Problem 21–21 (continued)
Investment Revenue Receivable Long-term Investments
______________________ _______________________________
2 31
Land Buildings and Equipment
______________________ _______________________________
Accumulated Depreciation Patent
Accounts Payable Salaries Payable
Bond Interest Payable Income Tax Payable
Problem 21–21 (continued)
Deferred Tax Payable Notes Payable
______________________ ______________________________
Lease Liability Bonds Payable
______________________ ______________________________
Discount on Bonds Common Stock
______________________ ______________________________
Paid-in Capital Preferred Stock
Problem 21–21 (continued)
INCOME STATEMENT ACCOUNTS
Sales Investment Revenue
______________________ _______________________________
21–124 Intermediate Accounting, 8/e
Problem 21–21 (continued)
Patent Amortization Expense
______________________
Insurance Expense Bond Interest Expense
Income Tax Expense Loss on Machine Damage
Problem 21–21 (concluded)
ARDUOUS COMPANY
Statement of Cash Flows
For year ended December 31, 2016 ($ in millions)
Cash flows from operating activities:
Cash inflows:
From customers $414
Cash flows from investing activities:
Sale of machine components 17
CASES
Communication Case 21–1
Memorandum
To: Mr. Robert James
From: Your Name
Date: Current Date
RE: Discrepancy between profitability and cash flows
($ in millions)
[Direct Method]
Cash flows from operating activities:
Cash inflows:
Case 21–1 (concluded)
[Indirect Method]
Cash flows from operating activities:
Net income $ 5
Adjustments for noncash effects:
Depreciation expense 5
Changes in operating assets and liabilities:
21–128 Intermediate Accounting, 8/e
Judgment Case 21–2
DARING COMPANY
Statement of Cash Flows
For year ended December 31, 2016 ($ in 000s)
Cash flows from operating activities:
Cash inflows:
Cash flows from investing activities:
Purchase of depreciable assets (given) (55)
Cash flows from financing activities:
Your concerns are justified in the sense that cash flows are insufficient to cover
existing interest charges, not to mention additional charges from new debt. In fact, the
Case 21–2 (concluded)
On the other hand, the negative cash flow from operations is not reason, in and of
itself, for rejecting the application. Profit is positive. The reason net income is
measured on an accrual basis rather than a cash basis is that very often, net income is a
21–130 Intermediate Accounting, 8/e
Research Case 21–3
The results students report will vary depending on the dates of the statements
Requirement 1
FedEx is expanding its business as evidenced by the investing activities. External
financing need not be sufficient to fund those investments because of the
substantial internal financing provided by operating activities. Notice that
dividends to shareholders are relatively small, so most funds from operating
activities are being reinvested in the business.
Requirement 2
The six activities listed under financing activities are:
($ in millions):
Financing Activities 2013 2012 2011
Principal payments on debt (417) (29) (262)
Proceeds from debt issuances 1,739 — —
Case 21–3 (concluded)
Requirement 3
Companies are required to separately disclose cash payments for both interest and
income taxes. When the direct method is used to report operating activities, those
amounts automatically are shown. But when a company uses the indirect method,
as FedEx does, supplemental disclosure is needed. Note 15 in the disclosure notes
serves this purpose:
Note 15: Supplemental Cash Flow Information
Cash paid for interest expense and income taxes for the years ended May 31 was as
follows:
In thousands 2013 2012 2011
21–132 Intermediate Accounting, 8/e
Trueblood Accounting Case 19–4
Analysis Case 21–5
Requirement 1
(a)
Cash
________________________________________________________________
Beginning balance ?
(b)
Accounts Receivable
________________________________________________________________
Beginning balance 252
21–134 Intermediate Accounting, 8/e
Case 21–5 (continued)
(c)
Accounts Payable
_______________________________________________________________
90 Beginning balance
Case 21–5 (continued)
(d)
Accumulated Depreciation
________________________________________________________________
? Beginning balance
