CHAPTER 17
SOLUTIONS TO PROBLEMS: SET B
PROBLEM 17-1B
Transaction
SCF Activity
Affected
Cash inflow, outflow,
or no cash flow effect?
(a)
Recorded depreciation expense
on the plant assets.
O
No cash flow effect
(b)
Incurred a loss on disposal of
plant assets.
O
No cash flow effect
(c)
Acquired a building by paying cash.
Cash outflow
(d)
Made principal repayments on a
mortgage.
F
Cash outflow
(e)
Issued common stock
Cash inflow
Purchased shares of another
company to be held as a long-term
equity investment.
Cash outflow
(g)
Paid cash dividends to common
stockholders.
F
Cash outflow
(h)
inventory system.
(i)
Purchased inventory on credit.
No cash flow effect
(j)
Paid wages to employees.
Cash outflow
Sold inventory on credit. The
company uses a perpetual
O
No cash flow effect
PROBLEM 17-2B
(a) Cash inflows (outflows) related to plant assets 2017:
Equipment purchase ($90,000)
Land purchase (30,000)
Proceeds from plant assets sold 21,000*
Note to instructor—some students may find journal entries helpful in under–
standing this exercise.
Equipment …………………………………………………….. 90,000
Cash ………………………………………………………. 90,000
(b) Equipment purchase Investing activities (outflow)
Land purchase Investing activities (outflow)
PROBLEM 17-3B
ASQUITH COMPANY
Partial Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income …………………………..……………………. $ 880,000
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation expense ………………………….. $ 95,000
Amortization expense ………………………….. 20,000
Decrease in accounts receivable ………….. 230,000
*PROBLEM 17-4B
ASQUITH COMPANY
Partial Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Cash receipts from customers……… $5,480,000 (1)
Less cash payments:
To suppliers …………………………. $3,380,000 (2)
Computations:
(1) Cash receipts from customers
Sales ………………………………………………………… $5,250,000
Add: Decrease in accounts receivable ………. 230,000
Cash receipts from customers …………………… $5,480,000
(2) Cash payments to suppliers
Cost of goods sold ……………………………………. $3,310,000
(3) Cash payments for operating expenses
Operating expenses ……………… $ 945,000
Add: Increase in prepaid
PROBLEM 17-5B
ANNE DROID INC.
Partial Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income …………………………………………………. $115,000
Adjustments to reconcile net income
to net cash provided by operating activities:
*PROBLEM 17-6B
ANNE DROID INC.
Partial Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Cash receipts from customers…………. $566,000 (1)
Less cash payments:
(1) Computation of cash receipts from customers
Revenues ………………………………………………………………. $551,000
Add: Decrease in accounts receivable
($70,000 – $55,000) ……………………………………….. 15,000
Cash receipts from customers………………………………… $566,000
(2) Computation of cash payments for operating expenses
Operating expenses ……………………………………………….. $400,000
(3) Income tax expense ……………………………………………….. $ 36,000
Deduct: Increase in income taxes payable
PROBLEM 17-7B
(a) ROCASTLE COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income ……………………………………………. $28,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Cash flows from investing activities
Sale of plant assets ……………………………….. 12,000
Purchase of equipment ………………………….. (7,000)
Cash flows from financing activities
Issuance of bonds …………………………………. 10,000
Payment of cash dividends ……………………. (25,000)
(b) ($5,000) – $7,000 – $25,000 = ($37,000)
*PROBLEM 17-8B
(a) ROCASTLE COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Cash receipts from customers …….. $275,000 (1)
Less cash payments:
To suppliers ………………………… $236,000 (2)
For operating expenses
Cash flows from investing activities
Sale of plant assets …………………….. 12,000
Purchase of equipment ……………….. (7,000)
Net cash provided by
investing activities ……………. 5,000
Computations:
(1) Cash receipts from customers
Sales ………………………………………………………. $286,000
Deduct: Increase in accounts receivable….. 11,000
Cash receipts from customers …………………. $275,000
*PROBLEM 17-8B (Continued)
(2) Cash payments to suppliers
Cost of goods sold ……………………………………….. $204,000
Add: Increase in inventory ……………………………. 20,000
(3) Cash payments for income taxes
Income tax expense ……………………………………… $ 10,000
PROBLEM 17-9B
MINNIE HOOPER COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income ………………………………………………. $ 108,160
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation expense ………………………… $ 25,000
Cash flows from investing activities
Sale of investments ………………………………….. 27,500
Sale of plant assets ………………………………….. 10,000
Cash flows from financing activities
Issuance of bonds ……………………………………. 70,000
Sale of common stock ………………………………. 50,000
Net increase in cash ………………………………………… 60,200
*PROBLEM 17-10B
MINNIE HOOPER COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Cash receipts from customers …………. $271,300 (1)
Less cash payments:
To suppliers ……………………………… $ 112,990 (2)
For income taxes ………………………. 37,270
Cash flows from investing activities
Sale of plant assets …………………………. 10,000
Sale of investments …………………………. 27,500
Cash flows from financing activities
Sale of common stock ……………………… 50,000
Issuance of bonds …………………………... 70,000
Net increase in cash ……………………………….. 60,200
Cash at beginning of period ……………………. 33,400
*PROBLEM 17-10B (Continued)
Computations:
(1) Cash receipts from customers
Sales ……………………………………………………………………. $297,500
Deduct: Increase in accounts receivable ………………. 26,200
(2) Cash payments to suppliers
Cost of goods sold ……………………………………………….. $ 99,460
Add: Increase in inventory …………………………………… 21,850
(3) Cash payments for operating expenses
Operating expenses ……………………………………………… $ 19,670
PROBLEM 17-11B
VERNET COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income ………………………………………………….. $50,000
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation expense ……………………………. $ 57,000
Gain on disposal of plant assets ……………. (6,000)*
Cash flows from investing activities
Sale of land …………………………………………………. 35,000
Sale of plant assets ……………………………………… 37,000
Cash flows from financing activities
Payment of cash dividends …………………………... (82,940)
Net decrease in cash …………………………………………… (15,540)