22-21
E22-9 (continued)
FAZZI COMPANY
Balance Sheet
December 31, 2010
Assets
Liabilities and Stockholders’ Equity
Cash
$ 1,500
Current liabilities
$ 1,700
E22-10
ANDELL COMPANY
Statement of Cash Flows
For Year Ended December 31, 2010
Net Cash Flow From Operating Activities
Net income $10,600
Adjustments for differences between income
Cash Flows From Investing Activities
Proceeds from sale of equipment $ 4,400
Payment for purchase of land (5,200)
Payment for investment in bonds (6,000)
Net cash used for investing activities (6,800)
E22-11
HANKS COMPANY
Worksheet for Statement of Cash Flows
For Year Ended December 31, 2010
Account Titles Worksheet Entries
Debits Change Debit Credit
Cash
Noncash Accounts:
Accounts receivable
Credits
Accumulated depreciation
Accounts payable
830
(290)
350
120
(m)
830
(d)
(b)
(f)
290
350
120
Net Cash Flow From Operating Activities
Net income
Add: Depreciation expense
Patent amortization expense
Decrease in accounts receivable
Increase in accounts payable
(a)
(b)
(c)
(d)
(f)
1,300
350
100
290
120
22-23
E22-11 (continued)
Note to Instructor: Stock dividends only affect stockholders’ equity accounts and
do not involve the transfer of assets to stockholders. Consequently, the issuance of
E22-12
Worksheet for E22-12 is on following page
Notes to Instructor:
(b) Equipment with a cost of $390 and a book value of $300 was sold for $390;
therefore, a gain of $90 was recorded.
E22-12 (continued)
PAYNE COMPANY
Worksheet for Statement of Cash Flows
For Year Ended December 31, 2010
Balances Worksheet Entries
Account Titles 1/1/2010
12/31/2010
Change
Debit Credit
Debits
Cash
Credits
Accumulated depreciation
Accounts payable
Notes payable (long-term)
Common stock, no par
Retained earnings
Totals
400
310
800
900
600
700
3,310
600
400
500
720
1,000
1,400
4,020
200
90
(300)
(180)
400
700
710
(l)
(b)
(g)
(j)
(k)
200
90
300
180
900
2,830
(h)
(d-1)
(a)
180
400
1,600
2,830
Net Cash Flow From Operating Activities
Net income
Add: Loss on sale of land
Decrease in accounts receivable
(a)
(c)
(e)
1,600
40
20
E22-13
1.
STEWART COMPANY
Worksheet for Statement of Cash Flows
For Year Ended December 31, 2010
Balances Worksheet Entries
Account Titles 12/31/2009
12/31/2010
Change
Debit Credit
Debits
Cash
Noncash Accounts:
Totals
Credits
Accumulated depreciation
Accounts payable
Bonds pay. (due 1/1/2015)
Common stock, $10 par
Retained earnings
Totals
700
3,400
200
600
1,000
900
700
3,400
1,130
4,140
150
750
1,000
1,400
840
4,140
430
740
(50)
150
0
500
140
740
(l)
(f)
(k)
430
100
1,000
2,510
(h)
(i)
(j)
(a)
50
150
500
1,140
2,510
Net Cash Flow From Operating Activities
Net income
Add: Decrease in accounts receivable
Loss on sale of equipment
(a)
(b)
(f)
1,140
140
260
Notes to Instructor:
(d) Land was sold for $530 on which a $400 gain was recorded; therefore, the cost
of the land was $130.
E22-13 (continued)
1. (continued)
(e) Land account increased by $200. Land costing $130 was sold; therefore, land
2. STEWART COMPANY
Statement of Cash Flows
For Year Ended December 31, 2010
Net Cash Flow From Operating Activities
Net income $ 1,140
Adjustments for differences between income
flows and cash flows from operating activities:
Add: Depreciation expense 50
Decrease in accounts receivable 140
22-27
E22-14
(1) Bonds Payable 20,000
Discount on Bonds Payable 1,700
(2) Bonds Payable 35,000
Premium on Bonds Payable 2,000
E22-15
1. Interest Paid
Income Taxes Paid
2. Under IFRS, interest paid may be reported as either a cash outflow for operating
activities or a cash outflow for financing activities. Income taxes paid may be
E22-16
2010 Worksheet Entries
E22-16 (continued)
Unrealized Decrease in Value of
Available-for-Sale Securities 100
Allowance for Change in Value of Investment 100
E22-17
Note to Instructor: The information presented only allows the calculation of 3
operating cash flows. If students have been assigned E22-13, it may be useful to
point out that the $1,290 net cash provided by operating activities is the same
under both the direct and indirect methods.
STEWART COMPANY
Statement of Cash Flows (Partial)
For Year Ended December 31, 2010
Cash Flows From Operating Activities
E22-18
1. WOODRAIL COMPANY
Statement of Cash Flows (Partial)
For Year Ended December 31, 2010
Cash Flows From Operating Activities
Cash Inflows:
2. Under IFRS: (a) the payment of dividends $4,000 may be classified as either a
cash outflow for operating activities or a cash outflow for financing activities;
E22-19
1. ESTES COMPANY
Statement of Cash Flows
For Year Ended December 31, 2010
Cash Flows From Operating Activities
Cash Flows From Investing Activities
Proceeds from sale of investments $ 6,000
Payment for purchase of equipment (18,500)
Net cash used for investing activities (12,500)
2. Under IFRS: (a) the payment of $4,000 dividends may be classified as either a
cash outflow for operating activities or a cash outflow for financing activities;
22-31
E22-20
WALSON COMPANY
Statement of Cash Flows
For Year Ended December 31, 2010
Cash Flows From Operating Activities
Cash Inflows:
Cash Flows From Investing Activities
Proceeds from sale of land $ 1,900
Payment for purchase of equipment (10,400)
Net cash used for investing activities (8,500)
Cash Flows From Financing Activities
22-32
SOLUTIONS TO PROBLEMS
P22-1
1.
7.
A-
A-
8.
14.
C-
D+ and –
15.
B+
21.
A+
P22-2
VERNA COMPANY
Statement of Cash Flows (Partial)
For Year Ended December 31, 2010
Net Cash Flow From Operating Activities
Net income $68,400
Adjustments for differences between income
22-33
P22-3
1. WARRICK COMPANY
Statement of Cash Flows
For Year Ended December 31, 2010
Net Cash Flow From Operating Activities
Net income $ 59,200
Net cash provided by operating activities $ 71,900
Cash Flows From Investing Activities
Payment for purchase of building $(98,000)
Proceeds from sale of land 7,000
Payment for purchase of long-term investments (9,600)
Schedule 1: Investing and Financing Activities Not Affecting Cash
Investing Activities
Acquisition of equipment under capital lease $(19,500)
22-34
P22-4
1. TRONE COMPANY
Statement of Cash Flows
For Year Ended December 31, 2010
Net Cash Flow From Operating Activities
Net income $ 49,200
Net cash provided by operating activities $ 44,100
Cash Flows From Investing Activities
Payment for purchase of patent $(19,800)
Payment for purchase of equipment (39,400)
Proceeds from sale of investments 8,500
Net cash used for investing activities (50,700)
Schedule 1: Investing and Financing Activities Not Affecting Cash
Investing Activities
P22-4 (continued)
2. The company would have had a $21,600 decrease ($25,000 – $3,400) in cash
P22-5
1. A small stock dividend only affects stockholders’ equity accounts and,
therefore, is not considered to be a financing activity and is not reported on the
2. This exchange represents cash flows for investing activities because cash was
paid in the acquisition of the land. Additionally, the use of equipment in the
exchange represents a simultaneous investing and financing activity, which
would be recorded as follows:*
Land 12,000
P22-5 (continued)
3. The conversion of preferred stock to common stock is a simultaneous investing
and financing transaction involving the exchange of equity securities that will
be reported in a schedule accompanying the statement of cash flows. It is
recorded on the worksheet as follows:
4. The retirement of bonds payable would be recorded under the cash flows from
financing activities section of the statement, and the following entry would be
made on the worksheet:
5. The cash flows from extraordinary items are reported as investing or financing
activities on the statement of cash flows, and are not included in net cash flows
from operating activities. The proceeds from the destroyed building are
P22-5 (continued)
6. Acquiring equipment by entering into a capital lease is a simultaneous investing
and financing activity, and both activities must be reported on a schedule
accompanying the statement of cash flows. In addition, the initial cash
payment must be reported as a cash outflow for investing activities. The
22-38
P22-6
PERRIN COMPANY
Worksheet for Statement of Cash Flows
For Year Ended December 31, 2010
Balances Worksheet Entries
Account Titles 12/31/2009
12/31/2010
Change
Debit Credit
Debits
Cash
Noncash Accounts:
Credits
Accumulated depreciation
Accounts payable
800
7,000
3,300
1,540
8,500
3,695
740
1,500
395
(p)
(k)
740
700
(b)
(e)
2,200
395
P22-6 (continued)
Worksheet Entries
Debit Credit
Net Cash Flow From Operating Activities
Net income
Add: Depreciation expense
Cash Flows From Financing Activities
Proceeds from issuance of bonds payable
Payment for acquisition of treasury stock3
Payment of dividends
(a)
(b)
(g)
8,000
2,200
5,300
(l)
(n)
2,000
3,660
Notes to Instructor:
1The retained earnings account has a $12,500 beginning balance and a $16,000
ending balance. These result in the total 12/31/2009 and 12/31/2010 credits
P22-7
1.
LAMBERSON COMPANY
Worksheet for Statement of Cash Flows
For Year Ended December 31, 2010
Balances Worksheet Entries
Account Titles 01/01/2010
12/31/2010
Change
Debit Credit
Debits
Cash
Noncash Accounts:
Accounts receivable
Credits
Accumulated depreciation
Accounts payable
1,400
2,800
16,000
3,800
2,400
2,690
16,400
4,150
1,000
(110)
400
350
(u)
(o)
1,000
1,700
(c)
(b)
(g)
110
2,100
350