Managerial Accounting 14th Edition Solution Manual
Managerial Accounting 14th Edition Solution Manual is packed with detailed solutions to help you grasp concepts effortlessly.
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Chapter 15 Introduction to Managerial Accounting ..................................................... 15-1
Chapter 16 Job Order Costing...................................................................................... 16-1
Chapter 17 Process Cost Systems ................................................................................ 17-1
Chapter 18 Activity-Based Costing............................................................................... 18-1
Chapter 19 Cost-Volume-Profit Analysis ...................................................................... 19-1
Chapter 20 Variable Costing for Management Analysis ................................................ 20-1
Chapter 21 Budgeting ................................................................................................. 21-1
Chapter 22 Evaluating Variances from Standard Costs ................................................. 22-1
Chapter 23 Evaluating Decentralized Operations ......................................................... 23-1
Chapter 24 Differential Analysis and Product Pricing ................................................... 24-1
Chapter 25 Capital Investment Analysis ...................................................................... 25-1
Chapter 26 Lean Manufacturing and Activity Analysis .................................................. 26-1
Chapter 13 Statement of Cash Flows ........................................................................... 13-1
(Managerial)
Chapter 14 Financial Statement Analysis ..................................................................... 14-1
(Managerial)
Appendix C International Financial Reporting Standards (IFRS) .......................................C-1
Appendix D Investments ............................................................................................... D-1
Appendix F Special Journals and Subsidiary Ledgers ....................................................... F-1
Chapter 16 Job Order Costing...................................................................................... 16-1
Chapter 17 Process Cost Systems ................................................................................ 17-1
Chapter 18 Activity-Based Costing............................................................................... 18-1
Chapter 19 Cost-Volume-Profit Analysis ...................................................................... 19-1
Chapter 20 Variable Costing for Management Analysis ................................................ 20-1
Chapter 21 Budgeting ................................................................................................. 21-1
Chapter 22 Evaluating Variances from Standard Costs ................................................. 22-1
Chapter 23 Evaluating Decentralized Operations ......................................................... 23-1
Chapter 24 Differential Analysis and Product Pricing ................................................... 24-1
Chapter 25 Capital Investment Analysis ...................................................................... 25-1
Chapter 26 Lean Manufacturing and Activity Analysis .................................................. 26-1
Chapter 13 Statement of Cash Flows ........................................................................... 13-1
(Managerial)
Chapter 14 Financial Statement Analysis ..................................................................... 14-1
(Managerial)
Appendix C International Financial Reporting Standards (IFRS) .......................................C-1
Appendix D Investments ............................................................................................... D-1
Appendix F Special Journals and Subsidiary Ledgers ....................................................... F-1
Chapter 15 Introduction to Managerial Accounting ..................................................... 15-1
Chapter 16 Job Order Costing...................................................................................... 16-1
Chapter 17 Process Cost Systems ................................................................................ 17-1
Chapter 18 Activity-Based Costing............................................................................... 18-1
Chapter 19 Cost-Volume-Profit Analysis ...................................................................... 19-1
Chapter 20 Variable Costing for Management Analysis ................................................ 20-1
Chapter 21 Budgeting ................................................................................................. 21-1
Chapter 22 Evaluating Variances from Standard Costs ................................................. 22-1
Chapter 23 Evaluating Decentralized Operations ......................................................... 23-1
Chapter 24 Differential Analysis and Product Pricing ................................................... 24-1
Chapter 25 Capital Investment Analysis ...................................................................... 25-1
Chapter 26 Lean Manufacturing and Activity Analysis .................................................. 26-1
Chapter 13 Statement of Cash Flows ........................................................................... 13-1
(Managerial)
Chapter 14 Financial Statement Analysis ..................................................................... 14-1
(Managerial)
Appendix C International Financial Reporting Standards (IFRS) .......................................C-1
Appendix D Investments ............................................................................................... D-1
Appendix F Special Journals and Subsidiary Ledgers ....................................................... F-1
Chapter 16 Job Order Costing...................................................................................... 16-1
Chapter 17 Process Cost Systems ................................................................................ 17-1
Chapter 18 Activity-Based Costing............................................................................... 18-1
Chapter 19 Cost-Volume-Profit Analysis ...................................................................... 19-1
Chapter 20 Variable Costing for Management Analysis ................................................ 20-1
Chapter 21 Budgeting ................................................................................................. 21-1
Chapter 22 Evaluating Variances from Standard Costs ................................................. 22-1
Chapter 23 Evaluating Decentralized Operations ......................................................... 23-1
Chapter 24 Differential Analysis and Product Pricing ................................................... 24-1
Chapter 25 Capital Investment Analysis ...................................................................... 25-1
Chapter 26 Lean Manufacturing and Activity Analysis .................................................. 26-1
Chapter 13 Statement of Cash Flows ........................................................................... 13-1
(Managerial)
Chapter 14 Financial Statement Analysis ..................................................................... 14-1
(Managerial)
Appendix C International Financial Reporting Standards (IFRS) .......................................C-1
Appendix D Investments ............................................................................................... D-1
Appendix F Special Journals and Subsidiary Ledgers ....................................................... F-1
13-1
CHAPTER 13
STATEMENT OF CASH FLOWS
DISCUSSION QUESTIONS
1. It is costly to accumulate the data needed and to prepare the statement of cash flows.
2. It focuses on the differences between net income and cash flows from operating activities, and
the data needed are generally more readily available and less costly to obtain than is the case for
the direct method.
3. In a separate schedule of noncash investing and financing activities accompanying the
statement of cash flows.
4. The $30,000 increase must be added to income from operations because the amount of cash paid
to merchandise creditors was $30,000 less than the amount of purchases included in the cost of
goods sold.
5. The $25,000 decrease in salaries payable should be deducted from income to determine the
amount of cash flows from operating activities. The effect of the decrease in the amount of
salaries owed was to pay $25,000 more cash during the year than had been recorded as an
expense.
6. A. $100,000 gain
B. Cash inflow of $600,000
C. The gain of $100,000 would be deducted from net income in determining net cash flow from
operating activities; $600,000 would be reported as cash flows from investing activities.
7. Cash flows from financing activities—issuance of bonds, $1,960,000 ($2,000,000 × 98%)
8. A. Cash flows from investing activities—Cash received from the disposal of fixed assets,
$15,000
The $15,000 gain on asset disposal should be deducted from net income in determining net
cash flow from operating activities under the indirect method.
B. No effect
9. The same. The total amount reported as the net cash flow from operating activities is not affected by
the use of the direct or indirect method.
10. Cash received from customers, cash payments for merchandise, cash payments for operating
expenses, cash payments for interest, cash payments for income taxes.
CHAPTER 13
STATEMENT OF CASH FLOWS
DISCUSSION QUESTIONS
1. It is costly to accumulate the data needed and to prepare the statement of cash flows.
2. It focuses on the differences between net income and cash flows from operating activities, and
the data needed are generally more readily available and less costly to obtain than is the case for
the direct method.
3. In a separate schedule of noncash investing and financing activities accompanying the
statement of cash flows.
4. The $30,000 increase must be added to income from operations because the amount of cash paid
to merchandise creditors was $30,000 less than the amount of purchases included in the cost of
goods sold.
5. The $25,000 decrease in salaries payable should be deducted from income to determine the
amount of cash flows from operating activities. The effect of the decrease in the amount of
salaries owed was to pay $25,000 more cash during the year than had been recorded as an
expense.
6. A. $100,000 gain
B. Cash inflow of $600,000
C. The gain of $100,000 would be deducted from net income in determining net cash flow from
operating activities; $600,000 would be reported as cash flows from investing activities.
7. Cash flows from financing activities—issuance of bonds, $1,960,000 ($2,000,000 × 98%)
8. A. Cash flows from investing activities—Cash received from the disposal of fixed assets,
$15,000
The $15,000 gain on asset disposal should be deducted from net income in determining net
cash flow from operating activities under the indirect method.
B. No effect
9. The same. The total amount reported as the net cash flow from operating activities is not affected by
the use of the direct or indirect method.
10. Cash received from customers, cash payments for merchandise, cash payments for operating
expenses, cash payments for interest, cash payments for income taxes.
13-1
CHAPTER 13
STATEMENT OF CASH FLOWS
DISCUSSION QUESTIONS
1. It is costly to accumulate the data needed and to prepare the statement of cash flows.
2. It focuses on the differences between net income and cash flows from operating activities, and
the data needed are generally more readily available and less costly to obtain than is the case for
the direct method.
3. In a separate schedule of noncash investing and financing activities accompanying the
statement of cash flows.
4. The $30,000 increase must be added to income from operations because the amount of cash paid
to merchandise creditors was $30,000 less than the amount of purchases included in the cost of
goods sold.
5. The $25,000 decrease in salaries payable should be deducted from income to determine the
amount of cash flows from operating activities. The effect of the decrease in the amount of
salaries owed was to pay $25,000 more cash during the year than had been recorded as an
expense.
6. A. $100,000 gain
B. Cash inflow of $600,000
C. The gain of $100,000 would be deducted from net income in determining net cash flow from
operating activities; $600,000 would be reported as cash flows from investing activities.
7. Cash flows from financing activities—issuance of bonds, $1,960,000 ($2,000,000 × 98%)
8. A. Cash flows from investing activities—Cash received from the disposal of fixed assets,
$15,000
The $15,000 gain on asset disposal should be deducted from net income in determining net
cash flow from operating activities under the indirect method.
B. No effect
9. The same. The total amount reported as the net cash flow from operating activities is not affected by
the use of the direct or indirect method.
10. Cash received from customers, cash payments for merchandise, cash payments for operating
expenses, cash payments for interest, cash payments for income taxes.
CHAPTER 13
STATEMENT OF CASH FLOWS
DISCUSSION QUESTIONS
1. It is costly to accumulate the data needed and to prepare the statement of cash flows.
2. It focuses on the differences between net income and cash flows from operating activities, and
the data needed are generally more readily available and less costly to obtain than is the case for
the direct method.
3. In a separate schedule of noncash investing and financing activities accompanying the
statement of cash flows.
4. The $30,000 increase must be added to income from operations because the amount of cash paid
to merchandise creditors was $30,000 less than the amount of purchases included in the cost of
goods sold.
5. The $25,000 decrease in salaries payable should be deducted from income to determine the
amount of cash flows from operating activities. The effect of the decrease in the amount of
salaries owed was to pay $25,000 more cash during the year than had been recorded as an
expense.
6. A. $100,000 gain
B. Cash inflow of $600,000
C. The gain of $100,000 would be deducted from net income in determining net cash flow from
operating activities; $600,000 would be reported as cash flows from investing activities.
7. Cash flows from financing activities—issuance of bonds, $1,960,000 ($2,000,000 × 98%)
8. A. Cash flows from investing activities—Cash received from the disposal of fixed assets,
$15,000
The $15,000 gain on asset disposal should be deducted from net income in determining net
cash flow from operating activities under the indirect method.
B. No effect
9. The same. The total amount reported as the net cash flow from operating activities is not affected by
the use of the direct or indirect method.
10. Cash received from customers, cash payments for merchandise, cash payments for operating
expenses, cash payments for interest, cash payments for income taxes.
CHAPTER 13 Statement of Cash Flows
13-2
BASIC EXERCISES
BE 13–1
A. Investing D. Operating
B. Investing E. Operating
C. Operating F. Financing
BE 13–2
Net income ...................................................................................................................... $224,500
Adjustments to reconcile net income to net cash flow from
operating activities:
Depreciation ........................................................................................................... 11,575
Amortization of patents ......................................................................................... 2,500
Gain from sale of investments ........................................................................... (33,190)
Net cash flow from operating activities ....................................................... $205,385
BE 13–3
Net income...................................................................................................................... $75,800
Changes in current operating assets and liabilities:
Increase in accounts receivable ........................................................................... (5,000)
Increase in inventory................................................................................................ (7,450)
Increase in accounts payable ............................................................................... 3,380
Net cash flow from operating activities .......................................................... $66,730
Note: The change in dividends payable impacts the cash paid for dividends,
which is disclosed under financing activities.
BE 13–4
Cash flows from operating activities:
Net income ........................................................................................ $396,200
Adjustments to reconcile net income to net cash flow
from operating activities:
Depreciation .............................................................................. 61,250
Loss on disposal of equipment .................................... 27,600
Changes in current operating assets and liabilities:
Increase in accounts receivable............................................ (9,000)
Increase in accounts payable ................................................
Net cash flow from operating activities .............................
3,350
$479,400
13-2
BASIC EXERCISES
BE 13–1
A. Investing D. Operating
B. Investing E. Operating
C. Operating F. Financing
BE 13–2
Net income ...................................................................................................................... $224,500
Adjustments to reconcile net income to net cash flow from
operating activities:
Depreciation ........................................................................................................... 11,575
Amortization of patents ......................................................................................... 2,500
Gain from sale of investments ........................................................................... (33,190)
Net cash flow from operating activities ....................................................... $205,385
BE 13–3
Net income...................................................................................................................... $75,800
Changes in current operating assets and liabilities:
Increase in accounts receivable ........................................................................... (5,000)
Increase in inventory................................................................................................ (7,450)
Increase in accounts payable ............................................................................... 3,380
Net cash flow from operating activities .......................................................... $66,730
Note: The change in dividends payable impacts the cash paid for dividends,
which is disclosed under financing activities.
BE 13–4
Cash flows from operating activities:
Net income ........................................................................................ $396,200
Adjustments to reconcile net income to net cash flow
from operating activities:
Depreciation .............................................................................. 61,250
Loss on disposal of equipment .................................... 27,600
Changes in current operating assets and liabilities:
Increase in accounts receivable............................................ (9,000)
Increase in accounts payable ................................................
Net cash flow from operating activities .............................
3,350
$479,400
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CHAPTER 13 Statement of Cash Flows
13-3
BE 13–5
The gain on the sale of land is subtracted from net income in the Operating Activities
section.
Gain on sale of land .......................................................................................... $ (40,000)
The purchase and sale of land is reported as part of cash flows from investing activities
as shown below.
Cash received from sale of land ....................................................................... 240,000
Cash paid for purchase of land ....................................................................... (400,000)
BE 13–6
Cash flows from financing activities:
Cash received from issuing common stock $800,000
Cash received from issuing bonds 700,000
Cash paid for dividends (90,000)
Net cash from financing activities $1,410,000
Appendix 2 BE 13–7
Sales.......................................................................................................................... $112,000
Decrease in accounts receivable ........................................................................ 10,500
Cash received from customers ........................................................................... $122,500
Appendix 2 BE 13–8
Cost of goods sold................................................................................................ $240,000
Increase in inventories ............................................................................................ 19,200
Increase in accounts payable .............................................................................. (12,000)
Cash paid for merchandise .................................................................................. $247,200
13-3
BE 13–5
The gain on the sale of land is subtracted from net income in the Operating Activities
section.
Gain on sale of land .......................................................................................... $ (40,000)
The purchase and sale of land is reported as part of cash flows from investing activities
as shown below.
Cash received from sale of land ....................................................................... 240,000
Cash paid for purchase of land ....................................................................... (400,000)
BE 13–6
Cash flows from financing activities:
Cash received from issuing common stock $800,000
Cash received from issuing bonds 700,000
Cash paid for dividends (90,000)
Net cash from financing activities $1,410,000
Appendix 2 BE 13–7
Sales.......................................................................................................................... $112,000
Decrease in accounts receivable ........................................................................ 10,500
Cash received from customers ........................................................................... $122,500
Appendix 2 BE 13–8
Cost of goods sold................................................................................................ $240,000
Increase in inventories ............................................................................................ 19,200
Increase in accounts payable .............................................................................. (12,000)
Cash paid for merchandise .................................................................................. $247,200
Loading page 5...
CHAPTER 13 Statement of Cash Flows
13-4
EXERCISES
Ex. 13–1
There were net additions to the net loss reported on the income statement to convert
the net loss from the accrual basis to the cash basis. For example, depreciation is an
expense in determining net income, but it does not result in a cash outflow. Thus,
depreciation is added back to the net loss in order to determine net cash flow from
operations. A second large item that is added to the net loss is the increase in
advanced ticket sales of $246 million. This represents an increase in unused, but paid,
tickets (unearned revenue) between the two balance sheet dates. This is a significant
item that is largely unique to the airline industry.
The cash flows from operating activities detail is provided as follows for class
discussion:
United Continental Holdings, Inc.
Cash Flows from Operating Activities
(Selected from Statement of Cash Flows)
(in millions)
Cash flows from operating activities:
Net income (loss) $ (723)
Adjustments to reconcile net income (loss) to net cash flow
provided by operating activities:
Depreciation and amortization 1,522
Special charges 389
Debt and lease discount amortization (247)
Share based compensation 14
Other, net 251
Changes in certain assets and liabilities:
Decrease (increase) in accounts receivable (21)
Decrease (increase) in other assets (484)
Increase (decrease) in accounts payable 285
Increase (decrease) in advanced ticket sales 246
Increase (decrease) in frequent flyer deferred revenue (712)
Increase (decrease) in other liabilities 415
Net cash flows from (used for) operating activities $ 935
13-4
EXERCISES
Ex. 13–1
There were net additions to the net loss reported on the income statement to convert
the net loss from the accrual basis to the cash basis. For example, depreciation is an
expense in determining net income, but it does not result in a cash outflow. Thus,
depreciation is added back to the net loss in order to determine net cash flow from
operations. A second large item that is added to the net loss is the increase in
advanced ticket sales of $246 million. This represents an increase in unused, but paid,
tickets (unearned revenue) between the two balance sheet dates. This is a significant
item that is largely unique to the airline industry.
The cash flows from operating activities detail is provided as follows for class
discussion:
United Continental Holdings, Inc.
Cash Flows from Operating Activities
(Selected from Statement of Cash Flows)
(in millions)
Cash flows from operating activities:
Net income (loss) $ (723)
Adjustments to reconcile net income (loss) to net cash flow
provided by operating activities:
Depreciation and amortization 1,522
Special charges 389
Debt and lease discount amortization (247)
Share based compensation 14
Other, net 251
Changes in certain assets and liabilities:
Decrease (increase) in accounts receivable (21)
Decrease (increase) in other assets (484)
Increase (decrease) in accounts payable 285
Increase (decrease) in advanced ticket sales 246
Increase (decrease) in frequent flyer deferred revenue (712)
Increase (decrease) in other liabilities 415
Net cash flows from (used for) operating activities $ 935
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CHAPTER 13 Statement of Cash Flows
13-5
Ex. 13–2
A. Cash payment, $411,000 E. Cash payment, $50,000
B. Cash receipt, $440,000 F. Cash receipt, $490,000
C. Cash receipt, $60,000 G. Cash payment, $332,500
D. Cash payment, $650,000 H. Cash payment, $1,320,000
Ex. 13–3
A. operating G. financing
B. financing H. investing
C. financing I. financing
D. financing J. investing
E. financing K. investing
F. investing
Ex. 13–4
A. added G. added
B. deducted H. added
C. added I. added
D. added J. added
E. added K. deducted
F. added
13-5
Ex. 13–2
A. Cash payment, $411,000 E. Cash payment, $50,000
B. Cash receipt, $440,000 F. Cash receipt, $490,000
C. Cash receipt, $60,000 G. Cash payment, $332,500
D. Cash payment, $650,000 H. Cash payment, $1,320,000
Ex. 13–3
A. operating G. financing
B. financing H. investing
C. financing I. financing
D. financing J. investing
E. financing K. investing
F. investing
Ex. 13–4
A. added G. added
B. deducted H. added
C. added I. added
D. added J. added
E. added K. deducted
F. added
Loading page 7...
CHAPTER 13 Statement of Cash Flows
13-6
Ex. 13–5
A . Net income ...................................................................................... $73,600
Adjustments to reconcile net income to net cash
flow from operating activities:
Depreciation.............................................................................. 27,400
Changes in current operating assets and liabilities:
Increase in accounts receivable .......................................... (8,000)
Decrease in inventories ........................................................ 4,500
Decrease in prepaid expenses............................................. 2,250
Increase in accounts payable .............................................. 5,000
Decrease in wages payable.................................................. (900)
Net cash flow from operating activities ......................... $103,850
B. Cash flows from operating activities shows the cash inflow or outflow from a
company’s day-to-day operations. Net income reports the excess of revenues over
expenses for a company using the accrual basis of accounting. Revenues are recorded
when they are earned, not necessarily when cash is received. Expenses are recorded
when they are incurred and matched against revenue, not necessarily when cash is
paid. As a result, the cash flows from operating activities differs from net income
because it does not use the accrual basis of accounting.
Ex. 13–6
A. Cash flows from operating activities:
Net income................................................................................... $185,000
Adjustments to reconcile net income to net cash
flow from operating activities:
Depreciation ........................................................................ 96,000
Changes in current operating assets and liabilities:
Decrease in accounts receivable..................................... 5,450
Increase in inventories ..................................................... (11,200)
Decrease in prepaid expenses ........................................ 900
Decrease in accounts payable ......................................... (18,500)
Increase in salaries payable ............................................ 3,200
Net cash flow from operating activities ..................... $260,850
B. Yes. The amount of cash flows from operating activities reported on the statement of
cash flows is not affected by the method of reporting such flows.
13-6
Ex. 13–5
A . Net income ...................................................................................... $73,600
Adjustments to reconcile net income to net cash
flow from operating activities:
Depreciation.............................................................................. 27,400
Changes in current operating assets and liabilities:
Increase in accounts receivable .......................................... (8,000)
Decrease in inventories ........................................................ 4,500
Decrease in prepaid expenses............................................. 2,250
Increase in accounts payable .............................................. 5,000
Decrease in wages payable.................................................. (900)
Net cash flow from operating activities ......................... $103,850
B. Cash flows from operating activities shows the cash inflow or outflow from a
company’s day-to-day operations. Net income reports the excess of revenues over
expenses for a company using the accrual basis of accounting. Revenues are recorded
when they are earned, not necessarily when cash is received. Expenses are recorded
when they are incurred and matched against revenue, not necessarily when cash is
paid. As a result, the cash flows from operating activities differs from net income
because it does not use the accrual basis of accounting.
Ex. 13–6
A. Cash flows from operating activities:
Net income................................................................................... $185,000
Adjustments to reconcile net income to net cash
flow from operating activities:
Depreciation ........................................................................ 96,000
Changes in current operating assets and liabilities:
Decrease in accounts receivable..................................... 5,450
Increase in inventories ..................................................... (11,200)
Decrease in prepaid expenses ........................................ 900
Decrease in accounts payable ......................................... (18,500)
Increase in salaries payable ............................................ 3,200
Net cash flow from operating activities ..................... $260,850
B. Yes. The amount of cash flows from operating activities reported on the statement of
cash flows is not affected by the method of reporting such flows.
Loading page 8...
CHAPTER 13 Statement of Cash Flows
13-7
Ex. 13–7
A. Cash flows from operating activities:
Net income........................................................................... $508,000
Adjustments to reconcile net income to net cash
flow from operating activities:
Depreciation ................................................................ 57,600
Gain on disposal of equipment ............................... (33,600)
Changes in current operating assets and liabilities:
Increase in accounts receivable (8,960)
Decrease in inventory ............................................... 5,120
Decrease in prepaid insurance ................................ 1,920
Decrease in accounts payable ................................. (6,080)
Increase in income taxes payable ........................... 1,410
Net cash flow from operating activities ............. $525,410
Note: The change in dividends payable would be used to adjust the dividends
declared in obtaining the cash paid for dividends in the Financing Activities section
of the statement of cash flows.
B. Cash flows from operating activities reports the cash inflow or outflow from a
company’s day-to-day operations. Net income reports the excess of revenues over
expenses for a company using the accrual basis of accounting. Revenues are
recorded when they are earned, not necessarily when cash is received. Expenses are
recorded when they are incurred and matched against revenue, not necessarily when
cash is paid. As a result, the cash flows from operating activities differs from net
income because it does not use the accrual basis of accounting.
Ex. 13–8
Cash flows from investing activities:
Cash received from sale of equipment ........................................................ $101,250
The loss on the sale, $16,875 ($101,250 proceeds from sale less $118,125 book value),
would be added to net income in determining the cash flows from operating activities if
the indirect method of reporting cash flows from operations is used.
Ex. 13–9
Cash flows from investing activities:
Cash received from sale of equipment ........................................................ $37,200
The loss on the sale, $6,800 ($37,200 proceeds from sale less $44,000 book value),
would be added to net income in determining the cash flows from operating activities if
the indirect method of reporting cash flows from operations is used.
13-7
Ex. 13–7
A. Cash flows from operating activities:
Net income........................................................................... $508,000
Adjustments to reconcile net income to net cash
flow from operating activities:
Depreciation ................................................................ 57,600
Gain on disposal of equipment ............................... (33,600)
Changes in current operating assets and liabilities:
Increase in accounts receivable (8,960)
Decrease in inventory ............................................... 5,120
Decrease in prepaid insurance ................................ 1,920
Decrease in accounts payable ................................. (6,080)
Increase in income taxes payable ........................... 1,410
Net cash flow from operating activities ............. $525,410
Note: The change in dividends payable would be used to adjust the dividends
declared in obtaining the cash paid for dividends in the Financing Activities section
of the statement of cash flows.
B. Cash flows from operating activities reports the cash inflow or outflow from a
company’s day-to-day operations. Net income reports the excess of revenues over
expenses for a company using the accrual basis of accounting. Revenues are
recorded when they are earned, not necessarily when cash is received. Expenses are
recorded when they are incurred and matched against revenue, not necessarily when
cash is paid. As a result, the cash flows from operating activities differs from net
income because it does not use the accrual basis of accounting.
Ex. 13–8
Cash flows from investing activities:
Cash received from sale of equipment ........................................................ $101,250
The loss on the sale, $16,875 ($101,250 proceeds from sale less $118,125 book value),
would be added to net income in determining the cash flows from operating activities if
the indirect method of reporting cash flows from operations is used.
Ex. 13–9
Cash flows from investing activities:
Cash received from sale of equipment ........................................................ $37,200
The loss on the sale, $6,800 ($37,200 proceeds from sale less $44,000 book value),
would be added to net income in determining the cash flows from operating activities if
the indirect method of reporting cash flows from operations is used.
Loading page 9...
CHAPTER 13 Statement of Cash Flows
13-8
Ex. 13–10
Cash flows from investing activities:
Cash received from sale of land ...................................................................... $ 95,550
Cash paid for purchase of land ....................................................................... (104,300)
The gain on the sale of land, $31,710, would be deducted from net income in determining
the cash flows from operating activities if the indirect method of reporting cash flows from
operations is used.
Ex. 13–11
Dividends declared ................................................................................................... $1,200,000
Decrease in dividends payable ............................................................................. 150,000
Dividends paid to stockholders during the year................................................. $1,350,000
Ex. 13–12
Cash flows from financing activities:
Cash received from sale of common stock .................................................... $1,920,000
Cash paid for dividends ................................................................................... (315,000)
Note: The stock dividend is not disclosed on the statement of cash flows.
13-8
Ex. 13–10
Cash flows from investing activities:
Cash received from sale of land ...................................................................... $ 95,550
Cash paid for purchase of land ....................................................................... (104,300)
The gain on the sale of land, $31,710, would be deducted from net income in determining
the cash flows from operating activities if the indirect method of reporting cash flows from
operations is used.
Ex. 13–11
Dividends declared ................................................................................................... $1,200,000
Decrease in dividends payable ............................................................................. 150,000
Dividends paid to stockholders during the year................................................. $1,350,000
Ex. 13–12
Cash flows from financing activities:
Cash received from sale of common stock .................................................... $1,920,000
Cash paid for dividends ................................................................................... (315,000)
Note: The stock dividend is not disclosed on the statement of cash flows.
Loading page 10...
CHAPTER 13 Statement of Cash Flows
13-9
Ex. 13–13
Cash flows from investing activities:
Cash paid for purchase of land...................................................................... $(246,000)
A separate schedule of noncash investing and financing activities would report the
purchase of $324,000 land with a long-term mortgage note, as follows:
Purchase of land by issuing long-term mortgage note..................................... $324,000
Ex. 13–14
Cash flows from financing activities:
Cash received from issuing bonds payable ................................................. $ 420,000
Cash paid to redeem bonds payable ............................................................. (138,000)
Note: The discount amortization of $2,625 would be shown as an adjusting item
(increase) in the Cash Flows from Operating Activities section under the indirect
method.
Ex. 13–15
A. Net cash flow from operating activities .................................
Increase in accounts receivable ............................................. $ 14,300
$357,500
Increase in prepaid expenses ................................................. 2,970
Decrease in income taxes payable ......................................... 7,700
Gain on sale of investments..................................................... 13,200 38,170
$395,670
Depreciation ................................................................................ $(29,480)
Decrease in inventories ............................................................. (19,140)
Increase in accounts payable ................................................. (5,280) (53,900)
Net income, per income statement ......................................... $341,770
Note to Instructors: The net income must be determined by working backward through
the Cash Flows from Operating Activities section of the statement of cash flows. Hence,
those items that were added (deducted) to determine net cash flow from operating
activities must be deducted (added) to determine net income.
13-9
Ex. 13–13
Cash flows from investing activities:
Cash paid for purchase of land...................................................................... $(246,000)
A separate schedule of noncash investing and financing activities would report the
purchase of $324,000 land with a long-term mortgage note, as follows:
Purchase of land by issuing long-term mortgage note..................................... $324,000
Ex. 13–14
Cash flows from financing activities:
Cash received from issuing bonds payable ................................................. $ 420,000
Cash paid to redeem bonds payable ............................................................. (138,000)
Note: The discount amortization of $2,625 would be shown as an adjusting item
(increase) in the Cash Flows from Operating Activities section under the indirect
method.
Ex. 13–15
A. Net cash flow from operating activities .................................
Increase in accounts receivable ............................................. $ 14,300
$357,500
Increase in prepaid expenses ................................................. 2,970
Decrease in income taxes payable ......................................... 7,700
Gain on sale of investments..................................................... 13,200 38,170
$395,670
Depreciation ................................................................................ $(29,480)
Decrease in inventories ............................................................. (19,140)
Increase in accounts payable ................................................. (5,280) (53,900)
Net income, per income statement ......................................... $341,770
Note to Instructors: The net income must be determined by working backward through
the Cash Flows from Operating Activities section of the statement of cash flows. Hence,
those items that were added (deducted) to determine net cash flow from operating
activities must be deducted (added) to determine net income.
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CHAPTER 13 Statement of Cash Flows
13-10
Ex. 13–15 (Concluded)
B. Curwen’s net income differed from cash flows from operations because of:
● $29,480 of depreciation expense which has no effect on cash flows from
operating activities,
● a $13,200 gain on the sale of investments. The proceeds from this sale, which
include the gain, are reported in the Investing Activities section of the statement
of cash flows.
● Changes in current operating assets and liabilities that are added or
deducted, depending on their effect on cash flows:
Increase in accounts receivable, $14,300
Increase in prepaid expenses, $2,970 Decrease
in income taxes payable, $7,700 Decrease in
inventories, $19,140
Increase in accounts payable, $5,280
Ex. 13–16
A. National Beverage Co.
Cash Flows from Operating Activities
(in thousands)
Cash flows from operating activities:
Net income $49,311
Adjustments to reconcile net loss to net
cash flow from operating activities:
Depreciation 11,580
Gain on disposal of property (1,188)
Other items involving noncash expenses 1,383
Changes in current operating assets and
liabilities:
Increase in accounts receivable (1,746)
Decrease in inventory 990
Increase in prepaid expenses (605)
Decrease in accounts payable (710)
Decrease in accrued and other current liabilities (995)
Net cash flow from operating activities $58,020
B. National Beverage is doing well financially. The company has positive earnings and
positive net cash flow from operating activities. The company continues to grow, and
the trend in recent years has been positive. The increase in accounts receivable is a
positive sign, indicating an increase in sales.
13-10
Ex. 13–15 (Concluded)
B. Curwen’s net income differed from cash flows from operations because of:
● $29,480 of depreciation expense which has no effect on cash flows from
operating activities,
● a $13,200 gain on the sale of investments. The proceeds from this sale, which
include the gain, are reported in the Investing Activities section of the statement
of cash flows.
● Changes in current operating assets and liabilities that are added or
deducted, depending on their effect on cash flows:
Increase in accounts receivable, $14,300
Increase in prepaid expenses, $2,970 Decrease
in income taxes payable, $7,700 Decrease in
inventories, $19,140
Increase in accounts payable, $5,280
Ex. 13–16
A. National Beverage Co.
Cash Flows from Operating Activities
(in thousands)
Cash flows from operating activities:
Net income $49,311
Adjustments to reconcile net loss to net
cash flow from operating activities:
Depreciation 11,580
Gain on disposal of property (1,188)
Other items involving noncash expenses 1,383
Changes in current operating assets and
liabilities:
Increase in accounts receivable (1,746)
Decrease in inventory 990
Increase in prepaid expenses (605)
Decrease in accounts payable (710)
Decrease in accrued and other current liabilities (995)
Net cash flow from operating activities $58,020
B. National Beverage is doing well financially. The company has positive earnings and
positive net cash flow from operating activities. The company continues to grow, and
the trend in recent years has been positive. The increase in accounts receivable is a
positive sign, indicating an increase in sales.
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CHAPTER 13 Statement of Cash Flows
13-11
Ex. 13–17
A. Olson-Jones Industries, Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y2
Cash flows from operating activities:
Net income $ 62
Adjustments to reconcile net income to net
cash flow from operating activities:
Depreciation 26
Gain on sale of land (40)
Changes in current operating assets and
liabilities:
Increase in accounts receivable (6)
Increase in inventories (18)
Increase in accounts payable 14
Net cash flow from operating activities $ 38
Cash flows from investing activities:
Cash received from sale of land $120
Cash paid for purchase of equipment (30)
Net cash flow from investing activities 90
Cash flows from financing activities:
Cash received from sale of common stock $ 60
Cash paid for dividends* (19)
Net cash flow from financing activities 41
Change in cash $169
Cash at the beginning of the year 14
Cash at the end of the year $183
* Dividends = $24 – $5 = $19
B. Olson-Jones Industries Inc.’s net income was more than the cash flows from
operations because of:
● $26 of depreciation expense, which has no effect on cash.
● A $40 gain on the sale of land. The proceeds from this sale of $120, which
include the gain, are reported in the Investing Activities section of the
statement of cash flows.
● Changes in current operating assets and liabilities that are added or deducted,
depending on their effect on cash flows:
Increase in accounts receivable, $6 deducted
Increase in inventories, $18 deducted Increase
in accounts payable, $14 added
13-11
Ex. 13–17
A. Olson-Jones Industries, Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y2
Cash flows from operating activities:
Net income $ 62
Adjustments to reconcile net income to net
cash flow from operating activities:
Depreciation 26
Gain on sale of land (40)
Changes in current operating assets and
liabilities:
Increase in accounts receivable (6)
Increase in inventories (18)
Increase in accounts payable 14
Net cash flow from operating activities $ 38
Cash flows from investing activities:
Cash received from sale of land $120
Cash paid for purchase of equipment (30)
Net cash flow from investing activities 90
Cash flows from financing activities:
Cash received from sale of common stock $ 60
Cash paid for dividends* (19)
Net cash flow from financing activities 41
Change in cash $169
Cash at the beginning of the year 14
Cash at the end of the year $183
* Dividends = $24 – $5 = $19
B. Olson-Jones Industries Inc.’s net income was more than the cash flows from
operations because of:
● $26 of depreciation expense, which has no effect on cash.
● A $40 gain on the sale of land. The proceeds from this sale of $120, which
include the gain, are reported in the Investing Activities section of the
statement of cash flows.
● Changes in current operating assets and liabilities that are added or deducted,
depending on their effect on cash flows:
Increase in accounts receivable, $6 deducted
Increase in inventories, $18 deducted Increase
in accounts payable, $14 added
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CHAPTER 13 Statement of Cash Flows
13-12
Ex. 13–18
1. The increase in accounts receivable should be deducted from net income in the
Cash Flows from Operating Activities section.
2. The gain on the sale of investments should be deducted from net income in the
Cash Flows from Operating Activities section.
3. The increase in accounts payable should be added to net income in the Cash
Flows from Operating Activities section.
4. The correct amount of cash at the beginning of the year, $240,000, should be
added to the increase in cash.
5. The final amount should be the amount of cash at the end of the year, $350,160.
6. The final amount of net cash flow from operating activities is $381,360.
13-12
Ex. 13–18
1. The increase in accounts receivable should be deducted from net income in the
Cash Flows from Operating Activities section.
2. The gain on the sale of investments should be deducted from net income in the
Cash Flows from Operating Activities section.
3. The increase in accounts payable should be added to net income in the Cash
Flows from Operating Activities section.
4. The correct amount of cash at the beginning of the year, $240,000, should be
added to the increase in cash.
5. The final amount should be the amount of cash at the end of the year, $350,160.
6. The final amount of net cash flow from operating activities is $381,360.
Loading page 14...
CHAPTER 13 Statement of Cash Flows
13-13
Ex. 13–18 (Concluded)
A correct statement of cash flows would be as follows:
Shasta Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y9
Cash flows from operating activities:
Net income $ 360,000
Adjustments to reconcile net income to
net cash flow from operating activities:
Depreciation 100,800
Gain on sale of investments (17,280)
Changes in current operating assets
and liabilities:
Increase in accounts receivable (27,360)
Increase in inventories (36,000)
Increase in accounts payable 3,600
Decrease in accrued expenses
payable (2,400)
Net cash flow from operating activities $ 381,360
Cash flows from investing activities:
Cash received from sale of investments $ 240,000
Cash paid for purchase of land (259,200)
Cash paid for purchase of equip. (432,000)
Net cash flow used for investing activities (451,200)
Cash flows from financing activities:
Cash received from sale of common stock $ 312,000
Cash paid for dividends (132,000)
Net cash flow from financing activities 180,000
Change in cash $ 110,160
Cash at the beginning of the year 240,000
Cash at the end of the year $ 350,160
13-13
Ex. 13–18 (Concluded)
A correct statement of cash flows would be as follows:
Shasta Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y9
Cash flows from operating activities:
Net income $ 360,000
Adjustments to reconcile net income to
net cash flow from operating activities:
Depreciation 100,800
Gain on sale of investments (17,280)
Changes in current operating assets
and liabilities:
Increase in accounts receivable (27,360)
Increase in inventories (36,000)
Increase in accounts payable 3,600
Decrease in accrued expenses
payable (2,400)
Net cash flow from operating activities $ 381,360
Cash flows from investing activities:
Cash received from sale of investments $ 240,000
Cash paid for purchase of land (259,200)
Cash paid for purchase of equip. (432,000)
Net cash flow used for investing activities (451,200)
Cash flows from financing activities:
Cash received from sale of common stock $ 312,000
Cash paid for dividends (132,000)
Net cash flow from financing activities 180,000
Change in cash $ 110,160
Cash at the beginning of the year 240,000
Cash at the end of the year $ 350,160
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CHAPTER 13 Statement of Cash Flows
13-14
Appendix 2 Ex. 13–19
A. Sales ................................................................................................................ $753,500
Decrease in accounts receivable balance ................................................ 48,400
Cash received from customers .................................................................. $801,900
B. Income tax expense ....................................................................................... $ 50,600
Decrease in income tax payable ................................................................ 5,500
Cash payments for income taxes .............................................................. $ 56,100
C. Because the customers paid more than the amount of sales for the period,
cash received from customers exceeded sales made on account by $48,400
during the current year.
Appendix 2 Ex. 13–20
A. Cost of goods sold ....................................................................................... $1,031,550
Decrease in accounts payable .................................................................... 9,660
$1,041,210
Decrease in inventories ................................................................................. (15,410)
Cash payments for merchandise ................................................................ $1,025,800
B. Operating expenses other than depreciation ............................................ $ 179,400
Decrease in accrued expenses payable .................................................... 1,380
$ 180,780
Decrease in prepaid expenses .................................................................... (1,610)
Cash payments for operating expenses .................................................... $ 179,170
13-14
Appendix 2 Ex. 13–19
A. Sales ................................................................................................................ $753,500
Decrease in accounts receivable balance ................................................ 48,400
Cash received from customers .................................................................. $801,900
B. Income tax expense ....................................................................................... $ 50,600
Decrease in income tax payable ................................................................ 5,500
Cash payments for income taxes .............................................................. $ 56,100
C. Because the customers paid more than the amount of sales for the period,
cash received from customers exceeded sales made on account by $48,400
during the current year.
Appendix 2 Ex. 13–20
A. Cost of goods sold ....................................................................................... $1,031,550
Decrease in accounts payable .................................................................... 9,660
$1,041,210
Decrease in inventories ................................................................................. (15,410)
Cash payments for merchandise ................................................................ $1,025,800
B. Operating expenses other than depreciation ............................................ $ 179,400
Decrease in accrued expenses payable .................................................... 1,380
$ 180,780
Decrease in prepaid expenses .................................................................... (1,610)
Cash payments for operating expenses .................................................... $ 179,170
Loading page 16...
CHAPTER 13 Statement of Cash Flows
13-15
Appendix 2 Ex. 13–21
A. Cash flows from operating activities:
Cash received from customers .............................................. $ 522,7601
Cash payments for merchandise ........................................... (302,400)2
Cash payments for operating
expenses .................................................................................. (99,960)3
Cash payments for income taxes ............................................ (24,360)4
Net cash flow from operating activities ........................... $ 96,040
Computations:
1. Sales............................................................................................................... $511,000
Decrease in accounts receivable.............................................................. 11,760
Cash received from customers................................................................. $522,760
2. Cost of goods sold ..................................................................................... $290,500
Increase in inventories ................................................................................. 3,920
Decrease in accounts payable .................................................................. 7,980
Cash payments for merchandise .............................................................. $302,400
3. Operating expenses other than depreciation ......................................... $105,000
Decrease in prepaid expenses.................................................................. (3,780)
Increase in accrued expenses
payable....................................................................................................... (1,260)
Cash payments for operating expenses .................................................. $ 99,960
4. Income tax expense...................................................................................... $ 21,700
Add decrease in income tax payable ....................................................... 2,660
Cash payments for income taxes ............................................................. $ 24,360
B. The direct method directly reports cash receipts and payments. The cash received
less the cash payments is the net cash flow from operating activities. Individual cash
receipts and payments are reported in the Cash Flows from Operating Activities
section.
The indirect method adjusts accrual-basis net income for revenues and expenses
that do not involve the receipt or payment of cash to arrive at cash flows from
operating activities.
13-15
Appendix 2 Ex. 13–21
A. Cash flows from operating activities:
Cash received from customers .............................................. $ 522,7601
Cash payments for merchandise ........................................... (302,400)2
Cash payments for operating
expenses .................................................................................. (99,960)3
Cash payments for income taxes ............................................ (24,360)4
Net cash flow from operating activities ........................... $ 96,040
Computations:
1. Sales............................................................................................................... $511,000
Decrease in accounts receivable.............................................................. 11,760
Cash received from customers................................................................. $522,760
2. Cost of goods sold ..................................................................................... $290,500
Increase in inventories ................................................................................. 3,920
Decrease in accounts payable .................................................................. 7,980
Cash payments for merchandise .............................................................. $302,400
3. Operating expenses other than depreciation ......................................... $105,000
Decrease in prepaid expenses.................................................................. (3,780)
Increase in accrued expenses
payable....................................................................................................... (1,260)
Cash payments for operating expenses .................................................. $ 99,960
4. Income tax expense...................................................................................... $ 21,700
Add decrease in income tax payable ....................................................... 2,660
Cash payments for income taxes ............................................................. $ 24,360
B. The direct method directly reports cash receipts and payments. The cash received
less the cash payments is the net cash flow from operating activities. Individual cash
receipts and payments are reported in the Cash Flows from Operating Activities
section.
The indirect method adjusts accrual-basis net income for revenues and expenses
that do not involve the receipt or payment of cash to arrive at cash flows from
operating activities.
Loading page 17...
CHAPTER 13 Statement of Cash Flows
13-16
Appendix 2 Ex. 13–22
Cash flows from operating activities:
Cash received from customers .................................................. $ 440,4401
Cash payments for merchandise .............................................. (161,260)2
Cash payments for operating expenses .................................. (115,720)3
Cash payments for income taxes............................................... (39,600)
Net cash flow from operating activities .............................. $123,860
Computations:
1. Sales .................................................................................................................. $445,500
Increase in accounts receivable................................................................... (5,060)
Cash received from customers .................................................................... $440,440
2. Cost of goods sold ........................................................................................ $154,000
Increase in inventories .................................................................................... 12,100
Increase in accounts payable ....................................................................... (4,840)
Cash payments for merchandise ................................................................. $161,260
3. Operating expenses other than depreciation ............................................. $115,280
Decrease in accrued expenses payable ...................................................... 1,760
Decrease in prepaid expenses ..................................................................... (1,320)
Cash payments for operating expenses...................................................... $115,720
13-16
Appendix 2 Ex. 13–22
Cash flows from operating activities:
Cash received from customers .................................................. $ 440,4401
Cash payments for merchandise .............................................. (161,260)2
Cash payments for operating expenses .................................. (115,720)3
Cash payments for income taxes............................................... (39,600)
Net cash flow from operating activities .............................. $123,860
Computations:
1. Sales .................................................................................................................. $445,500
Increase in accounts receivable................................................................... (5,060)
Cash received from customers .................................................................... $440,440
2. Cost of goods sold ........................................................................................ $154,000
Increase in inventories .................................................................................... 12,100
Increase in accounts payable ....................................................................... (4,840)
Cash payments for merchandise ................................................................. $161,260
3. Operating expenses other than depreciation ............................................. $115,280
Decrease in accrued expenses payable ...................................................... 1,760
Decrease in prepaid expenses ..................................................................... (1,320)
Cash payments for operating expenses...................................................... $115,720
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CHAPTER 13 Statement of Cash Flows
13-17
PROBLEMS
Prob. 13–1A
Livers Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y3
Cash flows from operating activities:
Net income $ 500,000
Adjustments to reconcile net income to
net cash flow from operating activities:
Depreciation 100,000
Gain on sale of investments (75,000)
Changes in current operating assets
and liabilities:
Increase in accounts receivable (50,000)
Increase in inventories (20,000)
Increase in accounts payable 40,000
Decrease in accrued expenses payable (5,000)
Net cash flow from operating activities $ 490,000
Cash flows from investing activities:
Cash received from sale of investments $ 175,000
Cash paid for purchase of land (500,000)
Cash paid for purchase of equipment (200,000)
Net cash flow used for investing activities (525,000)
Cash flows from financing activities:
Cash received from sale of common stock $ 125,000
Cash paid for dividends* (85,000)
Net cash flow from financing activities 40,000
Change in cash $ 5,000
Cash at the beginning of the year 150,000
Cash at the end of the year $ 155,000
* Cash paid for dividends = $90,000 + $25,000 – $30,000 = $85,000
13-17
PROBLEMS
Prob. 13–1A
Livers Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y3
Cash flows from operating activities:
Net income $ 500,000
Adjustments to reconcile net income to
net cash flow from operating activities:
Depreciation 100,000
Gain on sale of investments (75,000)
Changes in current operating assets
and liabilities:
Increase in accounts receivable (50,000)
Increase in inventories (20,000)
Increase in accounts payable 40,000
Decrease in accrued expenses payable (5,000)
Net cash flow from operating activities $ 490,000
Cash flows from investing activities:
Cash received from sale of investments $ 175,000
Cash paid for purchase of land (500,000)
Cash paid for purchase of equipment (200,000)
Net cash flow used for investing activities (525,000)
Cash flows from financing activities:
Cash received from sale of common stock $ 125,000
Cash paid for dividends* (85,000)
Net cash flow from financing activities 40,000
Change in cash $ 5,000
Cash at the beginning of the year 150,000
Cash at the end of the year $ 155,000
* Cash paid for dividends = $90,000 + $25,000 – $30,000 = $85,000
Loading page 19...
CHAPTER 13 Statement of Cash Flows
13-18
Prob. 13–1A (Concluded) (Optional)
Livers Inc.
Spreadsheet (Work Sheet) for Statement of Cash Flows
For the Year Ended December 31, 20Y3
Account Title
Balance,
Dec. 31, 20Y2
Transactions Balance,
Dec. 31, 20Y3Debit Credit
Cash 150,000 (m) 5,000 155,000
Accounts receivable (net) 400,000 (l) 50,000 450,000
Inventories 750,000 (k) 20,000 770,000
Investments 100,000 (j) 100,000 0
Land 0 (i) 500,000 500,000
Equipment 1,200,000 (h) 200,000 1,400,000
Accum. depr.—equipment (500,000) (g) 100,000 (600,000)
Accounts payable (300,000) (f) 40,000 (340,000)
Accrued expenses payable (50,000) (e) 5,000 (45,000)
Dividends payable (25,000) (d) 5,000 (30,000)
Common stock, $4 par (600,000) (c) 100,000 (700,000)
Paid-in capital in excess
of par—common stock (175,000) (c) 25,000 (200,000)
Retained earnings (950,000) (b) 90,000 (a) 500,000 (1,360,000)
Totals 0 870,000 870,000 0
Operating activities:
Net income (a) 500,000
Depreciation (g) 100,000
Gain on sale of investments (j) 75,000
Increase in accounts
receivable (l) 50,000
Increase in inventories (k) 20,000
Increase in accounts payable (f) 40,000
Decrease in accrued
expenses payable (e) 5,000
Investing activities:
Purchase of equipment (h) 200,000
Purchase of land (i) 500,000
Sale of investments (j) 175,000
Financing activities:
Declaration of cash dividends (b) 90,000
Sale of common stock (c) 125,000
Increase in dividends payable (d) 5,000
Net change in cash (m) 5,000
Totals 945,000 945,000
Note to Instructor: The letters in the debit and credit columns are included for
reference purposes only.
13-18
Prob. 13–1A (Concluded) (Optional)
Livers Inc.
Spreadsheet (Work Sheet) for Statement of Cash Flows
For the Year Ended December 31, 20Y3
Account Title
Balance,
Dec. 31, 20Y2
Transactions Balance,
Dec. 31, 20Y3Debit Credit
Cash 150,000 (m) 5,000 155,000
Accounts receivable (net) 400,000 (l) 50,000 450,000
Inventories 750,000 (k) 20,000 770,000
Investments 100,000 (j) 100,000 0
Land 0 (i) 500,000 500,000
Equipment 1,200,000 (h) 200,000 1,400,000
Accum. depr.—equipment (500,000) (g) 100,000 (600,000)
Accounts payable (300,000) (f) 40,000 (340,000)
Accrued expenses payable (50,000) (e) 5,000 (45,000)
Dividends payable (25,000) (d) 5,000 (30,000)
Common stock, $4 par (600,000) (c) 100,000 (700,000)
Paid-in capital in excess
of par—common stock (175,000) (c) 25,000 (200,000)
Retained earnings (950,000) (b) 90,000 (a) 500,000 (1,360,000)
Totals 0 870,000 870,000 0
Operating activities:
Net income (a) 500,000
Depreciation (g) 100,000
Gain on sale of investments (j) 75,000
Increase in accounts
receivable (l) 50,000
Increase in inventories (k) 20,000
Increase in accounts payable (f) 40,000
Decrease in accrued
expenses payable (e) 5,000
Investing activities:
Purchase of equipment (h) 200,000
Purchase of land (i) 500,000
Sale of investments (j) 175,000
Financing activities:
Declaration of cash dividends (b) 90,000
Sale of common stock (c) 125,000
Increase in dividends payable (d) 5,000
Net change in cash (m) 5,000
Totals 945,000 945,000
Note to Instructor: The letters in the debit and credit columns are included for
reference purposes only.
Loading page 20...
CHAPTER 13 Statement of Cash Flows
13-19
Prob. 13–2A
Yellow Dog Enterprises Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y8
Cash flows from operating activities:
Net income $ 190,000
Adjustments to reconcile net income to
net cash flow from operating activities:
Depreciation 115,000
Changes in current operating assets
and liabilities:
Decrease in accounts receivable 25,000
Increase in inventory (110,000)
Increase in prepaid expenses (5,000)
Increase in accounts payable 10,000
Net cash flow from operating activities $ 225,000
Cash flows from investing activities:
Cash paid for equipment $(395,000)
Net cash flow used for investing activities (395,000)
Cash flows from financing activities:
Cash received from sale of common stock $ 600,000
Cash paid for dividends (50,000)
Cash paid to retire mortgage note payable (400,000)
Net cash flow used for financing activities 150,000
Change in cash $ (20,000)
Cash at the beginning of the year 100,000
Cash at the end of the year $ 80,000
Note to Instructors: The disposal of fully depreciated equipment is not included in the cash
flow statement because there is no associated cash flow. This transaction strictly involves
the removal of $75,000 from the equipment and accumulated depreciation— equipment
accounts.
13-19
Prob. 13–2A
Yellow Dog Enterprises Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y8
Cash flows from operating activities:
Net income $ 190,000
Adjustments to reconcile net income to
net cash flow from operating activities:
Depreciation 115,000
Changes in current operating assets
and liabilities:
Decrease in accounts receivable 25,000
Increase in inventory (110,000)
Increase in prepaid expenses (5,000)
Increase in accounts payable 10,000
Net cash flow from operating activities $ 225,000
Cash flows from investing activities:
Cash paid for equipment $(395,000)
Net cash flow used for investing activities (395,000)
Cash flows from financing activities:
Cash received from sale of common stock $ 600,000
Cash paid for dividends (50,000)
Cash paid to retire mortgage note payable (400,000)
Net cash flow used for financing activities 150,000
Change in cash $ (20,000)
Cash at the beginning of the year 100,000
Cash at the end of the year $ 80,000
Note to Instructors: The disposal of fully depreciated equipment is not included in the cash
flow statement because there is no associated cash flow. This transaction strictly involves
the removal of $75,000 from the equipment and accumulated depreciation— equipment
accounts.
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CHAPTER 13 Statement of Cash Flows
13-20
Prob. 13–2A (Concluded) (Optional)
Yellow Dog Enterprises Inc.
Spreadsheet (Work Sheet) for Statement of Cash Flows
For the Year Ended December 31, 20Y8
Account Title
Balance,
Dec. 31, 20Y7
Transactions Balance,
Dec. 31, 20Y8Debit Credit
Cash 100,000 (l) 20,000 80,000
Accounts receivable (net) 300,000 (k) 25,000 275,000
Merchandise inventory 400,000 (j) 110,000 510,000
Prepaid expenses 10,000 (i) 5,000 15,000
Equipment 750,000 (h) 395,000 (g) 75,000 1,070,000
Accum. depr.—equipment (160,000) (g) 75,000 (f) 115,000 (200,000)
Accounts payable (90,000) (e) 10,000 (100,000)
Mortgage note payable (400,000) (d) 400,000 0
Common stock, $10 par (200,000) (c) 400,000 (600,000)
Paid-in capital in excess
of par—common stock (100,000) (c) 200,000 (300,000)
Retained earnings (610,000) (b) 50,000 (a) 190,000 (750,000)
Totals 0 1,035,000 1,035,000 0
Operating activities:
Net income (a) 190,000
Depreciation (f) 115,000
Decrease in accts. receivable (k) 25,000
Increase in merchandise
inventory (j) 110,000
Increase in prepaid expenses (i) 5,000
Increase in accounts payable (e) 10,000
Investing activities:
Purchase of equipment (h) 395,000
Financing activities:
Payment of cash dividends (b) 50,000
Sale of common stock (c) 600,000
Payment of mortgage note
payable (d) 400,000
Net decrease in cash (l) 20,000
Totals 960,000 960,000
Note to Instructor: The letters in the debit and credit columns are included for reference
purposes only.
13-20
Prob. 13–2A (Concluded) (Optional)
Yellow Dog Enterprises Inc.
Spreadsheet (Work Sheet) for Statement of Cash Flows
For the Year Ended December 31, 20Y8
Account Title
Balance,
Dec. 31, 20Y7
Transactions Balance,
Dec. 31, 20Y8Debit Credit
Cash 100,000 (l) 20,000 80,000
Accounts receivable (net) 300,000 (k) 25,000 275,000
Merchandise inventory 400,000 (j) 110,000 510,000
Prepaid expenses 10,000 (i) 5,000 15,000
Equipment 750,000 (h) 395,000 (g) 75,000 1,070,000
Accum. depr.—equipment (160,000) (g) 75,000 (f) 115,000 (200,000)
Accounts payable (90,000) (e) 10,000 (100,000)
Mortgage note payable (400,000) (d) 400,000 0
Common stock, $10 par (200,000) (c) 400,000 (600,000)
Paid-in capital in excess
of par—common stock (100,000) (c) 200,000 (300,000)
Retained earnings (610,000) (b) 50,000 (a) 190,000 (750,000)
Totals 0 1,035,000 1,035,000 0
Operating activities:
Net income (a) 190,000
Depreciation (f) 115,000
Decrease in accts. receivable (k) 25,000
Increase in merchandise
inventory (j) 110,000
Increase in prepaid expenses (i) 5,000
Increase in accounts payable (e) 10,000
Investing activities:
Purchase of equipment (h) 395,000
Financing activities:
Payment of cash dividends (b) 50,000
Sale of common stock (c) 600,000
Payment of mortgage note
payable (d) 400,000
Net decrease in cash (l) 20,000
Totals 960,000 960,000
Note to Instructor: The letters in the debit and credit columns are included for reference
purposes only.
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CHAPTER 13 Statement of Cash Flows
13-21
Prob. 13–3A
Whitman Co.
Statement of Cash Flows
For the Year Ended December 31, 20Y2
Cash flows from operating activities:
Net loss $ (35,320)
Adjustments to reconcile net loss to
net cash flow from operating activities:
Depreciation* 55,620
Loss on sale of land** 12,600
Changes in current operating assets
and liabilities:
Increase in accounts receivable (66,960)
Increase in inventories (105,480)
Decrease in prepaid expenses 5,760
Decrease in accounts payable (35,820)
Net cash flow used for operating activities $(169,600)
Cash flows from investing activities:
Cash received from land sold $ 151,200
Cash paid for acquisition of building (561,600)
Cash paid for purchase of equipment (104,400)
Net cash flow used for investing activities (514,800)
Cash flows from financing activities:
Cash received from issuance of
bonds payable $ 270,000
Cash received from issuance of
common stock 400,000
Cash paid for dividends (32,400)
Net cash flow from financing activities 637,600
Change in cash $ (46,800)
Cash at the beginning of the year 964,800
Cash at the end of the year $ 918,000
* Depreciation = $26,280 + $29,340
** Loss on sale of land = $151,200 – $163,800
13-21
Prob. 13–3A
Whitman Co.
Statement of Cash Flows
For the Year Ended December 31, 20Y2
Cash flows from operating activities:
Net loss $ (35,320)
Adjustments to reconcile net loss to
net cash flow from operating activities:
Depreciation* 55,620
Loss on sale of land** 12,600
Changes in current operating assets
and liabilities:
Increase in accounts receivable (66,960)
Increase in inventories (105,480)
Decrease in prepaid expenses 5,760
Decrease in accounts payable (35,820)
Net cash flow used for operating activities $(169,600)
Cash flows from investing activities:
Cash received from land sold $ 151,200
Cash paid for acquisition of building (561,600)
Cash paid for purchase of equipment (104,400)
Net cash flow used for investing activities (514,800)
Cash flows from financing activities:
Cash received from issuance of
bonds payable $ 270,000
Cash received from issuance of
common stock 400,000
Cash paid for dividends (32,400)
Net cash flow from financing activities 637,600
Change in cash $ (46,800)
Cash at the beginning of the year 964,800
Cash at the end of the year $ 918,000
* Depreciation = $26,280 + $29,340
** Loss on sale of land = $151,200 – $163,800
Loading page 23...
CHAPTER 13 Statement of Cash Flows
13-22
Prob. 13–3A (Concluded) (Optional)
Whitman Co.
Spreadsheet (Work Sheet) for Statement of Cash Flows
For the Year Ended December 31, 20Y2
Account Title
Balance,
Dec. 31, 20Y1
Transactions Balance,
Dec. 31, 20Y2Debit Credit
Cash 964,800 (o) 46,800 918,000
Accounts receivable 761,940 (g) 66,960 828,900
Inventories 1,162,980 (h) 105,480 1,268,460
Prepaid expenses 35,100 (f) 5,760 29,340
Land 479,700 (l) 163,800 315,900
Buildings 900,900 (k) 561,600 1,462,500
Accum. depr.—buildings (382,320) (e) 26,280 (408,600)
Equipment 454,680 (i) 104,400 (j) 46,800 512,280
Accum. depr.—equipment (158,760) (j) 46,800 (d) 29,340 (141,300)
Accounts payable (958,320) (c) 35,820 (922,500)
Bonds payable 0 (m) 270,000 (270,000)
Common stock, $25 par (117,000) (n) 200,000 (317,000)
Paid-in capital in excess of
par—common stock (558,000) (n) 200,000 (758,000)
Retained earnings (2,585,700) (a) 35,320 (2,582,780)
(b) (32,400)
Totals 0 923,980 988,780 (64,800)
Operating activities:
Net loss (a) 35,320
Depreciation—equipment (d) 29,340
Depreciation—buildings (e) 26,280
Loss on sale of land (l) 12,600
Increase in accts. receivable (g) 66,960
Increase in inventories (h) 105,480
Decrease in prepaid expenses (f) 5,760
Decrease in accounts payable (c) 35,820
Investing activities:
Purchase of equipment (i) 104,400
Acquisition of building (k) 561,600
Sale of land (l) 151,200
Financing activities:
Payment of cash dividends (b) (32,400)
Issuance of bonds payable (m) 270,000
Issuance of common stock (n) 400,000
Net decrease in cash (o) 46,800
Totals 941,980 877,180
13-22
Prob. 13–3A (Concluded) (Optional)
Whitman Co.
Spreadsheet (Work Sheet) for Statement of Cash Flows
For the Year Ended December 31, 20Y2
Account Title
Balance,
Dec. 31, 20Y1
Transactions Balance,
Dec. 31, 20Y2Debit Credit
Cash 964,800 (o) 46,800 918,000
Accounts receivable 761,940 (g) 66,960 828,900
Inventories 1,162,980 (h) 105,480 1,268,460
Prepaid expenses 35,100 (f) 5,760 29,340
Land 479,700 (l) 163,800 315,900
Buildings 900,900 (k) 561,600 1,462,500
Accum. depr.—buildings (382,320) (e) 26,280 (408,600)
Equipment 454,680 (i) 104,400 (j) 46,800 512,280
Accum. depr.—equipment (158,760) (j) 46,800 (d) 29,340 (141,300)
Accounts payable (958,320) (c) 35,820 (922,500)
Bonds payable 0 (m) 270,000 (270,000)
Common stock, $25 par (117,000) (n) 200,000 (317,000)
Paid-in capital in excess of
par—common stock (558,000) (n) 200,000 (758,000)
Retained earnings (2,585,700) (a) 35,320 (2,582,780)
(b) (32,400)
Totals 0 923,980 988,780 (64,800)
Operating activities:
Net loss (a) 35,320
Depreciation—equipment (d) 29,340
Depreciation—buildings (e) 26,280
Loss on sale of land (l) 12,600
Increase in accts. receivable (g) 66,960
Increase in inventories (h) 105,480
Decrease in prepaid expenses (f) 5,760
Decrease in accounts payable (c) 35,820
Investing activities:
Purchase of equipment (i) 104,400
Acquisition of building (k) 561,600
Sale of land (l) 151,200
Financing activities:
Payment of cash dividends (b) (32,400)
Issuance of bonds payable (m) 270,000
Issuance of common stock (n) 400,000
Net decrease in cash (o) 46,800
Totals 941,980 877,180
Loading page 24...
CHAPTER 13 Statement of Cash Flows
13-23
Appendix 2 Prob. 13–4A
Canace Products Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y6
Cash flows from operating activities:
Cash received from customers1 $ 5,960,600
Cash payments for merchandise2 (2,456,800)
Cash payments for operating expenses3 (3,107,400)
Cash payments for income taxes (102,800)
Net cash flow from operating activities $ 293,600
Cash flows from investing activities:
Cash received from sale of investments $ 176,000
Cash paid for purchase of land (520,000)
Cash paid for purchase of equipment (200,000)
Net cash flow used for investing activities (544,000)
Cash flows from financing activities:
Cash received from sale of common stock $ 240,000
Cash paid for dividends* (25,600)
Net cash flow from financing activities 214,400
Change in cash $ (36,000)
Cash at the beginning of the year 679,400
Cash at the end of the year $ 643,400
Reconciliation of Net Income with Cash Flows from Operating Activities:
Net income ..................................................................................................... $217,200
Adjustments to reconcile net income to net cash flow
from operating activities:
Depreciation ........................................................................................... 44,000
Loss on sale of investments .............................................................. 64,000
Changes in current operating assets and liabilities:
Increase in accounts receivable ........................................................ (19,400)
Increase in inventories .......................................................................... (28,200)
Increase in accounts payable ............................................................ 23,400
Decrease in accrued expenses payable ........................................... (7,400)
Net cash flow from operating activities ......................................... $293,600
* Dividends paid: $28,000 + $6,400 – $8,800 = $25,600
13-23
Appendix 2 Prob. 13–4A
Canace Products Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y6
Cash flows from operating activities:
Cash received from customers1 $ 5,960,600
Cash payments for merchandise2 (2,456,800)
Cash payments for operating expenses3 (3,107,400)
Cash payments for income taxes (102,800)
Net cash flow from operating activities $ 293,600
Cash flows from investing activities:
Cash received from sale of investments $ 176,000
Cash paid for purchase of land (520,000)
Cash paid for purchase of equipment (200,000)
Net cash flow used for investing activities (544,000)
Cash flows from financing activities:
Cash received from sale of common stock $ 240,000
Cash paid for dividends* (25,600)
Net cash flow from financing activities 214,400
Change in cash $ (36,000)
Cash at the beginning of the year 679,400
Cash at the end of the year $ 643,400
Reconciliation of Net Income with Cash Flows from Operating Activities:
Net income ..................................................................................................... $217,200
Adjustments to reconcile net income to net cash flow
from operating activities:
Depreciation ........................................................................................... 44,000
Loss on sale of investments .............................................................. 64,000
Changes in current operating assets and liabilities:
Increase in accounts receivable ........................................................ (19,400)
Increase in inventories .......................................................................... (28,200)
Increase in accounts payable ............................................................ 23,400
Decrease in accrued expenses payable ........................................... (7,400)
Net cash flow from operating activities ......................................... $293,600
* Dividends paid: $28,000 + $6,400 – $8,800 = $25,600
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CHAPTER 13 Statement of Cash Flows
13-24
Appendix 2 Prob. 13–4A (Concluded) Computations:
1. Sales ............................................................................................................. $5,980,000
Increase in accounts receivable ............................................................. (19,400)
Cash received from customers ............................................................... $5,999,400
2. Cost of goods sold ................................................................................... $2,452,000
Increase in inventories ............................................................................... 28,200
Increase in accounts payable.................................................................. (23,400)
Cash payments for merchandise ............................................................ $2,456,800
3. Operating expenses other than depreciation ........................................ $3,100,000
Decrease in accrued expenses payable................................................. 7,400
Cash payments for operating expenses ................................................ $3,107,400
13-24
Appendix 2 Prob. 13–4A (Concluded) Computations:
1. Sales ............................................................................................................. $5,980,000
Increase in accounts receivable ............................................................. (19,400)
Cash received from customers ............................................................... $5,999,400
2. Cost of goods sold ................................................................................... $2,452,000
Increase in inventories ............................................................................... 28,200
Increase in accounts payable.................................................................. (23,400)
Cash payments for merchandise ............................................................ $2,456,800
3. Operating expenses other than depreciation ........................................ $3,100,000
Decrease in accrued expenses payable................................................. 7,400
Cash payments for operating expenses ................................................ $3,107,400
Loading page 26...
CHAPTER 13 Statement of Cash Flows
13-25
Appendix 2 Prob. 13–5A
Livers Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y3
Cash flows from operating activities:
Cash received from customers1 $ 2,950,000
Cash payments for merchandise2 (1,380,000)
Cash payments for operating expenses3 (955,000)
Cash payments for income taxes (125,000)
Net cash flow from operating activities $ 490,000
Cash flows from investing activities:
Cash received from sale of investments $ 175,000
Cash paid for purchase of land (500,000)
Cash paid for purchase of equipment (200,000)
Net cash flow used for investing activities (525,000)
Cash flows from financing activities:
Cash received from sale of common stock $ 125,000
Cash paid for dividends4
(85,000)
Net cash flow from financing activities 40,000
Change in cash $ 5,000
Cash at the beginning of the year 150,000
Cash at the end of the year $ 155,000
Reconciliation of Net Income with Cash Flows from Operating Activities:
Net income ................................................................................................................... $500,000
Adjustments to reconcile net income to net cash flow
from operating activities:
Depreciation ................................................................................................... 100,000
Gain on sale of investments ........................................................................... (75,000)
Changes in current operating assets and liabilities:
Increase in accounts receivable ................................................................... (50,000)
Increase in inventories .............................................................................. (20,000)
Increase in accounts payable ................................................................... 40,000
Decrease in accrued expenses payable ................................................... (5,000)
Net cash flow from operating activities ......................................................... $490,000
13-25
Appendix 2 Prob. 13–5A
Livers Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y3
Cash flows from operating activities:
Cash received from customers1 $ 2,950,000
Cash payments for merchandise2 (1,380,000)
Cash payments for operating expenses3 (955,000)
Cash payments for income taxes (125,000)
Net cash flow from operating activities $ 490,000
Cash flows from investing activities:
Cash received from sale of investments $ 175,000
Cash paid for purchase of land (500,000)
Cash paid for purchase of equipment (200,000)
Net cash flow used for investing activities (525,000)
Cash flows from financing activities:
Cash received from sale of common stock $ 125,000
Cash paid for dividends4
(85,000)
Net cash flow from financing activities 40,000
Change in cash $ 5,000
Cash at the beginning of the year 150,000
Cash at the end of the year $ 155,000
Reconciliation of Net Income with Cash Flows from Operating Activities:
Net income ................................................................................................................... $500,000
Adjustments to reconcile net income to net cash flow
from operating activities:
Depreciation ................................................................................................... 100,000
Gain on sale of investments ........................................................................... (75,000)
Changes in current operating assets and liabilities:
Increase in accounts receivable ................................................................... (50,000)
Increase in inventories .............................................................................. (20,000)
Increase in accounts payable ................................................................... 40,000
Decrease in accrued expenses payable ................................................... (5,000)
Net cash flow from operating activities ......................................................... $490,000
Loading page 27...
CHAPTER 13 Statement of Cash Flows
13-26
Appendix 2 Prob. 13–5A (Concluded) Computations:
1. Sales ................................................................................................................ $3,000,000
Increase in accounts receivable ................................................................ (50,000)
Cash received from customers .................................................................. $2,950,000
2. Cost of goods sold ...................................................................................... $1,400,000
Increase in inventories .................................................................................. 20,000
Increase in accounts payable .................................................................... (40,000)
Cash payments for merchandise ............................................................... $1,380,000
3. Operating expenses other than depreciation........................................... $ 950,000
Decrease in accrued expenses payable ................................................... 5,000
Cash payments for operating expenses ................................................... $ 955,000
4. Cash dividends declared .............................................................................. $ 90,000
Increase in dividends payable.................................................................... (5,000)
Cash payments for dividends .................................................................... $ 85,000
13-26
Appendix 2 Prob. 13–5A (Concluded) Computations:
1. Sales ................................................................................................................ $3,000,000
Increase in accounts receivable ................................................................ (50,000)
Cash received from customers .................................................................. $2,950,000
2. Cost of goods sold ...................................................................................... $1,400,000
Increase in inventories .................................................................................. 20,000
Increase in accounts payable .................................................................... (40,000)
Cash payments for merchandise ............................................................... $1,380,000
3. Operating expenses other than depreciation........................................... $ 950,000
Decrease in accrued expenses payable ................................................... 5,000
Cash payments for operating expenses ................................................... $ 955,000
4. Cash dividends declared .............................................................................. $ 90,000
Increase in dividends payable.................................................................... (5,000)
Cash payments for dividends .................................................................... $ 85,000
Loading page 28...
CHAPTER 13 Statement of Cash Flows
13-27
Prob. 13–1B
Merrick Equipment Co.
Statement of Cash Flows
For the Year Ended December 31, 20Y9
Cash flows from operating activities:
Net income $ 141,680
Adjustments to reconcile net income to
net cash flow from operating activities:
Depreciation 14,790
Loss on sale of investments 10,200
Changes in current operating assets
and liabilities:
Increase in accounts receivable (19,040)
Increase in inventories (8,670)
Increase in accounts payable 11,560
Increase in accrued expenses
payable 3,740
Net cash flow from operating activities $ 154,260
Cash flows from investing activities:
Cash received from sale of investments $ 91,800
Cash paid for purchase of land (295,800)
Cash paid for purchase of equipment (80,580)
Net cash flow used for investing activities (284,580)
Cash flows from financing activities:
Cash received from sale of common stock $ 250,000
Cash paid for dividends* (96,900)
Net cash flow from financing activities 153,100
Change in cash $ 22,780
Cash at the beginning of the year 47,940
Cash at the end of the year $ 70,720
* $102,000 + $20,400 – $25,500 = $96,900
13-27
Prob. 13–1B
Merrick Equipment Co.
Statement of Cash Flows
For the Year Ended December 31, 20Y9
Cash flows from operating activities:
Net income $ 141,680
Adjustments to reconcile net income to
net cash flow from operating activities:
Depreciation 14,790
Loss on sale of investments 10,200
Changes in current operating assets
and liabilities:
Increase in accounts receivable (19,040)
Increase in inventories (8,670)
Increase in accounts payable 11,560
Increase in accrued expenses
payable 3,740
Net cash flow from operating activities $ 154,260
Cash flows from investing activities:
Cash received from sale of investments $ 91,800
Cash paid for purchase of land (295,800)
Cash paid for purchase of equipment (80,580)
Net cash flow used for investing activities (284,580)
Cash flows from financing activities:
Cash received from sale of common stock $ 250,000
Cash paid for dividends* (96,900)
Net cash flow from financing activities 153,100
Change in cash $ 22,780
Cash at the beginning of the year 47,940
Cash at the end of the year $ 70,720
* $102,000 + $20,400 – $25,500 = $96,900
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CHAPTER 13 Statement of Cash Flows
13-28
Prob. 13–1B (Concluded) (Optional)
Merrick Equipment Co.
Spreadsheet (Work Sheet) for Statement of Cash Flows
For the Year Ended December 31, 20Y9
Account Title
Balance,
Dec. 31, 20Y8
Transactions Balance,
Dec. 31, 20Y9Debit Credit
Cash 47,940 (m) 22,780 70,720
Accounts receivable (net) 188,190 (l) 19,040 207,230
Inventories 289,850 (k) 8,670 298,520
Investments 102,000 (j) 102,000 0
Land 0 (i) 295,800 295,800
Equipment 358,020 (h) 80,580 438,600
Accum. depr.—equipment (84,320) (g) 14,790 (99,110)
Accounts payable (194,140) (f) 11,560 (205,700)
Accrued expenses payable (26,860) (e) 3,740 (30,600)
Dividends payable (20,400) (d) 5,100 (25,500)
Common stock, $1 par (102,000) (c) 100,000 (202,000)
Paid-in capital in excess
of par—common stock (204,000) (c) 150,000 (354,000)
Retained earnings (354,280) (b) 102,000 (a) 141,680 (393,960)
Totals 0 528,870 528,870 0
Operating activities:
Net income (a) 141,680
Depreciation (g) 14,790
Loss on sale of investments (j) 10,200
Increase in accounts
receivable (l) 19,040
Increase in inventories (k) 8,670
Increase in accounts payable (f) 11,560
Increase in accrued expenses
payable (e) 3,740
Investing activities:
Purchase of equipment (h) 80,580
Purchase of land (i) 295,800
Sale of investments (j) 91,800
Financing activities:
Declaration of cash dividends (b) 102,000
Sale of common stock (c) 250,000
Increase in dividends payable (d) 5,100
Net change in cash (m) 22,780
Totals 528,870 528,870
Note to Instructor: The letters in the debit and credit columns are included for
reference purposes only.
13-28
Prob. 13–1B (Concluded) (Optional)
Merrick Equipment Co.
Spreadsheet (Work Sheet) for Statement of Cash Flows
For the Year Ended December 31, 20Y9
Account Title
Balance,
Dec. 31, 20Y8
Transactions Balance,
Dec. 31, 20Y9Debit Credit
Cash 47,940 (m) 22,780 70,720
Accounts receivable (net) 188,190 (l) 19,040 207,230
Inventories 289,850 (k) 8,670 298,520
Investments 102,000 (j) 102,000 0
Land 0 (i) 295,800 295,800
Equipment 358,020 (h) 80,580 438,600
Accum. depr.—equipment (84,320) (g) 14,790 (99,110)
Accounts payable (194,140) (f) 11,560 (205,700)
Accrued expenses payable (26,860) (e) 3,740 (30,600)
Dividends payable (20,400) (d) 5,100 (25,500)
Common stock, $1 par (102,000) (c) 100,000 (202,000)
Paid-in capital in excess
of par—common stock (204,000) (c) 150,000 (354,000)
Retained earnings (354,280) (b) 102,000 (a) 141,680 (393,960)
Totals 0 528,870 528,870 0
Operating activities:
Net income (a) 141,680
Depreciation (g) 14,790
Loss on sale of investments (j) 10,200
Increase in accounts
receivable (l) 19,040
Increase in inventories (k) 8,670
Increase in accounts payable (f) 11,560
Increase in accrued expenses
payable (e) 3,740
Investing activities:
Purchase of equipment (h) 80,580
Purchase of land (i) 295,800
Sale of investments (j) 91,800
Financing activities:
Declaration of cash dividends (b) 102,000
Sale of common stock (c) 250,000
Increase in dividends payable (d) 5,100
Net change in cash (m) 22,780
Totals 528,870 528,870
Note to Instructor: The letters in the debit and credit columns are included for
reference purposes only.
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CHAPTER 13 Statement of Cash Flows
13-29
Prob. 13–2B
Harris Industries Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y4
Cash flows from operating activities:
Net income $ 524,580
Adjustments to reconcile net income to
net cash flow from operating activities:
Depreciation 74,340
Patent amortization 5,040
Changes in current operating assets
and liabilities:
Increase in accounts receivable (73,080)
Decrease in inventories 134,680
Increase in prepaid expenses (6,440)
Decrease in accounts payable (89,600)
Decrease in salaries payable (8,120)
Net cash flow from operating activities $ 561,400
Cash flows from investing activities:
Cash paid for construction of building $(579,600)
Net cash flow used for investing activities (579,600)
Cash flows from financing activities:
Cash received from issuance of mortgage note $ 224,000
Cash paid for dividends* (123,480)
Net cash flow from financing activities 100,520
Change in cash $ 82,320
Cash at the beginning of the year 360,920
Cash at the end of the year $ 443,240
Schedule of Noncash Financing and Investing Activities:
Issuance of common stock to retire bonds $ 390,000
* Cash paid for dividends = $131,040 + $25,200 – $32,760 = $123,480
13-29
Prob. 13–2B
Harris Industries Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y4
Cash flows from operating activities:
Net income $ 524,580
Adjustments to reconcile net income to
net cash flow from operating activities:
Depreciation 74,340
Patent amortization 5,040
Changes in current operating assets
and liabilities:
Increase in accounts receivable (73,080)
Decrease in inventories 134,680
Increase in prepaid expenses (6,440)
Decrease in accounts payable (89,600)
Decrease in salaries payable (8,120)
Net cash flow from operating activities $ 561,400
Cash flows from investing activities:
Cash paid for construction of building $(579,600)
Net cash flow used for investing activities (579,600)
Cash flows from financing activities:
Cash received from issuance of mortgage note $ 224,000
Cash paid for dividends* (123,480)
Net cash flow from financing activities 100,520
Change in cash $ 82,320
Cash at the beginning of the year 360,920
Cash at the end of the year $ 443,240
Schedule of Noncash Financing and Investing Activities:
Issuance of common stock to retire bonds $ 390,000
* Cash paid for dividends = $131,040 + $25,200 – $32,760 = $123,480
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Accounting