Cash flows from investing activities
Sale of equipment Value
Net cash provided by investing activities Value
Cash flows from financing activities
Issuance of common stock Value
Redemption of bonds Value
Payment of dividends Value
Net cash used by financing activities ?
Net increase in cash ?
Cash at beginning of period Value
Cash at end of period ?
(b) Free Cash Flow:
Net cash provided by operating activities Value
Less: Capital expenditures Value
Cash dividends Value
?
?
After you have completed the requirements of P17-7A, consider the additional question.
Answers are on the other tab in this file.
1. Assume that depreciation changed to $17,500 and that asset was sold for $11,500 cash. Also assume that the
book value of the asset at the time of sale was also $11,500. Show the impact of these changes on the
statement of cash flows and free cash flow.
P17-7A Solution
(a)
Cash flows from operating activities
Net income $32,000
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation expense $14,500
Increase in accounts receivable (16,000)
Cash flows from investing activities
Sale of equipment 8,500
Net cash provided by investing activities 8,500
Cash flows from financing activities
Issuance of common stock 4,000
(b) Free Cash Flow:
Net cash provided by operating activities $31,500
Less: Capital expenditures $0
NOSKER COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
P17-7A Solution to additional question
1. Assume that depreciation changed to $17,500 and that asset was sold for $11,500 cash. Also assume that the
book value of the asset at the time of sale was also $11,500. Show the impact of these changes on the
statement of cash flows and free cash flow.
(a)
Cash flows from operating activities
Net income $32,000
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation expense $17,500
Increase in accounts receivable (16,000)
Cash flows from investing activities
Sale of equipment 11,500
Net cash provided by investing activities 11,500
Cash flows from financing activities
Issuance of common stock 4,000
(b) Free Cash Flow:
Net cash provided by operating activities $34,500
Less: Capital expenditures $0
Cash dividends 20,000
NOSKER COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
P17-8A Solution
(a)
Cash flows from operating activities
Cash receipts from customers $226,000 (1)
Less cash payments:
To suppliers $173,000 (2)
For operating expenses 9,500 (3)
Cash flows from investing activities
Sale of equipment 8,500
Net cash provided by investing activities 8,500
Cash flows from financing activities
Issuance of common stock 4,000
Computations:
(1) Cash receipts from customers
Sales revenue $242,000
Deduct: Increase in accounts receivable 16,000
Cash receipts from customers $226,000
(2) Cash payments to suppliers
Cost of goods sold $175,000
Add: increase in inventory 7,000
NOSKER COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash payments for income taxes $9,000
(b) Free Cash Flow:
Net cash provided by operating activities $31,500
Less: Capital expenditures $0
P17-8A Solution to additional question
1. Assume that the 2017 balances for accounts receivable, inventory, and accounts payable changed to $26,000,
$30,000, and $23,000 respectively. Dividends declared and paid also changed to $28,000. Show the impact on the
statement of cash flows and free cash flow.
(a)
Cash flows from operating activities
Cash receipts from customers $230,000 (1)
Less cash payments:
To suppliers $177,000 (2)
For operating expenses 9,500 (3)
Cash flows from investing activities
Sale of equipment 8,500
Net cash provided by investing activities 8,500
Cash flows from financing activities
Issuance of common stock 4,000
Computations:
(1) Cash receipts from customers
Sales revenue $242,000
Deduct: Increase in accounts receivable 12,000
Cash receipts from customers $230,000
(2) Cash payments to suppliers
Cost of goods sold $175,000
Add: increase in inventory 10,000
(3) Cash payments for operating expenses
Operating expenses $24,000
Deduct: Depreciation 14,500
Cash payments for operating expenses $9,500
(b) Free Cash Flow:
Net cash provided by operating activities $31,500
NOSKER COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
Less: Capital expenditures $0
P17-12A Prepare a worksheet – indirect method
Condensed financial data of Oakley Company appear below.
Assets 2017 2016
Cash $82,700 $47,250
Accounts Receivable 90,800 57,000
Inventory 126,900 102,650
Investments 84,500 87,000
Equipment 255,000 205,000
Accumulated depreciation–equipmen
($49,500) (40,000)
Total 590,400 $458,900
Liabilities and Stockholders’ Equity
Accounts payable $57,700 $48,280
Accrued expenses payable 12,100 18,830
Bonds payable 100,000 70,000
Common stock 250,000 200,000
Retained earnings 170,600 121,790
Total $590,400 $458,900
Sales revenue $297,500
Gain on disposal of equipment 8,750
306,250
Less:
Cost of goods sold $99,460
Operating expenses (excluding
depreciation expense)
14,670
Depreciation expense 49,700
Income tax expense 7,270
Interest expense 2,940 174,040
Net income $132,210
Additional information:
1. Equipment costing $97,000 was purchased for cash during the year.
2. Investments were sold at cost.
3. Equipment costing $47,000 was sold for $15,550, resulting in gain of $8,750.
4. A cash dividend of $83,400 was declared and paid during the year.
Instructions
Prepare a worksheet for the statement of cash flows using the indirect method. Enter the
reconciling items directly in the worksheet columns, using letters to cross-reference each entry.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
Balance
12/31/16
Debit Credit
Balance
12/31/17
Cash Value Value Value
Accounts Receivable Value Value Value
Inventory Value Value Value
For the Year ended December 31, 2017
OAKLEY COMPANY
Comparative Balance sheet
December 31
OAKLEY COMPANY
Income Statement
Balance Sheet Accounts
Debits
OAKLEY COMPANY
Worksheet – Statement of Cash Flows
For the Year Ended December 31, 2017
Reconciling Items
Investments Value Value Value
Equipment Value Value Value Value
Total ? ?
Accumulated depreciation –equipment Value Value Value Value
Accounts payable Value Value Value
Accrued expenses payable Value Value Value
Bonds payable Value Value Value
Common stock Value Value Value
Retained earnings Value Value Value Value
Total ? ?
Operating activities
Net income Value
Increase in accounts receivable Value
Increase in inventory Value
Increase in accounts payable Value
Decrease in accrued expenses payable Value
Depreciation expense Value
Gain on disposal of equipment Value
Investing activities
Sale of investments Value
Sale of equipment Value
Purchase of equipment Value
Financing activities
Issuance of common stock Value
Issuance of bonds Value
Payment of dividends Value
Totals ? ?
Increase in cash Value
Totals ? ?
After you have completed the requirements of P17-12A, consider the additional question.
Answers are on the other tab in this file.
1. Assume that in 2017, the balances for accounts receivable, inventory, accounts payable, and accrued expenses payable changed to
$94,800, $122,900, $54,700 and $15,100 respectively. Revise the worksheet to show the impact of these changes.
Credits
Statement of Cash Flow Effects
P17-12A Solution
Balance
12/31/16
Debit Credit
Balance
12/31/17
Cash 47,250 (m) 35,450 82,700
Accounts Receivable 57,000 (a) 33,800 90,800
Accumulated depreciation –equipment 40,000 (h) 40,200 (g) 49,700 49,500
Accounts payable 48,280 (c) 9,420 57,700
Accrued expenses payable 18,830 (d) 6,730 12,100
Operating activities
Net income (k) 132,210
Increase in accounts receivable (a) 33,800
Increase in inventory (b) 24,250
Increase in accounts payable (c) 9,420
Decrease in accrued expenses payable (d ) 6,730
Purchase of equipment (f) 97,000
Financing activities
Issuance of common stock (j) 50,000
Issuance of bonds (l) 30,000
Credits
Statement of Cash Flow Effects
OAKLEY COMPANY
Worksheet – Statement of Cash Flows
For the Year Ended December 31, 2017
Reconciling Items
Balance Sheet Accounts
Debits
P17-12A Solution to additional question
1. Assume that in 2017, the balances for accounts receivable, inventory, accounts payable, and accrued expenses payable changed to
$94,800, $122,900, $54,700 and $15,100 respectively. Revise the worksheet to show the impact of these changes.
Balance
12/31/16
Debit Credit
Balance
12/31/17
Cash 47,250 (m) 35,450 82,700
Accumulated depreciation –equipment 40,000 (h) 40,200 (g) 49,700 49,500
Accounts payable 48,280 (c) 6,420 54,700
Operating activities
Net income (k) 132,210
Increase in accounts receivable (a) 37,800
Increase in inventory (b) 20,250
Investing activities
Sale of investments (e ) 2,500
Sale of equipment (h) 15,550
Purchase of equipment (f) 97,000
Financing activities
Credits
Statement of Cash Flow Effects
OAKLEY COMPANY
Worksheet – Statement of Cash Flows
For the Year Ended December 31, 2017
Reconciling Items
Balance Sheet Accounts
Debits