activities:
Decrease in accrued expenses
payable (7,800)
Net cash flow from operating activities $ 148,280
Cash flows from investing activities:
For the Year Ended December 31, 2014
CHARLES INC.
Statement of Cash Flows
PROBLEMS
16-20