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*PROBLEM 17-12A
OAKLEY COMPANY
Worksheet—Statement of Cash Flows
For the Year Ended December 31, 2017
Balance
12/31/16
Reconciling Items
Balance
12/31/17
Balance Sheet Accounts
Debit
Credit
Debits
Cash
Accounts receivable
Inventory
Investments
47,250
57,000
102,650
87,000
(m) 35,450
(a) 33,800
(b) 24,250
(e) 2,500
82,700
90,800
126,900
84,500
Statement of Cash Flow Effects
Operating activities
Net income
Increase in accounts receivable
Increase in inventory
Increase in accounts payable
Decrease in accrued expenses payable
Depreciation expense
Gain on disposal of equipment
Investing activities
Sale of investments
Sale of equipment
Purchase of equipment
Financing activities
(k) 132,210
(c) 9,420
(g) 49,700
(e) 2,500
(h) 15,550
(a) 33,800
(b) 24,250
(d) 6,730
(h) 8,750
(f) 97,000
BYP 17-1 FINANCIAL REPORTING PROBLEM
(a) Net cash provided by operating activities:
2013 $53,666 million
2012 $50,856 million
(b) The increase in cash and cash equivalents for the year ended September 28,
2013 was $3,513 million, and the increase was $931 million for the year
ended September 29, 2012.
(e) The net cash used by investing activities in 2013 was $33,774 million.
BYP 17-2 COMPARATIVE ANALYSIS PROBLEM
All amounts in millions
PepsiCo
Coca-Cola
(a)
$9,688 – $2,795 – $3,434 =
$3,459
(b) The companies are similar in their ability to generate cash. Both had a
BYP 17-3 COMPARATIVE ANALYSIS PROBLEM
All amounts in millions
Amazon
Wal-Mart
(a)
$5,475 – $3,444 – $0 =
$2,031
(b) Both companies had a significant amount of “free cash” available after
covering capital expenditures and cash dividends (for Wal-Mart). Wal-
BYP 17-4 DECISION MAKING ACROSS THE ORGANIZATION
(a) GUTHRIE COMPANY
Statement of Cash Flows
For the Year Ended January 31, 2017
Cash flows from operating activities
Net loss ................................................... $ (30,000)*
Adjustments to reconcile net income
Cash flows from investing activities
Sale of investment ................................. 80,000
Purchase of investment ......................... (75,000)
Cash flows from financing activities
Sale of capital stock ............................... 420,000
Purchase of treasury stock ................... (10,000)
Net cash provided by financing
activities ...................................... 410,000
Noncash investing and financing activities
Issuance of note for truck ..................... $ 20,000
BYP 17-4 (Continued)
*Computation of net income (loss)
Sales of merchandise .............................. $380,000
Interest revenue........................................ 6,000
Gain on sale of investment
(b) From the information given, it appears that from an operating standpoint,
Guthrie Company did not have a superb first year, having suffered a
$30,000 net loss. Mary is correct; the statement of cash flows is not
BYP 17-5 REAL-WORLD FOCUS
(a) Crucial to the SEC’s effectiveness is its enforcement authority. Each
year the SEC brings hundreds of civil enforcement actions against indi-
viduals and companies that break the securities laws. Typical infracti-
(b) The main purposes of these laws can be reduced to two common-sense
notions:
Companies publicly offering securities for investment dollars must
tell the public the truth about their businesses, the securities they
are selling, and the risks involved in investing.
BYP 17-6 REAL-WORLD FOCUS
Answers will vary depending on the company chosen by the student.
BYP 17-7 COMMUNICATION ACTIVITY
MEMO
To: Will Hardin
From: Student
Re: Statement of cash flows
The statement of cash flows provides information about the cash receipts
and cash payments of a firm, classified as operating, investing, and financing
activities. The operating activities section of the company’s statement of cash
flows shows that cash increased by $172,000 as a result of transactions which
affected net income. This amount is computed by adjusting net income for
those items which affect net income, but do not affect cash, such as sales
on account which remain uncollected at year-end.
BYP 17-8 ETHICS CASE
(a) The stakeholders in this situation are:
Samuel Gunkle, president of Wesley Corporation.
Gerald Rondelli, controller.
The Board of Directors.
The stockholders of Wesley Corporation.
(b) The president’s statement, “We must get that amount above $1 million,”
puts undue pressure on the controller. This statement along with his
statement, “I know you won’t let me down, Gerald,” encourages Gerald
to do something unethical.
(c) It is unlikely that any board members (other than board members who are
also officers of the company) would discover the misclassification. Board
members generally do not have detailed enough knowledge of their
company’s transactions to detect this misstatement. It is possible that an
BYP 17-9 ALL ABOUT YOU
(a) The article describes three factors that determine how much money
you should set aside. (1) Your willingness to take risk. You need to evaluate
how willing you are to experience wide swings in your financial position.
(2) Your needs. Your need to carefully evaluate your situation and evaluate
(b) They recommend having at least three months of living expenses set
aside, and up to six months.
(c) Responses to this question will vary. What is most important is that
BYP 17-10 FASB CODIFICATION ACTIVITY
(a) Cash equivalents are short-term, highly liquid investments that have
both of the following characteristics:
a. Readily convertible to known amounts of cash
b. So near their maturity that they present insignificant risk of
changes in value because of changes in interest rates.
Generally, only investments with original maturities of three months or
less qualify under that definition. Original maturity means original
maturity to the entity holding the investment. For example, both a
(b) Financing activities include obtaining resources from owners and
providing them with a return on, and a return of, their investment;
receiving restricted resources that by donor stipulation must be used
(c) Investing activities include making and collecting loans and acquiring
and disposing of debt or equity instruments and property, plant, and
equipment and other productive assets, that is, assets held for or used
BYP 17-10 (Continued)
(d) Operating activities include all transactions and other events that are
not defined as investing or financing activities (see paragraph 230-10-
(e) The primary objective of a statement of cash flows is to provide
relevant information about the cash receipts and cash payments of an
entity during a period.
As indicated in the glossary at this same section, cash includes not
only currency on hand but demand deposits with banks or other
financial institutions. Cash also includes other kinds of accounts that
have the general characteristics of demand deposits in that the
(f) Information about all investing and financing activities of an entity
during a period that affect recognized assets or liabilities but that do
not result in cash receipts or cash payments in the period shall be
IFRS EXERCISES
IFRS 17-1
Under IFRS bank overdrafts are treated as part of cash and cash
equivalents on the balance sheet. As a result, on the statement of cash
flows they are part of the change in cash in cash equivalents. In contrast,
of financing on the statement of cash flows.
IFRS 17-2
The treatment of these items under IFRS and GAAP is as follows:
IFRS GAAP
(a) Interest paid Operating or financing Operating
(b) Interest received Operating or investing Operating
IFRS 17-3 INTERNATIONAL FINANCIAL REPORTING PROBLEM
(a) The company reports interest paid as an operating activity.
(b) The company reports dividends received as an operating activity.
