PROBLEM 23-5B (Continued)
(3) Funds to redeem bonds ($300,000 X 1.01) ………..
$303,000
Face value of bonds ………………………………………..
$300,000
Unamortized discount 12/31/13 ………………………..
$6,075
Amortization to 5/31/14 not requiring cash
($9,000 ÷ 40) X 5/12 ………………………………………
Balance at date of redemption ………………….
Loss on redemption
(4) Face amount of bonds issued ………………………….
$400,000
Premium on $400,000 of bonds sold
($400,000 X 0.02) …………………………………………
$8,000
Expense of issuance ……………………………………….
1,200
Total ………………………………………………………
Amortization for seven months, which
did not require cash ……………………………..
(238)*
Amortization for seven months, which
did not require cash ……………………………..
*($8,000/235 months (a)) X 7 months = $238
**($1,200/235 months (a)) X 7 months = $35
(a) (20 years X 12 months) – 5
(5) Purchase of stock requiring cash …………………….
$146,000
60% of subsidiary’s income for year
($90,000), which did not provide
cash but was credited to income …………………..
54,000
PROBLEM 23-5B (Continued)
(6) Analysis of accumulated depreciation—
Building
Balance of accumulated depreciation 12/31/13 …
Charge for major repairs which used cash ……….
(12,600)
Balance 12/31/14 …………………………………………….
(248,000)
Depreciation charged against income which
did not require cash ……………………………………..
(7) Analysis of retained earnings
Balance of retained earnings 12/31/13 ………………
$166,600
Net income for current year ……………………………..
76,538
Balance 12/31/14 …………………………………………….
(205,138)
Dividends paid ………………………………………………..
Comments on Other Items
(not required)
Increase in cash surrender value of insurance required cash ……
$ 1,610
Increase in buildings required cash …………………………………………
125,000
Decrease in trademarks was a noncash charge against income ..
PROBLEM 23-6B
(a)
Net Cash Flow from Operating Activities
Cash received from customers ………………………..
$827,6001
Cash payments:
Cash payments to suppliers ………………………..
$541,3002
Cash payments for operating expenses ……….
*Writeoff of accounts receivable.
PROBLEM 23-6B (Continued)
(b) EASTON INC.
Statement of Cash Flows
For the Year Ended December 31, 2014
Cash flows from operating activities
Net income ……………………………………………….
$71,400
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation expense ………………………….
Gain on sale of investments ………………..
(5,500)
Gain on sale of equipment …………………..
Increase in accounts receivable (net) …..
Decrease in inventory ………………………….
Increase in accounts payable ………………
Decr. in salaries and wages payables …..
Net cash provided by operating activities …..
Cash flows from investing activities
Purchase of equipment
$60,800 – ($41,000 – $5,400) ……………………
(25,200)
Sale of investments …………………………………..
Sale of equipment ……………………………………..
Net cash used by investing activities ………….
Reduction in long-term note payable …………
Cash dividends paid …………………………………
Net cash used by financing activities …………
Net increase in cash ……………………………………….
6,900
Cash, January 1, 2014 …………………………………….
33,600
Cash, December 31, 2014 ………………………………..
$40,500
PROBLEM 23-7B
(a) Both the direct method and the indirect method for reporting cash
flows from operating activities are acceptable in preparing a statement
of cash flows according to GAAP; however, the FASB encourages the use
(b) The Statement of Cash Flows for Cooper Company, for the year ended
October 31, 2014, using the direct method, is presented below.
COOPER COMPANY
Statement of Cash Flows
For the Year Ended October 31, 2014
Cash flows from operating activities
Cash received from customers ………………….
$1,588,800
Cash payments:
To suppliers ……………………………………..
$995,800
To employees …………………………………..
For other expenses …………………………..
For interest ……………………………………….
For income taxes ………………………………
Net cash provided by operating activities …..
Cash flows from investing activities
Purchase of plant assets…………………………...
Cash flows from financing activities
Cash received from common stock issue …..
$ 13,000
Proceeds from long-term debt ……………………
45,000
Cash paid for dividends …………………………….
Net cash used by financing activities …………
Net increase in cash ………………………………………….
Cash, November 1, 2013 ……………………………………
12,000
Cash, October 31, 2014 ……………………………………..
PROBLEM 23-7B (Continued)
Note 1: Noncash investing and financing activities:
Issuance of common stock for plant assets $25,000.
Supporting Calculations:
Cash collected from customers
Sales ……………………………………………………….
$1,600,800
Less: Increase in accounts receivable ………
12,000
Cash collected from customers ……….
$1,588,800
Cash paid to suppliers
Cost of merchandise sold …………………………
$ 980,200
Add: Increase in merchandise inventory…..
Less: Increase in accounts payable ………….
4,000
Cash paid to suppliers …………………….
$ 995,800
Cash paid to employees
Salary expense …………………………………………
$ 346,100
Add: Decrease in salaries and
wages payable …………………………………
4,800
Cash paid to employees …………………..
$ 350,900
Cash paid for other expenses
Other expenses ………………………………………..
$ 12,900
Less: Decrease in prepaid expenses ………….
5,000
Cash paid for other expenses …………..
Cash paid for interest
Interest expense ……………………………………….
$ 11,000
Less: Increase in interest payable …………….
1,800
Cash paid for interest ……………………..
$ 9,200
Cash paid for income taxes:
Income tax expense (given)……………………….
$ 73,600
PROBLEM 23-7B (Continued)
(c) The calculation of the cash flow from operating activities for Cooper
Company, for the year ended October 31, 2014, using the indirect
method, is presented below.
COOPER COMPANY
Statement of Cash Flows
For the Year Ended October 31, 2014
Cash flows from operating activities
Net income ………………………………………………..
$152,000
Depreciation expense ………………………..
Increase in accounts payable ……………..
Increase in interest payable ………………..
Decrease in prepaid expenses ……………
Increase in inventory ………………………….
Increase in accounts receivable ………….
PROBLEM 23-8B
(a) Net Cash Provided by Operating Activities
Cash receipts from customers
$734,000 (1)
Cash payments:
Cash payments to suppliers
Cash payments for operating expenses
Cash payments for income taxes
Net cash provided by operating activities
(1) (Sales) less (Increase in Accounts Receivables)
$750,000 – $16,000 = $734,000
(3) (Operating Expenses) less (Depreciation Expense) less
(2) (Cost of Goods Sold) plus (Increase in Inventory) less
PROBLEM 23-8B (Continued)
(b) HAMBLIN COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2014
Cash flows from operating activities
Net income ………………………………………………….
$76,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation expense …………………………...
Gain on sale of investments ………………….
Loss on sale of equipment …………………….
Increase in accounts receivable (net) …….
Increase in inventory …………………………….
Increase in accounts payable ………………..
Increase in income taxes payable ………….
Net cash provided by operating activities ……..
Cash flows from investing activities
Purchase of equipment
[$60,000 – ($41,500 – $20,000)] …………………..
(38,500)
Sale of investments ($25,000 + $7,000) ………….
32,000
Net cash provided by investing activities ………
Cash flows from financing activities
Payment of long-term notes payable …………….
Issuance of common stock …………………………..
Net cash used by financing activities ……………
Sale of equipment
Net decrease in cash ……………………………………………
(11,500)
Cash, January 1, 2014 ………………………………………….
71,500
Cash, December 31, 2014 …………………………………….
$60,000
Noncash investing and financing activities
Issuance of common stock for land ………………
$35,000
PROBLEM 23-9B
(a) DINGEL CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2014
Cash flows from operating activities
Net income …………………………………………………. $26,000(a)
Adjustments to reconcile net income to net
cash provided by operating activities:
Cash flows from investing activities
Sale of investments …………………………………….. 12,000
Sale of equipment ………………………………………. 2,000
Purchase of equipment (cash) …………………….. (26,000)
Increase in cash ……………………………………………… 21,500
Cash, January 1, 2014 …………………………………….. 18,000
Cash, December 31, 2014 ………………………………… $39,500
Supplemental disclosures of cash flow information:
Cash paid during the year for:
PROBLEM 23-9B (Continued)
Noncash investing and financing activities:
Retired note payable by issuing common stock …….. $ 13,000
Purchased equipment by issuing notes payable …….. 23,000
Supporting Computations:
(a) Ending retained earnings ……………………………………… $45,000
Beginning retained earnings …………………………………. (35,000)
Add: Cash dividends declared ($10,000 + $6,000) …… 16,000
Net income ……………………………………………………. $26,000
(b) (1) For a severely financially troubled firm:
Operating: Probably a small cash inflow or a cash outflow.
ing funds) as a source of cash at high interest cost.
(2) For a recently formed firm which is experiencing rapid growth: