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Chapter 12 – Reporting and Analyzing Cash Flows
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Exercise 12-4 page 547
Cash flow from operations - Indirect
Exercise 12-4
Exercise 12-4 Algo
Exercise 12-5 page 547
Cash flow from operations - Direct
Exercise 12-5
Exercise 12-5 Algo
Exercise 12-6 page 547
Cash flow from operations - Indirect
Exercise 12-6
Exercise 12-6 Algo
Exercise 12-7 page 548
Cash flow from operations - Direct
Exercise 12-7
Exercise 12-7 Algo
Exercise 12-8 page 548
Investing Activities
Exercise 12-8
Exercise 12-8 Algo
Exercise 12-9 page 548
Financing Activities
Exercise 12-9
Exercise 12-9 Algo
Exercise 12-10 page 548
SCF – Indirect Method
Exercise 12-10
Exercise 12-10 Algo
Exercise 12-11 page 549
SCF – Direct Method
Exercise 12-11
Exercise 12-11 Algo
Exercise 12-12 page 549
Cash flow from operations - Indirect
Exercise 12-12
Exercise 12-12 Algo
Exercise 12-13 page 549
Cash flow from operations - Indirect
Exercise 12-13
Exercise 12-13 Algo
Exercise 12-14 page 549
Cash Flows Spreadsheet
Exercise 12-14
Exercise 12-14 Algo
Exercise 12-15 page 550
Direct SCF – Supporting Note
Exercise 12-15
Exercise 12-15 Algo
Exercise 12-16 page 551
Indirect SCF – From Cash T-account
Exercise 12-16
Exercise 12-16 Algo
Exercise 12-17 page 551
Cash Flows on Total Assets
Exercise 12-17
Exercise 12-17 Algo
Exercise 12-18 page 551
Statement of Cash Flows -IFRS
Exercise 12-18
Exercise 12-18 Algo
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Exercise 12-4 page 547
12-2
Salud Company reports net income of $400,000 for the year ended December 31, 2013. It also reports
$80,000 of depreciation expense, and a $20,000 gain on sale of machinery. Its comparative balance sheets
reveal a $40,000 increase in Accounts receivable, $6,000 increase in Accounts payable, $12,000 decrease
in Prepaid expenses, and $2,000 decrease in Wages payable.
Required:
Prepare only the operating activities section of the statement of cash flows for 2013 using the indirect method.
Salud Company
Statement of Cash Flows (partial) - Indirect Method
For the year ended December 31, 2013
Cash flows from operating activities
Net income
$400,000
Adjustments to reconcile net income to operating cash flow:
Depreciation expense
$80,000
Gain on sale of machinery
(20,000)
Increase In Accounts Receivable
(40,000)
Decrease In Prepaid Expenses
12,000
Increase In Accounts Payable
6,000
Decrease In Wages Payable
(2,000)
36,000
Net cash provided by operating activities
$436,000
Exercise 12-4 page 547
12-3
Salud Company reports net income of $340,000 for the year ended December 31, 2013. It also reports $61,200
of depreciation expense, and a $3,500 gain on sale of machinery. Its comparative balance sheets reveal a
$27,200 increase in Accounts receivable, $13,940 increase in Accounts payable, $7,480 decrease in Prepaid
expenses, and $10,540 decrease in Wages payable.
Prepare only the operating activities section of the statement of cash flows for 2013 using the indirect method.
Salud Company
Statement of Cash Flows (partial) - Indirect Method
For the year ended December 31, 2013
Cash flows from operating activities
Net income
$340,000
Adjustments to reconcile net income to operating cash flow:
Depreciation expense
$61,200
Gain on sale of machinery
(3,500)
Increase in Accounts Receivable
(27,200)
Decrease in Prepaid Expenses
7,480
Increase in Accounts Payable
13,940
Decrease in Wages Payable
(10,540)
41,380
Net cash provided by operating activities
$381,380
Exercise 12-4 page 547 Algorithm
12-4
Exercise 12-5 page 547
12-5
Case X:
Case Y:
Case Z:
Compute cash received from customers:
Sales
Accounts receivable, December 31, 2013
Accounts receivable, December 31, 2014
$515,000
27,200
33,600
Compute cash paid for rent:
Rent expense
Rent payable, December 31, 2013
Rent payable, December 31, 2014
$139,800
7,800
6,200
Compute cash paid for merchandise:
Cost of goods sold
Merchandise inventory, December 31, 2013
Accounts payable, December 31, 2013
Merchandise inventory, December 31, 2014
Accounts payable, December 31, 2014
$525,000
158,600
66,700
130,400
82,000
For each of the above three separate cases, use the information provided about the calendar-year 2014
operations of Sahim Company to compute the required cash flow information.
Exercise 12-5 page 547
12-6
Case X:
Compute cash received from customers: $508,600
Sales
Accounts receivable, December 31, 2013
Accounts receivable, December 31, 2014
Date
General Journal
Debit
508,600
6,400
Cash
Accounts receivable
Sales
Case Y:
Compute cash paid for rent:
Rent expense
Rent payable, December 31, 2013
Rent payable, December 31, 2014
Date
General Journal
Rent expense
Rent payable
Cash
Exercise 12-5 page 547
$515,000
27,200
33,600
Credit
515,000
$141,400
$139,800
7,800
6,200
Debit
139,800
1,600
Credit
141,400
12-7
Case Z:
Date
Exercise 12-5 page 547
Compute cash paid for merchandise: $481,500
Cost of goods sold
Merchandise inventory, December 31, 2013
Accounts payable, December 31, 2013
Merchandise inventory, December 31, 2014
Accounts payable, December 31, 2014
General Journal
Cost of goods sold
Merchandise inventory
Accounts payable
Cash
$525,000
158,600
66,700
130,400
82,000
Debit
525,000
Credit
28,200
15,300
481,500
12-8
Case Z:
Compute cash paid for merchandise:
Cost of goods sold
Merchandise inventory, December 31, 2013
Accounts payable, December 31, 2013
Merchandise inventory, December 31, 2014
Accounts payable, December 31, 2014
Date
Exercise 12-5 page 547
General Journal
Cost of goods sold
Merchandise inventory
Accounts payable
Cash
$525,000
158,600
66,700
130,400
82,000
Debit
525,000
Credit
28,200
15,300
481,500
12-9
Case X: Compute cash received from customers:
Sales
Accounts receivable, December 31, 2013
Accounts receivable, December 31, 2014
Case Y:
Case Z:
$430,000
43,000
59,340
Compute cash paid for rent:
Rent expense
Rent payable, December 31, 2013
Rent payable, December 31, 2014
$105,600
12,900
11,610
Compute cash paid for merchandise:
Cost of goods sold
Merchandise inventory, December 31, 2013
Accounts payable, December 31, 2013
Merchandise inventory, December 31, 2014
Accounts payable, December 31, 2014
$455,000
141,050
59,241
115,661
73,459
For each of the above three separate cases, use the information provided about the calendar-year 2014
operations of Sahim Company to compute the required cash flow information.
Exercise 12-5 page 547
Algorithm
12-10
Case X: Compute cash received from customers:
Sales
Accounts receivable, December 31, 2013
Accounts receivable, December 31, 2014
Date
$413,660
$430,000
43,000
59,340
General Journal
Debit
413,660
16,340
Cash
Accounts receivable
Sales
Case Y:
Compute cash paid for rent:
Rent expense
Rent payable, December 31, 2013
Rent payable, December 31, 2014
Date
Exercise 12-5 page 547 Algorithm
430,000
$106,890
General Journal
Rent expense
Rent payable
Cash
Credit
$105,600
12,900
11,610
Debit
105,600
1,290
Credit
106,890
12-11
Case Z:
Compute cash paid for merchandise: $415,393
Cost of goods sold
Merchandise inventory, December 31, 2013
Accounts payable, December 31, 2013
Merchandise inventory, December 31, 2014
Accounts payable, December 31, 2014
Date
Exercise 12-5 page 547 Algorithm
General Journal
Cost of goods sold
Merchandise inventory
Accounts payable
Cash
$455,000
141,050
59,241
115,661
73,459
Debit
455,000
Credit
25,389
14,218
415,393
12-12
Exercise 12-6 page 547
12-13
The following income statement and information about changes in noncash current assets and current
liabilities are reported.
Sohad Company
Income Statement
For the year ended December 31, 2013
Sales
Cost of goods sold
Gross profit
Operating expenses
Salaries expense
Depreciation expense
Rent expense
Amortization expense - Patents
Utilities expense
Total operating expenses
Gain on sale of equipment
Net income
$1,828,000
991,000
837,000
$245,535
44,200
49,600
4,200
18,125
361,660
475,340
6,200
$481,540
Changes in current asset and current liability accounts for the year that relate to operating activities follow:
Accounts receivable
Merchandise inventory
$30,500 Increase
25,000 Increase
Accounts payable
Salaries payable
$12,500 Decrease
3,500 Decrease
Prepare only the cash flows from operating activities section of the statement of cash flows for 2013 using the
indirect method.
Exercise 12-6 page 547
12-14
Statement of Cash Flows - Indirect Method
Cash flows from operating activities
Net income
Adjustments to reconcile net income to operating cash flow:
Income statement items (opposite direction):
+ Noncash expenses (Depreciation, amortization)
- Noncash revenues (Equity method earnings)
+ Loss on sale of LT assets
- Gain on sale of LT assets
Balance sheet items:
Change in noncash operating assets (opposite direction)
+ Decreases in current operating assets
- Increases in current operating assets
Change in noncash operating liabilities (same direction)
+ Increases in current operating liabilities
- Decreases in current operating liabilities
Net cash provided (used) by operating activities
Exercise 12-6 page 547
Start assuming that NI = change in cash
Correct for that assumption
Why?
These expenses didn't reduce cash
These revenues didn't provide cash
Cash flow is reported in the
Investing activities section
Think of it as a journal entry:
Debit
Credit
Cash
Current asset
Current asset
Cash
Cash
Current liability
Current liability
Cash
12-15
Sohad Company
Income Statement
For the year ended December 31, 2013
Sales
Cost of goods sold
Gross profit
Operating expenses
Salaries expense
Depreciation expense
Rent expense
Amortization expense - Patents
Utilities expense
Total operating expenses
Gain on sale of equipment
Net income
$1,828,000
991,000
837,000
$245,535
44,200
49,600
4,200
18,125
361,660
475,340
6,200
$481,540
Sohad Company
Statement of Cash Flows (partial) - Indirect Method
For the year ended December 31, 2013
Cash flows from operating activities
Net income
$481,540
Adjustments to reconcile net income to operating cash flow:
Depreciation expense
$44,200
Amortization expense - Patents
4,200
Gain on sale of equipment
(6,200)
Increase in Accounts receivable
(30,500)
Increase in Merchandise inventory
(25,000)
Decrease in Accounts payable
(12,500)
Decrease in Salaries payable
(3,500)
(29,300)
Net cash provided by operating activities
$452,240
Changes in current asset and current liability accounts for the year that relate to operating activities follow:
Accounts receivable
Merchandise inventory
Exercise 12-6 page 547
$30,500 Increase
25,000 Increase
Accounts payable
Salaries payable
$12,500 Decrease
3,500 Decrease
12-16
The following income statement and information about changes in noncash current assets and current
liabilities are reported.
Sahim Company
Income Statement
For the year ended December 31, 2013
Sales
Cost of goods sold
Gross profit
Operating expenses
Salaries expense
Depreciation expense
Rent expense
Amortization expense - Patents
Utilities expense
Total operating expenses
Gain on sale of equipment
Net income
$2,012,000
985,880
1,026,120
$275,644
48,288
54,324
6,036
22,132
406,424
619,696
8,048
$627,744
Changes in current asset and current liability accounts for the year that relate to operating activities follow:
Accounts receivable
Merchandise inventory
$18,100 Increase
18,200 Increase
Accounts payable
Salaries payable
$9,300 Decrease
5,550 Decrease
Prepare only the cash flows from operating activities section of the statement of cash flows for 2013 using
the indirect method.
Exercise 12-6 page 547 Algorithm
12-17
Statement of Cash Flows - Indirect Method
Cash flows from operating activities
Net income
Adjustments to reconcile net income to operating cash flow:
Income statement items (opposite direction):
+ Noncash expenses (Depreciation, amortization)
- Noncash revenues (Equity method earnings)
+ Loss on sale of LT assets
- Gain on sale of LT assets
Balance sheet items:
Change in noncash operating assets (opposite direction)
+ Decreases in current operating assets
- Increases in current operating assets
Change in noncash operating liabilities (same direction)
+ Increases in current operating liabilities
- Decreases in current operating liabilities
Net cash provided (used) by operating activities
Exercise 12-6 page 547 Algorithm
Start assuming that NI = change in cash
Correct for that assumption
Why?
These expenses didn't reduce cash
These revenues didn't provide cash
Cash flow is reported in the
Investing activities section
Think of it as a journal entry:
Debit
Credit
Cash
Current asset
Current asset
Cash
Cash
Current liability
Current liability
Cash
12-18
Sahim Company
Income Statement
For the year ended December 31, 2013
Sales
$2,012,000
Cost of goods sold
985,880
Gross profit
1,026,120
Operating expenses
Salaries expense
$275,644
Depreciation expense
48,288
Rent expense
54,324
Amortization expense - Patents
6,036
Utilities expense
22,132
Total operating expenses
406,424
619,696
Gain on sale of equipment
8,048
Net income
$627,744
Sahim Company
Statement of Cash Flows (partial) - Indirect Method
For the year ended December 31, 2013
Cash flows from operating activities
Net income
$627,744
Adjustments to reconcile net income to operating cash flow:
Depreciation expense
$48,288
Amortization expense - Patents
6,036
Gain on sale of equipment
(8,048)
Increase in Accounts Receivable
(18,100)
Increase in Merchandise Inventory
(18,200)
Decrease in Accounts Payable
(9,300)
Decrease in Salaries Payable
(5,550)
(4,874)
Net cash provided by operating activities
$622,870
Changes in current asset and current liability accounts for the year that relate to operating activities follow:
Accounts receivable
Merchandise inventory
Exercise 12-6 page 547 Algorithm
$18,100 Increase
18,200 Increase
Accounts payable
Salaries payable
$9,300 Decrease
5,550 Decrease
12-19
Exercise 12-7 page 548
12-20
The following income statement and information about changes in noncash current assets and current
liabilities are reported.
Sohad Company
Income Statement
For the year ended December 31, 2013
Sales
Cost of goods sold
Gross profit
Operating expenses
Salaries expense
Depreciation expense
Rent expense
Amortization expense - Patents
Utilities expense
Total operating expenses
Gain on sale of equipment
Net income
$1,828,000
991,000
837,000
$245,535
44,200
49,600
4,200
18,125
361,660
475,340
6,200
$481,540
Changes in current asset and current liability accounts for the year that relate to operating activities follow:
Accounts receivable
Merchandise inventory
$30,500 Increase
25,000 Increase
Accounts payable
Salaries payable
$12,500 Decrease
3,500 Decrease
Prepare only the cash flows from operating activities section of the statement of cash flows for 2013 using the
direct method.
Exercise 12-7 page 548
12-21
Sohad Company
Income Statement
For the year ended December 31, 2013
Sales
Cost of goods sold
Gross profit
Operating expenses
Salaries expense
Depreciation expense
Rent expense
Amortization expense - Patents
Utilities expense
Total operating expenses
$1,828,000
991,000
837,000
$245,535
44,200
49,600
4,200
18,125
361,660
475,340
6,200
$481,540
Gain on sale of equipment
Net income
Date
Accounts receivable
Merchandise inventory
Accounts payable
Salaries payable
General Journal
Cash
Accounts receivable
Sales
Exercise 12-7 page 548
Sohad Company
Statement of Cash Flows (partial) - Direct Method
For the year ended December 31, 2013
Cash flows from operating activities
Receipts from customers
$1,797,500
Payments for merchandise
(1,028,500)
Payments for salaries
(249,035)
Payments for rent
(49,600)
Payments for utilities
(18,125)
Net cash provided by operating activities
$452,240
$30,500
25,000
12,500
3,500
Debit
1,797,500
30,500
Increase
Increase
Decrease
Decrease
Credit
1,828,000
Cost of goods sold
Merchandise inventory
Accounts payable
Cash
991,000
25,000
12,500
Salaries expense
Salaries payable
Cash
245,535
3,500
1,028,500
249,035
12-22
The following income statement and information about changes in noncash current assets and current
liabilities are reported.
Sahim Company
Income Statement
For the year ended December 31, 2013
Sales
Cost of goods sold
Gross profit
Operating expenses
Salaries expense
Depreciation expense
Rent expense
Amortization expense - Patents
Utilities expense
Total operating expenses
Gain on sale of equipment
Net income
$2,012,000
985,880
1,026,120
$275,644
48,288
54,324
6,036
22,132
406,424
619,696
8,048
$627,744
Changes in current asset and current liability accounts for the year that relate to operating activities follow:
Accounts receivable
Merchandise inventory
$18,100 Increase
18,200 Increase
Accounts payable
Salaries payable
$9,300 Decrease
5,550 Decrease
Prepare only the cash flows from operating activities section of the statement of cash flows for 2013 using
the direct method.
Exercise 12-7 page 548 Algorithm
12-23
Sahim Company
Income Statement
For the year ended December 31, 2013
Sales
$2,012,000
Cost of goods sold
985,880
Gross profit
1,026,120
Operating expenses
Salaries expense
$275,644
Depreciation expense
48,288
Rent expense
54,324
Amortization expense - Patents
6,036
Utilities expense
22,132
Total operating expenses
406,424
619,696
Gain on sale of equipment
8,048
Net income
$627,744
General Journal
Cash
Accounts receivable
Sales
Debit
1,993,900
18,100
Credit
2,012,000
Cost of goods sold
Merchandise inventory
Accounts payable
Cash
985,880
18,200
9,300
Salaries expense
Salaries payable
Cash
275,644
5,550
1,013,380
281,194
Changes in current asset and current liability accounts for the year that relate to operating activities follow:
Accounts receivable
Merchandise inventory
Exercise 12-7 page 548 Algorithm
$18,100 Increase
18,200 Increase
Accounts payable
Salaries payable
$9,300 Decrease
5,550 Decrease
12-24
Sahim Company
Income Statement
For the year ended December 31, 2013
Sales
$2,012,000
Cost of goods sold
985,880
Gross profit
1,026,120
Operating expenses
Salaries expense
$275,644
Depreciation expense
48,288
Rent expense
54,324
Amortization expense - Patents
6,036
Utilities expense
22,132
Total operating expenses
406,424
619,696
Gain on sale of equipment
8,048
Net income
$627,744
Exercise 12-7 page 548 Algorithm
General Journal
Cash
Accounts receivable
Sales
Debit
1,993,900
18,100
Credit
2,012,000
Cost of goods sold
Merchandise inventory
Accounts payable
Cash
985,880
18,200
9,300
Salaries expense
Salaries payable
Cash
275,644
5,550
1,013,380
281,194
Sahim Company
Statement of Cash Flows (partial) - Direct Method
For the year ended December 31, 2013
Cash flows from operating activities
Receipts from customers
$1,993,900
Payments for merchandise
(1,013,380)
Payments for salaries
(281,194)
Payments for rent
(54,324)
Payments for utilities
(22,132)
Net cash provided by operating activities
$622,870
12-25
Sahim Company
Statement of Cash Flows (partial) - Direct Method
For the year ended December 31, 2013
Cash flows from operating activities
Receipts from customers
$1,993,900
Payments for merchandise
(1,013,380)
Payments for salaries
(281,194)
Payments for rent
(54,324)
Payments for utilities
(22,132)
Net cash provided by operating activities
$622,870
Exercise 12-7 page 548 Algorithm
Sahim Company
Statement of Cash Flows (partial) - Indirect Method
For the year ended December 31, 2013
Cash flows from operating activities
Net income
$627,744
Adjustments to reconcile net income to operating cash flow:
Depreciation expense
$48,288
Amortization expense - Patents
6,036
Gain on sale of equipment
(8,048)
Increase in Accounts Receivable
(18,100)
Increase in Merchandise Inventory
(18,200)
Decrease in Accounts Payable
(9,300)
Decrease in Salaries Payable
(5,550)
(4,874)
Net cash provided by operating activities
$622,870
12-26
Exercise 12-8 page 548
12-27
a.
b.
c.
d.
Equipment with a book value of $65,300, and an original cost of $133,000 was sold at a loss of $14,000.
Paid $89,000 cash for a new truck.
Sold land costing $154,000 for $198,000 cash, yielding a gain of $44,000.
Long-term investments in stock were sold for $60,800 cash, yielding a gain of $4,150.
Use the above information to determine this company's cash flows from investing activities.
Cash flows from investing activities
Cash received from the sale of equipment
Date
General Journal
Cash
Accumulated depreciation - Equipment
Loss on sale of equipment
Equipment
Exercise 12-8 page 548
$51,300
Debit
51,300
67,700
14,000
Credit
133,000
12-28
a.
b.
c.
d.
Equipment with a book value of $65,300, and an original cost of $133,000 was sold at a loss of $14,000.
Paid $89,000 cash for a new truck.
Sold land costing $154,000 for $198,000 cash, yielding a gain of $44,000.
Long-term investments in stock were sold for $60,800 cash, yielding a gain of $4,150.
Cash flows from investing activities
Cash received from the sale of equipment
Cash paid for the new truck
Cash received from the sale of land
Cash received from the sale of long-term investments in stock
Net cash provided by investing activities
Date
General Journal
Truck
Cash
Date
General Journal
General Journal
Cash
Gain on sale of long-term investments in stock
Long-term investments in stock
Exercise 12-8 page 548
Debit
89,000
Credit
89,000
Cash
Gain on sale of land
Land
Date
$51,300
(89,000)
198,000
60,800
$221,100
Debit
198,000
Credit
44,000
154,000
Debit
60,800
Credit
4,150
56,650
12-29
a.
b.
c.
d.
Equipment with a book value of $82,000, and an original cost of $166,000 was sold at a loss of $34,000.
Paid $109,000 cash for a new truck.
Sold land costing $320,000 for $415,000 cash, yielding a gain of $95,000.
Long-term investments in stock were sold for $92,100 cash, yielding a gain of $15,500.
Use the above information to determine this company's cash flows from investing activities.
Exercise 12-8 page 548 Algorithm
12-30
a.
b.
c.
d.
Equipment with a book value of $82,000, and an original cost of $166,000 was sold at a loss of $34,000.
Paid $109,000 cash for a new truck.
Sold land costing $320,000 for $415,000 cash, yielding a gain of $95,000.
Long-term investments in stock were sold for $92,100 cash, yielding a gain of $15,500.
Cash flows from investing activities
Cash received from the sale of equipment
Cash paid for the new truck
Date
General Journal
Cash
Accumulated depreciation - Equipment
Loss on sale of equipment
Equipment
Exercise 12-8 page 548 Algorithm
$48,000
(109,000)
Debit
48,000
84,000
34,000
Credit
166,000
12-31
a.
b.
c.
d.
Equipment with a book value of $82,000, and an original cost of $166,000 was sold at a loss of $34,000.
Paid $109,000 cash for a new truck.
Sold land costing $320,000 for $415,000 cash, yielding a gain of $95,000.
Long-term investments in stock were sold for $92,100 cash, yielding a gain of $15,500.
Cash flows from investing activities
Cash received from the sale of equipment
Cash paid for the new truck
Cash received from the sale of land
Cash received from the sale of long-term investments in stock
Net cash provided by investing activities
Date
General Journal
Cash
Gain on sale of long-term investments in stock
Long-term investments in stock
Exercise 12-8 page 548 Algorithm
$48,000
(109,000)
415,000
92,100
$446,100
Debit
92,100
Credit
15,500
76,600
12-32
Exercise 12-9 page 548
12-33
a.
b.
c.
d.
e.
f.
Net income was $35,000.
Issued common stock for $64,000 cash.
Paid cash dividend of $14,600.
Paid $50,000 cash to settle a note payable at its $50,000 maturity value.
Paid $12,000 cash to acquire its treasury stock.
Purchased equipment for $39,000 cash.
Use the above information to determine this company's cash flows from financing activities.
Cash flows from financing activities
Proceeds for issuance of common stock
Paid cash dividend
Repaid note payable
Purchased treasury stock
Net cash used by financing activities
Exercise 12-9 page 548
$64,000
(14,600)
(50,000)
(12,000)
($12,600)
12-34
a.
b.
c.
d.
e.
f.
Net income was $473,000.
Issued common stock for $73,000 cash.
Paid cash dividend of $11,000.
Paid $130,000 cash to settle a note payable at its $130,000 maturity value.
Paid $116,000 cash to acquire its treasury stock.
Purchased equipment for $90,000 cash.
Use the above information to determine this company's cash flows from financing activities.
Cash flows from financing activities
Proceeds for issuance of common stock
Paid cash dividend
Repaid note payable
Purchased treasury stock
Net cash used by financing activities
Exercise 12-9 page 548 Algorithm
$73,000
(11,000)
(130,000)
(116,000)
($184,000)
12-35
Exercise 12-10 page 548
12-36
The following financial statements and additional information are reported:
IKIBAN INC.
Income Statement
For the year ended June 30, 2013
Sales
$678,000
Cost of goods sold
411,000
Gross profit
267,000
Operating expenses
Other expenses
$67,000
Depreciation expense
58,600
Total operating expenses
125,600
141,400
Gain on sale of equipment
2,000
Income before taxes
143,400
Income taxes expense
43,890
Net income
$99,510
Prepare a statement of cash flows for the year
ended June 30, 2013 using the indirect method.
a.
b.
c.
d.
e.
f.
IKIBAN INC.
Comparative Balance Sheets
June 30, 2013 and 2012
2013
2012
Assets
Cash
Accounts receivable, net
Inventory
Prepaid expenses
Equipment
Accum. Depreciation - Equipment
Total Assets
$87,500
65,000
63,800
4,400
124,000
(27,000)
$317,700
$44,000
51,000
86,500
5,400
115,000
(9,000)
$292,900
Liabilities and equity
Accounts payable
Wages payable
Income taxes payable
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
Total Liabilities and Equity
$25,000
6,000
3,400
30,000
220,000
33,300
$317,700
$30,000
15,000
3,800
60,000
160,000
24,100
$292,900
A $30,000 note payable is retired at its $30,000 carrying (book value) in exchange for cash.
The only changes affecting retained earnings are net income and cash dividends paid.
New equipment is acquired for $57,600 cash.
Received cash for the sale of equipment that had cost $48,600, yielding a $2,000 gain.
Prepaid expenses and Wages payable relate to Other expenses on the income statement.
All purchases and sales of merchandise inventory are on credit.
Exercise 12-10 page 548
12-37
IKIBAN INC.
Income Statement
For the year ended June 30, 2013
Sales
$678,000
Cost of goods sold
411,000
Gross profit
267,000
Operating expenses
Other expenses
$67,000
Depreciation expense
58,600
Total operating expenses
125,600
141,400
Gain on sale of equipment
2,000
Income before taxes
143,400
Income taxes expense
43,890
Net income
$99,510
IKIBAN Inc. Company
Statement of Cash Flows - Indirect Method
For the year ended June 30, 2013
Cash flows from operating activities
Net income
$99,510
Adjustments to reconcile net income to operating cash flow:
Depreciation expense
$58,600
Gain on sale of equipment
(2,000)
Cash flows from investing activities
Cash flows from financing activities
Net increase in cash
Exercise 12-10 page 548
12-38
IKIBAN INC.
Comparative Balance Sheets
June 30, 2013 and 2012
2013
2012
Assets
Cash
Accounts receivable, net
Inventory
Prepaid expenses
Equipment
Accum. Depreciation - Equipment
Total Assets
$87,500
65,000
63,800
4,400
124,000
(27,000)
$317,700
$44,000
51,000
86,500
5,400
115,000
(9,000)
$292,900
Liabilities and equity
Accounts payable
Wages payable
Income taxes payable
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
Total Liabilities and Equity
$25,000
6,000
3,400
30,000
220,000
33,300
$317,700
$30,000
15,000
3,800
60,000
160,000
24,100
$292,900
c.
New equipment is acquired for $57,600 cash.
d.
Received cash for the sale of equipment that had cost
$48,600, yielding a $2,000 gain.
Equipment
115,000
57,600
48,600
124,000
Exercise 12-10 page 548
Accum. Depr
9,000
40,600
58,600
27,000
IKIBAN Inc. Company
Statement of Cash Flows - Indirect Method
For the year ended June 30, 2013
Cash flows from operating activities
Net income
$99,510
Adjustments to reconcile net income to operating cash flow:
Depreciation expense
$58,600
Gain on sale of equipment
(2,000)
Increase in Accounts receivable, net (14,000)
Decrease in Inventory
22,700
Decrease in Prepaid expenses
1,000
Decrease in Accounts payable
(5,000)
Decrease in Wages payable
(9,000)
Decrease in Income taxes payable
(400)
51,900
Net cash provided by operating activities
151,410
Cash flows from investing activities
Cash received sale of equipment
$10,000
Cash paid for equipment
(57,600)
Net cash used by investing activities
(47,600)
Cash flows from financing activities
Net increase in cash
The book value of the equipment sold was $8,000 ($48,600 cost $40,600) accumulated depreciation. Since it was sold at a gain,
cash receipt was $10,000.
12-39
IKIBAN INC.
Comparative Balance Sheets
June 30, 2013 and 2012
2013
2012
Assets
Cash
Accounts receivable, net
Inventory
Prepaid expenses
Equipment
Accum. Depreciation - Equipment
Total Assets
$87,500
65,000
63,800
4,400
124,000
(27,000)
$317,700
$44,000
51,000
86,500
5,400
115,000
(9,000)
$292,900
Liabilities and equity
Accounts payable
Wages payable
Income taxes payable
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
Total Liabilities and Equity
$25,000
6,000
3,400
30,000
220,000
33,300
$317,700
$30,000
15,000
3,800
60,000
160,000
24,100
$292,900
a.
A $30,000 note payable is retired at its $30,000 carrying
(book value) in exchange for cash.
b.
The only changes affecting retained earnings are net
income and cash dividends paid.
$24,100 + $99,510 – Dividends = $33,300
Dividends = $90,310
Exercise 12-10 page 548
IKIBAN Inc. Company
Statement of Cash Flows - Indirect Method
For the year ended June 30, 2013
Cash flows from operating activities
Net income
$99,510
Adjustments to reconcile net income to operating cash flow:
Depreciation expense
$58,600
Gain on sale of equipment
(2,000)
Increase in Accounts receivable, net (14,000)
Decrease in Inventory
22,700
Decrease in Prepaid expenses
1,000
Decrease in Accounts payable
(5,000)
Decrease in Wages payable
(9,000)
Decrease in Income taxes payable
(400)
51,900
Net cash provided by operating activities
151,410
Cash flows from investing activities
Cash received sale of equipment
$10,000
Cash paid for equipment
(57,600)
Net cash used by investing activities
(47,600)
Cash flows from financing activities
Cash received from stock issuance
$60,000
Cash paid to retire notes
(30,000)
Cash paid for dividends
(90,310)
Net cash used by financing activities
(60,310)
Net increase in cash
$43,500
Cash balance at June 30, 2012
44,000
Cash balance at June 30, 2013
$87,500
12-40
The following financial statements and additional information are reported:
Prepare a statement of cash flows for the year ended June 30, 2013 using the indirect method.
IKIBAN INC.
Income Statement
For the year ended June 30, 2013
Sales
$672,000
Cost of goods sold
410,000
Gross profit
262,000
Operating expenses
Other expenses
$66,600
Depreciation expense
57,800
Total operating expenses
124,400
137,600
Gain on sale of equipment
2,400
Income before taxes
140,000
Income taxes expense
56,000
Net income
$84,000
a.
b.
c.
d.
e.
f.
IKIBAN INC.
Comparative Balance Sheets
June 30, 2013 and 2012
2013
2012
Assets
Cash
$100,800
Accounts receivable, net
69,700
Inventory
66,100
Prepaid expenses
4,300
Equipment
126,300
Accum. Depreciation - Equipment
(28,600)
Total Assets
$338,600
$57,100
51,600
95,800
6,200
115,000
(10,700)
$315,000
Liabilities and equity
Accounts payable
Wages payable
Income taxes payable
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
Total Liabilities and Equity
$32,300
17,000
3,800
71,000
183,000
7,900
$315,000
$26,100
7,500
2,100
46,000
232,000
24,900
$338,600
A $25,000 note payable is retired at its $25,000 carrying (book value) in exchange for cash.
The only changes affecting retained earnings are net income and cash dividends paid.
New equipment is acquired for $60,100 cash.
Received cash for the sale of equipment that had cost $48,800, yielding a $2,400 gain.
Prepaid expenses and Wages payable relate to Other expenses on the income statement.
All purchases and sales of merchandise inventory are on credit.
Exercise 12-10 page 548 Algorithm
12-41
IKIBAN Inc. Company
Statement of Cash Flows - Indirect Method
For the year ended June 30, 2013
Cash flows from operating activities
Net income
$84,000
Adjustments to reconcile net income to operating cash flow:
Depreciation expense
$57,800
Gain on sale of equipment
(2,400)
IKIBAN INC.
Income Statement
For the year ended June 30, 2013
Sales
$672,000
Cost of goods sold
410,000
Gross profit
262,000
Operating expenses
Other expenses
$66,600
Depreciation expense
57,800
Total operating expenses
124,400
137,600
Gain on sale of equipment
2,400
Income before taxes
140,000
Income taxes expense
56,000
Net income
$84,000
Cash flows from investing activities
Cash flows from financing activities
Exercise 12-10 page 548 Algorithm
12-42
IKIBAN Inc. Company
Statement of Cash Flows - Indirect Method
For the year ended June 30, 2013
Cash flows from operating activities
Net income
$84,000
Adjustments to reconcile net income to operating cash flow:
Depreciation expense
$57,800
Gain on sale of equipment
(2,400)
Increase in Accounts receivable, net
(18,100)
Decrease in Inventory
29,700
Decrease in Prepaid expenses
1,900
Decrease in Accounts payable
(6,200)
Decrease in Wages payable
(9,500)
Decrease in Income taxes payable
(1,700)
51,500
Net cash provided by operating activities
135,500
Cash flows from investing activities
Cash paid for equipment
Cash flows from financing activities
(60,100)
IKIBAN INC.
Comparative Balance Sheets
June 30, 2013 and 2012
2013
2012
Assets
Cash
$100,800
Accounts receivable, net
69,700
Inventory
66,100
Prepaid expenses
4,300
Equipment
126,300
Accum. Depreciation - Equipment
(28,600)
Total Assets
$338,600
$57,100
51,600
95,800
6,200
115,000
(10,700)
$315,000
Liabilities and equity
Accounts payable
Wages payable
Income taxes payable
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
Total Liabilities and Equity
$32,300
17,000
3,800
71,000
183,000
7,900
$315,000
$26,100
7,500
2,100
46,000
232,000
24,900
$338,600
c. New equipment is acquired for $60,100 cash.
d. Received cash for the sale of equipment that had cost
$48,800, yielding a $2,400 gain.
Exercise 12-10 page 548 Algorithm
12-43
IKIBAN INC.
Comparative Balance Sheets
June 30, 2013 and 2012
2013
Equipment
115,000
60,100
48,800
126,300
Accum. Depr
10,700
39,900
57,800
28,600
Cost
Accumulated depreciation
Book Value
Gain on sale of equipment
Cash received from sale
$48,800
(39,900)
$8,900
2,400
$11,300
2012
Assets
Cash
$100,800
Accounts receivable, net
69,700
Inventory
66,100
Prepaid expenses
4,300
Equipment
126,300
Accum. Depreciation - Equipment
(28,600)
Total Assets
$338,600
$57,100
51,600
95,800
6,200
115,000
(10,700)
$315,000
Liabilities and equity
Accounts payable
Wages payable
Income taxes payable
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
Total Liabilities and Equity
$32,300
17,000
3,800
71,000
183,000
7,900
$315,000
$26,100
7,500
2,100
46,000
232,000
24,900
$338,600
c. New equipment is acquired for $60,100 cash.
d. Received cash for the sale of equipment that had cost
$48,800, yielding a $2,400 gain.
Exercise 12-10 page 548 Algorithm
12-44
IKIBAN Inc. Company
Statement of Cash Flows - Indirect Method
For the year ended June 30, 2013
Cash flows from operating activities
Net income
$84,000
Adjustments to reconcile net income to operating cash flow:
Depreciation expense
$57,800
Gain on sale of equipment
(2,400)
Increase in Accounts receivable, net
(18,100)
Decrease in Inventory
29,700
Decrease in Prepaid expenses
1,900
Decrease in Accounts payable
(6,200)
Decrease in Wages payable
(9,500)
Decrease in Income taxes payable
(1,700)
51,500
Net cash provided by operating activities
135,500
Cash flows from investing activities
Cash received from sale of equipment $11,300
Cash paid for equipment
(60,100)
Net cash used by investing activities
(48,800)
Cash flows from financing activities
IKIBAN INC.
Comparative Balance Sheets
June 30, 2013 and 2012
2013
2012
Assets
Cash
$100,800
Accounts receivable, net
69,700
Inventory
66,100
Prepaid expenses
4,300
Equipment
126,300
Accum. Depreciation - Equipment
(28,600)
Total Assets
$338,600
$57,100
51,600
95,800
6,200
115,000
(10,700)
$315,000
Liabilities and equity
Accounts payable
Wages payable
Income taxes payable
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
Total Liabilities and Equity
$32,300
17,000
3,800
71,000
183,000
7,900
$315,000
$26,100
7,500
2,100
46,000
232,000
24,900
$338,600
c. New equipment is acquired for $60,100 cash.
d. Received cash for the sale of equipment that had cost
$48,800, yielding a $2,400 gain.
Exercise 12-10 page 548 Algorithm
12-45
IKIBAN Inc. Company
Statement of Cash Flows - Indirect Method
For the year ended June 30, 2013
Cash flows from operating activities
Net income
$84,000
Adjustments to reconcile net income to operating cash flow:
Depreciation expense
$57,800
Gain on sale of equipment
(2,400)
Increase in Accounts receivable, net
(18,100)
Decrease in Inventory
29,700
Decrease in Prepaid expenses
1,900
Decrease in Accounts payable
(6,200)
Decrease in Wages payable
(9,500)
Decrease in Income taxes payable
(1,700)
51,500
Net cash provided by operating activities
135,500
Cash flows from investing activities
Cash received from sale of equipment $11,300
Cash paid for equipment
(60,100)
Net cash used by investing activities
(48,800)
Cash flows from financing activities
Cash received from stock issuance
$49,000
Cash paid to retire notes
(25,000)
Cash paid for dividends
(67,000)
Net cash used by financing activities
(43,000)
Net increase in cash
$43,700
Cash balance at June 30, 2012
57,100
Cash balance at June 30, 2013
$100,800
Exercise 12-10 page 548 Algorithm
IKIBAN INC.
Comparative Balance Sheets
June 30, 2013 and 2012
2013
2012
Assets
Cash
$100,800
Accounts receivable, net
69,700
Inventory
66,100
Prepaid expenses
4,300
Equipment
126,300
Accum. Depreciation - Equipment
(28,600)
Total Assets
$338,600
$57,100
51,600
95,800
6,200
115,000
(10,700)
$315,000
Liabilities and equity
Accounts payable
Wages payable
Income taxes payable
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
Total Liabilities and Equity
$32,300
17,000
3,800
71,000
183,000
7,900
$315,000
a
$26,100
7,500
2,100
46,000
232,000
24,900
$338,600
A $25,000 note payable is retired at its $25,000 carrying
(book value) in exchange for cash.
b. The only changes affecting retained earnings are net
income and cash dividends paid.
12-46
IKIBAN Inc. Company
Statement of Cash Flows - Indirect Method
For the year ended June 30, 2013
Cash flows from operating activities
Net income
$84,000
Adjustments to reconcile net income to operating cash flow:
Depreciation expense
$57,800
Gain on sale of equipment
(2,400)
Increase in Accounts receivable, net
(18,100)
Decrease in inventory
29,700
Decrease in Prepaid expenses
1,900
Decrease in Accounts payable
(6,200)
Decrease in Wages payable
(9,500)
Decrease in Income taxes payable
(1,700)
51,500
Net cash provided by operating activities
135,500
Cash flows from investing activities
Cash received from sale of equipment $11,300
Cash paid for equipment
(60,100)
Net cash used by investing activities
(48,800)
Cash flows from financing activities
Cash received from stock issuance
$49,000
Cash paid to retire notes
(25,000)
Cash paid for dividends
(67,000)
Net cash used by financing activities
(43,000)
Net increase in cash
$43,700
Cash balance at June 30, 2012
57,100
Cash balance at June 30, 2013
$100,800
IKIBAN INC.
Comparative Balance Sheets
June 30, 2013 and 2012
2013
Assets
Cash
$100,800
Accounts receivable, net
69,700
Inventory
66,100
Prepaid expenses
4,300
Equipment
126,300
Accum. Depreciation - Equipment
(28,600)
Total Assets
$338,600
$57,100
51,600
95,800
6,200
115,000
(10,700)
$315,000
Liabilities and equity
Accounts payable
Wages payable
Income taxes payable
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
Total Liabilities and Equity
$32,300
17,000
3,800
71,000
183,000
7,900
$315,000
$26,100
7,500
2,100
46,000
232,000
24,900
$338,600
Compute the company's cash flow on total assets ratio for
its fiscal year 2013.
Operating cash flows
Average total assets
$135,500
($315,000 + $338,600) / 2
$135,500
$326,800
Exercise 12-10 page 548 Algorithm
2012
41.5%
12-47
Exercise 12-11 page 549
12-48
The following financial statements and additional information are reported:
IKIBAN INC.
Income Statement
For the year ended June 30, 2013
Sales
$678,000
Cost of goods sold
411,000
Gross profit
267,000
Operating expenses
Other expenses
$67,000
Depreciation expense
58,600
Total operating expenses
125,600
141,400
Gain on sale of equipment
2,000
Income before taxes
143,400
Income taxes expense
43,890
Net income
$99,510
Prepare a statement of cash flows for the year
ended June 30, 2013 using the direct method.
a.
b.
c.
d.
e.
f.
IKIBAN INC.
Comparative Balance Sheets
June 30, 2013 and 2012
2013
2012
Assets
Cash
Accounts receivable, net
Inventory
Prepaid expenses
Equipment
Accum. Depreciation - Equipment
Total Assets
$87,500
65,000
63,800
4,400
124,000
(27,000)
$317,700
$44,000
51,000
86,500
5,400
115,000
(9,000)
$292,900
Liabilities and equity
Accounts payable
Wages payable
Income taxes payable
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
Total Liabilities and Equity
$25,000
6,000
3,400
30,000
220,000
33,300
$317,700
$30,000
15,000
3,800
60,000
160,000
24,100
$292,900
A $30,000 note payable is retired at its $30,000 carrying (book value) in exchange for cash.
The only changes affecting retained earnings are net income and cash dividends paid.
New equipment is acquired for $57,600 cash.
Received cash for the sale of equipment that had cost $48,600, yielding a $2,000 gain.
Prepaid expenses and Wages payable relate to Other expenses on the income statement.
All purchases and sales of merchandise inventory are on credit.
Exercise 12-11 page 549
12-49
IKIBAN Inc. Company
Statement of Cash Flows - Direct Method
For the year ended June 30, 2013
Cash flows from operating activities
Receipts from customers
$664,000
Payments for merchandise
(393,300)
Payments for other expenses
(75,000)
Payments for income taxes
(44,290)
Net cash provided by operating activities
$151,410
Cash flows from investing activities
Cash flows from financing activities
Income Statement
Sales
Cost of goods sold
Gross profit
Operating expenses
Other expenses
$67,000
Depreciation expense
58,600
Total operating expenses
$678,000
411,000
267,000
Gain on sale of equipment
125,600
141,400
2,000
Income before taxes
Income taxes expense
Net income
143,400
43,890
$99,510
Comparative Balance Sheets
2013
General Journal
Cash
Accounts receivable, net
Sales
Debit
664,000
14,000
Cost of goods sold
Accounts payable
Inventory
Cash
411,000
5,000
678,000
22,700
393,300
Other expenses
Wages payable
Prepaid expenses
Cash
67,000
9,000
Income taxes expense
Income taxes payable
Cash
43,890
400
Exercise 12-11 page 549
Credit
1,000
75,000
2012
Assets
Cash
Accounts receivable, net
Inventory
Prepaid expenses
Equipment
Accum. Depreciation - Equipment
Total Assets
$87,500
65,000
63,800
4,400
124,000
(27,000)
$317,700
$44,000
51,000
86,500
5,400
115,000
(9,000)
$292,900
Liabilities and equity
Accounts payable
Wages payable
Income taxes payable
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
Total Liabilities and Equity
$25,000
6,000
3,400
30,000
220,000
33,300
$317,700
$30,000
15,000
3,800
60,000
160,000
24,100
$292,900
44,290
12-50
IKIBAN Inc. Company
Statement of Cash Flows - Direct Method
For the year ended June 30, 2013
Cash flows from operating activities
Receipts from customers
$664,000
Payments for merchandise
(393,300)
Payments for other expenses
(75,000)
Payments for income taxes
(44,290)
Net cash provided by operating activities
$151,410
Cash flows from investing activities
Cash received from sale of equipment $10,000
Cash paid for equipment
(57,600)
Net cash used by investing activities
(47,600)
Cash flows from financing activities
Income Statement
Sales
Cost of goods sold
Gross profit
Operating expenses
Other expenses
$67,000
Depreciation expense
58,600
Total operating expenses
$678,000
411,000
267,000
Gain on sale of equipment
125,600
141,400
2,000
Income before taxes
Income taxes expense
Net income
143,400
43,890
$99,510
Comparative Balance Sheets
2013
Assets
Cash
c.
New equipment is acquired for $57,600 cash.
d.
Received cash for the sale of equipment that had cost
$48,600, yielding a $2,000 gain.
Equipment
115,000
57,600
48,600
124,000
Accum. Depr
9,000
40,600
58,600
27,000
The book value of the equipment sold was
$8,000 ($48,600 cost - $40,600 accumulated
depreciation.) Since it was sold at a gain, cash
receipt was $10,000.
Exercise 12-11 page 549
Equipment
Accum. Depreciation - Equipment
Total Assets
2012
$87,500
$44,000
124,000
(27,000)
$317,700
115,000
(9,000)
$292,900
30,000
220,000
33,300
$317,700
60,000
160,000
24,100
$292,900
Liabilities and equity
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
Total Liabilities and Equity
12-51
IKIBAN Inc. Company
Statement of Cash Flows - Direct Method
For the year ended June 30, 2013
Cash flows from operating activities
Receipts from customers
$664,000
Payments for merchandise
(393,300)
Payments for other expenses
(75,000)
Payments for income taxes
(44,290)
Net cash provided by operating activities
$151,410
Cash flows from investing activities
Cash received from sale of equipment $10,000
Cash paid for equipment
(57,600)
Net cash used by investing activities
(47,600)
Cash flows from financing activities
Cash received from stock issuance
$60,000
Cash paid to retire notes
(30,000)
Cash paid for dividends
(90,310)
Net cash used by financing activities
(60,310)
Net increase in cash
$43,500
Cash balance at June 30, 2012
44,000
Cash balance at June 30, 2013
$87,500
a.
A $30,000 note payable is retired at its $30,000 carrying
(book value) in exchange for cash.
b.
The only changes affecting retained earnings are net
income and cash dividends paid.
$24,100 + $99,510 – Dividends = $33,300
Dividends = $90,310
Exercise 12-11 page 549
Income Statement
Sales
Cost of goods sold
Gross profit
Operating expenses
Other expenses
$67,000
Depreciation expense
58,600
Total operating expenses
$678,000
411,000
267,000
Gain on sale of equipment
125,600
141,400
2,000
Income before taxes
Income taxes expense
Net income
143,400
43,890
$99,510
Comparative Balance Sheets
2013
2012
Assets
Cash
Accounts receivable, net
Inventory
Prepaid expenses
Equipment
Accum. Depreciation - Equipment
Total Assets
$87,500
65,000
63,800
4,400
124,000
(27,000)
$317,700
$44,000
51,000
86,500
5,400
115,000
(9,000)
$292,900
Liabilities and equity
Accounts payable
Wages payable
Income taxes payable
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
Total Liabilities and Equity
$25,000
6,000
3,400
30,000
220,000
33,300
$317,700
$30,000
15,000
3,800
60,000
160,000
24,100
$292,900
12-52
The following financial statements and additional information are reported:
Prepare a statement of cash flows for the year ended June 30, 2013 using the direct method.
IKIBAN INC.
Income Statement
For the year ended June 30, 2013
Sales
$672,000
Cost of goods sold
410,000
Gross profit
262,000
Operating expenses
Other expenses
$66,600
Depreciation expense
57,800
Total operating expenses
124,400
137,600
Gain on sale of equipment
2,400
Income before taxes
140,000
Income taxes expense
56,000
Net income
$84,000
a.
b.
c.
d.
e.
f.
IKIBAN INC.
Comparative Balance Sheets
June 30, 2013 and 2012
2013
2012
Assets
Cash
$100,800
Accounts receivable, net
69,700
Inventory
66,100
Prepaid expenses
4,300
Equipment
126,300
Accum. Depreciation - Equipment
(28,600)
Total Assets
$338,600
$57,100
51,600
95,800
6,200
115,000
(10,700)
$315,000
Liabilities and equity
Accounts payable
Wages payable
Income taxes payable
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
Total Liabilities and Equity
$32,300
17,000
3,800
71,000
183,000
7,900
$315,000
$26,100
7,500
2,100
46,000
232,000
24,900
$338,600
A $25,000 note payable is retired at its $25,000 carrying (book value) in exchange for cash.
The only changes affecting retained earnings are net income and cash dividends paid.
New equipment is acquired for $60,100 cash.
Received cash for the sale of equipment that had cost $48,800, yielding a $2,400 gain.
Prepaid expenses and Wages payable relate to Other expenses on the income statement.
All purchases and sales of merchandise inventory are on credit.
Exercise 12-11 page 549 Algorithm 12-53
IKIBAN Inc. Company
Statement of Cash Flows - Direct Method
For the year ended June 30, 2013
Cash flows from operating activities
Receipts from customers
$653,900
Payments for merchandise
(386,500)
Payments for other expenses
(74,200)
Payments for income taxes
(57,700)
Net cash provided by operating activities
$135,500
Cash
Accounts receivable, net
Sales
Cost of goods sold
Accounts payable
Inventory
Cash
Debit
653,900
18,100
Credit
672,000
410,000
6,200
29,700
386,500
Other expenses
Wages payable
Prepaid expenses
Cash
66,600
9,500
Income taxes expense
Income taxes payable
Cash
56,000
1,700
1,900
74,200
IKIBAN INC.
Income Statement
For the year ended June 30, 2013
Sales
$672,000
Cost of goods sold
410,000
Gross profit
262,000
Operating expenses
Other expenses
$66,600
Depreciation expense
57,800
Total operating expenses
124,400
137,600
Gain on sale of equipment
2,400
Income before taxes
140,000
Income taxes expense
56,000
Net income
$84,000
IKIBAN INC.
Comparative Balance Sheets
June 30, 2013 and 2012
2013
Cash
$100,800
Accounts receivable, net
69,700
Inventory
66,100
Prepaid expenses
4,300
Accounts payable
$26,100
Wages payable
7,500
Income taxes payable
2,100
2012
$57,100
51,600
95,800
6,200
$32,300
17,000
3,800
57,700
e. Prepaid expenses and Wages payable relate to Other expenses on the income statement.
Exercise 12-11 page 549 Algorithm
12-54
IKIBAN Inc. Company
Statement of Cash Flows - Direct Method
For the year ended June 30, 2013
Cash flows from operating activities
Receipts from customers
$653,900
Payments for merchandise
(386,500)
Payments for other expenses
(74,200)
Payments for income taxes
(57,700)
Net cash provided by operating activities
$135,500
Cash flows from investing activities
Cash received from sale of equipment $11,300
Cash paid for equipment
(60,100)
Net cash used by investing activities
(48,800)
IKIBAN INC.
Comparative Balance Sheets
June 30, 2013 and 2012
2013
Assets
Equipment
126,300
Accum. Depreciation - Equipment
(28,600)
Total Assets
$338,600
Equipment
115,000
60,100
48,800
126,300
2012
115,000
(10,700)
$315,000
Accum. Depr
10,700
39,900
57,800
28,600
c. New equipment is acquired for $60,100 cash.
d. Received cash for the sale of equipment that had cost
$48,800, yielding a $2,400 gain.
Income Statement:
Depreciation expense
Gain on sale of equipment
Exercise 12-11 page 549 Algorithm
$57,800
Cost
Accumulated depreciation
Book Value
Gain on sale of equipment
Cash received from sale
$48,800
(39,900)
$8,900
2,400
$11,300
2,400
12-55
IKIBAN Inc. Company
Statement of Cash Flows - Direct Method
For the year ended June 30, 2013
Cash flows from operating activities
Receipts from customers
$653,900
Payments for merchandise
(386,500)
Payments for other expenses
(74,200)
Payments for income taxes
(57,700)
Net cash provided by operating activities
$135,500
Cash flows from investing activities
Cash received from sale of equipment $11,300
Cash paid for equipment
(60,100)
Net cash used by investing activities
(48,800)
Cash flows from financing activities
Cash received from stock issuance
$49,000
Cash paid to retire notes
(25,000)
Cash paid for dividends
(67,000)
Net cash used by financing activities
(43,000)
Net increase in cash
$43,700
Exercise 12-11 page 549 Algorithm
IKIBAN INC.
Comparative Balance Sheets
June 30, 2013 and 2012
2013
Notes payable (long-term)
46,000
Common stock, $5 par value
232,000
Retained earnings
24,900
a
2012
71,000
183,000
7,900
A $25,000 note payable is retired at its $25,000 carrying
(book value) in exchange for cash.
b. The only changes affecting retained earnings are net
income and cash dividends paid.
Retained Earnings
7,900
67,000
84,000
24,900
12-56
IKIBAN Inc. Company
Statement of Cash Flows - Direct Method
For the year ended June 30, 2013
Cash flows from operating activities
Receipts from customers
$653,900
Payments for merchandise
(386,500)
Payments for other expenses
(74,200)
Payments for income taxes
(57,700)
Net cash provided by operating activities
$135,500
Cash flows from investing activities
Cash received from sale of equipment $11,300
Cash paid for equipment
(60,100)
Net cash used by investing activities
(48,800)
Cash flows from financing activities
Cash received from stock issuance
$49,000
Cash paid to retire notes
(25,000)
Cash paid for dividends
(67,000)
Net cash used by financing activities
(43,000)
Net increase in cash
$43,700
Cash balance at June 30, 2012
57,100
Cash balance at June 30, 2013
$100,800
IKIBAN INC.
Comparative Balance Sheets
June 30, 2013 and 2012
2013
2012
Assets
Cash
$100,800
Accounts receivable, net
69,700
Inventory
66,100
Prepaid expenses
4,300
Equipment
126,300
Accum. Depreciation - Equipment
(28,600)
Total Assets
$338,600
$57,100
51,600
95,800
6,200
115,000
(10,700)
$315,000
Liabilities and equity
Accounts payable
Wages payable
Income taxes payable
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
Total Liabilities and Equity
$32,300
17,000
3,800
71,000
183,000
7,900
$315,000
$26,100
7,500
2,100
46,000
232,000
24,900
$338,600
Compute the company's cash flow on total assets ratio for its fiscal year 2013.
Operating cash flows
Average total assets
Exercise 12-11 page 549 Algorithm
$135,500
($315,000 + $338,600) / 2
$135,500
$326,800
41.5%
12-57
Exercise 12-12 page 549
12-58
Hampton Company reports the following information for its recent calendar year.
Income Statement
Sales
Cost of goods sold
$100,000
Salaries expense
24,000
Depreciation expense
12,000
Net income
$160,000
$24,000
Changes in current asset and current liability accounts for the year that relate to operating activities follow:
Accounts receivable
Merchandise inventory
Salaries payable
$10,000 Increase
16,000 Decrease
1,000 Increase
Prepare the operating activities section of the statement of cash flows for Hampton Company using the
indirect method.
Exercise 12-12 page 549
12-59
Income Statement
Sales
Cost of goods sold
$100,000
Salaries expense
24,000
Depreciation expense
12,000
Net income
Accounts receivable
Merchandise inventory
Salaries payable
$160,000
$24,000
$10,000 Increase
16,000 Decrease
1,000 Increase
Hampton Company Company
Statement of Cash Flows (partial) - Indirect Method
For the year ended December 31, 2013
Cash flows from operating activities
Net income
$24,000
Adjustments to reconcile net income to operating cash flow:
Depreciation expense
$12,000
Increase in Accounts receivable
(10,000)
Decrease in Merchandise inventory
16,000
Increase in Salaries payable
1,000
19,000
Net cash provided by operating activities
$43,000
Exercise 12-12 page 549
12-60
Hampton Company reports the following information for its recent calendar year.
Income Statement
Sales
Cost of goods sold
Salaries expense
Depreciation expense
Net income
$78,000
$39,000
14,000
5,000
$20,000
Accounts receivable
$6,000 Increase
Merchandise inventory 3,000 Decrease
Salaries payable
600 Increase
Prepare the operating activities section of the statement of cash flows for Hampton Company using
the indirect method.
Exercise 12-12 page 549 Algorithm
12-61
Hampton Company reports the following information for its recent calendar year.
Income Statement
Sales
Cost of goods sold
Salaries expense
Depreciation expense
Net income
$78,000
$39,000
14,000
5,000
$20,000
Accounts receivable
$6,000 Increase
Merchandise inventory 3,000 Decrease
Salaries payable
600 Increase
Hampton Company Company
Statement of Cash Flows (partial) - Indirect Method
Cash flows from operating activities
Net income
$20,000
Adjustments to reconcile net income to operating cash flow:
Depreciation expense
$5,000
Increase in Accounts Receivable
(6,000)
Decrease in Merchandise Inventory
3,000
Increase in Salaries Payable
600
2,600
Net cash provided by operating activities
$22,600
Exercise 12-12 page 549 Algorithm
12-62
Exercise 12-13 page 549
12-63
The following income statement and information about changes in noncash current assets and current
liabilities are reported.
Arundel Company
Income Statement
For the year ended December 31, 2013
Revenues
Operating expenses
Salaries expense
Utilities expense
Depreciation expense
Other expenses
Total operating expenses
Net loss
Decrease in Accounts receivable
Purchased a Machine
Increase in Salaries payable
Decrease in Other accrued liabilities
$100,000
$84,000
14,000
14,600
3,400
116,000
($16,000)
$24,000
$10,000
18,000
8,000
Prepare the operating activities section of the statement of cash flows using the indirect method.
Exercise 12-13 page 549
12-64
Arundel Company
Income Statement
For the year ended December 31, 2013
Revenues
Operating expenses
Salaries expense
Utilities expense
Depreciation expense
Other expenses
Total operating expenses
Net loss
$100,000
$84,000
14,000
14,600
3,400
Decrease in Accounts receivable
Purchased a Machine
Increase in Salaries payable
Decrease in Other accrued liabilities
$24,000
$10,000
18,000
8,000
116,000
($16,000)
Arundel Company
Statement of Cash Flows (partial) - Indirect Method
Cash flows from operating activities
Net loss
($16,000)
Adjustments to reconcile net income to operating cash flow:
Depreciation expense
$14,600
Decrease in Accounts receivable
24,000
Increase in Salaries payable
18,000
Decrease in Other accrued liabilities (8,000)
Net cash provided by operating activities
$32,600
Exercise 12-13 page 549
12-65
The following income statement and information about changes in noncash current assets and current
liabilities are reported.
Arundel Company
Income Statement
For the year ended December 31, 2013
Revenues
Operating expenses
Salaries expense
Utilities expense
Depreciation expense
Other expenses
Total operating expenses
Net loss
Decrease in Accounts Receivable
Purchased a Machine
Increase in Salaries Payable
Decrease in Other Accrued Liabilities
$85,000
$70,000
35,000
31,400
7,200
143,600
($58,600)
$24,000
$20,000
26,000
15,000
Prepare the operating activities section of the statement of cash flows using the indirect method.
Exercise 12-13 page 549 Algorithm
12-66
Arundel Company
Income Statement
For the year ended December 31, 2013
Revenues
Operating expenses
Salaries expense
Utilities expense
Depreciation expense
Other expenses
Total operating expenses
Net loss
Decrease in Accounts Receivable
Purchased a Machine
Increase in Salaries Payable
Decrease in Other Accrued Liabilities
$85,000
$70,000
35,000
31,400
7,200
143,600
($58,600)
$24,000
$20,000
26,000
15,000
Statement of Cash Flows - Indirect Method
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income to operating cash flow:
Income statement items (opposite direction):
+ Noncash expenses (Depreciation, amortization)
- Noncash revenues (Equity method earnings)
+ Loss on sale of LT assets
- Gain on sale of LT assets
Balance sheet items:
Change in noncash operating assets (opposite direction)
+ Decreases in current operating assets
- Increases in current operating assets
Change in noncash operating liabilities (same direction)
+ Increases in current operating liabilities
- Decreases in current operating liabilities
Net cash provided (used) by operating activities
Arundel Company
Statement of Cash Flows (partial) - Indirect Method
Cash flows from operating activities
Net loss
($58,600)
Adjustments to reconcile net income to operating cash flow:
Depreciation Expense
$31,400
Decrease in Accounts Receivable
24,000
Increase in Salaries Payable
26,000
Decrease in Other Accrued Liabilities
(15,000)
Net cash provided by operating activities
$7,800
Exercise 12-13 page 549 Algorithm
12-67
Exercise 12-14 page 549
12-68
Complete the following spreadsheet in preparation of the statement of cash flows. (The statement of cash
flows is not required.) Report operating activities under the indirect method
a. Net income for the year was $100,000.
b. Dividends of $80,000 cash were declared and paid.
c. Scoreteck's only noncash expense was
depreciation expense of $70,000.
d. The company purchased plant assets for $70,000 cash.
e. Notes payable of $20,000 were issued for $20,000 cash.
12/31/2012
Balance sheet - debit balance accounts
Cash
Accounts receivable, net
Merchandise inventory
Plant assets
Balance sheet - credit balance accounts
Accum. Depreciation - Equipment
Accounts payable
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
Exercise 12-14 page 549
$80,000
120,000
250,000
600,000
$1,050,000
$100,000
150,000
370,000
200,000
230,000
$1,050,000
Debit
70,000
70,000
Credit
12/31/2013
$60,000
190,000
20,000
230,000
670,000
$1,150,000
70,000
10,000
80,000
$170,000
140,000
20,000
390,000
200,000
100,000
250,000
$1,150,000
12-69
a. Net income for the year was $100,000.
b. Dividends of $80,000 cash were declared and paid.
c. Scoreteck's only noncash expense was
depreciation expense of $70,000.
d. The company purchased plant assets for $70,000 cash.
e. Notes payable of $20,000 were issued for $20,000 cash.
12/31/2012
Balance sheet - debit balance accounts
Cash
Accounts receivable, net
Merchandise inventory
Plant assets
Balance sheet - credit balance accounts
Accum. Depreciation - Equipment
Accounts payable
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
$80,000
120,000
250,000
600,000
$1,050,000
$100,000
150,000
370,000
200,000
230,000
$1,050,000
Statement of Cash Flows
Operating activities
Net income
Depreciation expense
Increase in Accounts receivable, net
Decrease in Merchandise inventory
Decrease in Accounts payable
Investing activities
Cash paid to purchase plant assets
Financing activities
Cash paid for dividends
Cash received from note payable
Exercise 12-14 page 549
Debit
70,000
70,000
Credit
12/31/2013
$60,000
190,000
20,000
230,000
670,000
$1,150,000
70,000
10,000
80,000
$170,000
140,000
20,000
390,000
200,000
100,000
250,000
$1,150,000
100,000
70,000
70,000
20,000
10,000
70,000
80,000
20,000
$440,000
$440,000
12-70
Complete the following spreadsheet in preparation of the statement of cash flows. (The statement of
cash flows is not required.) Report operating activities under the indirect method.
a.
b.
c.
d.
e.
Net income for the year was $240,000.
Dividends of $144,000 cash were declared and paid.
Scoreteck's only noncash expense was depreciation expense of $60,000.
The company purchased plant assets for $92,000 cash.
Notes payable of $76,000 were issued for $76,000 cash.
12/31/2012
Balance sheet - debit balance accounts
Cash
Accounts receivable, net
Merchandise inventory
Plant assets
Balance sheet - credit balance accounts
Accum. Depreciation - Equipment
Accounts payable
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
Debit
Credit
12/31/2013
$218,000
132,000
274,000
612,000
$1,236,000
$289,000
211,000
247,000
704,000
$1,451,000
$184,000
166,000
382,000
229,000
275,000
$1,236,000
$244,000
149,000
458,000
229,000
371,000
$1,451,000
a. Dividends of $144,000 cash were declared and paid.
b. Net income for the year was $240,000.
c. Scoreteck's only noncash expense was depreciation expense of $60,000.
d. The company purchased plant assets for $92,000 cash.
e. Notes payable of $76,000 were issued for $76,000 cash.
Exercise 12-14 page 549 Algorithm
12-71
12/31/2012
Debit
Credit
12/31/2013
Balance sheet - debit balance accounts
Cash
Accounts receivable, net
Merchandise inventory
Plant assets
Balance sheet - credit balance accounts
Accum. Depreciation - Equipment
Accounts payable
Notes payable (long-term)
Common stock, $5 par value
Retained earnings
Statement of Cash Flows
Operating activities
Net income
Depreciation expense
Increase in Accounts receivable, net
Decrease in Merchandise inventory
Decrease in Accounts payable
$218,000
132,000
274,000
612,000
$1,236,000
$184,000
166,000
382,000
229,000
275,000
$1,236,000
79,000
92,000
Exercise 12-14 page 549 Algorithm
$71,000
60,000
17,000
144,000
$244,000
149,000
76,000
458,000
229,000
240,000
371,000
$1,451,000
240,000
60,000
79,000
27,000
Investing activities
Cash paid to purchase plant assets
Financing activities
Cash paid for dividends
Cash received from note payable
$289,000
211,000
27,000
247,000
704,000
$1,451,000
17,000
$231,000
92,000
(92,000)
144,000
76,000
$735,000
(68,000)
$735,000
12-72
Exercise 12-15 page 550
12-73
Cash and cash equivalents balance, December 31, 2012
Cash and cash equivalents balance, December 31, 2013
Cash received as interest
Cash paid for salaries
Bonds payable retired by issuing common stock (no gain or loss on retirement)
Cash paid to retire long-term notes payable
Cash received from sale of equipment
Cash received in exchange for six-month note payable
Land purchased by issuing long-term note payable
Cash paid for store equipment
Cash dividends paid
Cash paid for other expenses
Cash received from customers
Cash paid for merchandise
$40,000
148,000
3,500
76,500
185,500
100,000
60,250
35,000
105,250
24,750
10,000
20,000
495,000
254,500
Use the above information about the cash flows of Ferron Company to prepare a complete
statement of cash flows (direct method) for the year ended December 31, 2013.
Exercise 12-15 page 550
12-74
Cash and cash equivalents balance, December 31, 2012
Cash and cash equivalents balance, December 31, 2013
Cash received as interest
Cash paid for salaries
Bonds payable retired by issuing common stock
(no gain or loss on retirement)
Cash paid to retire long-term notes payable
Cash received from sale of equipment
Cash received in exchange for six-month note payable
Land purchased by issuing long-term note payable
Cash paid for store equipment
Cash dividends paid
Cash paid for other expenses
Cash received from customers
Cash paid for merchandise
$40,000
148,000
3,500
76,500
185,500
100,000
60,250
35,000
105,250
24,750
10,000
20,000
495,000
254,500
FERRON COMPANY
Statement of Cash Flows - Direct Method
For the year ended December 31, 2013
Cash flows from operating activities
Cash received from customers
$495,000
Cash received as interest
3,500
Cash paid for merchandise
(254,500)
Cash paid for salaries
(76,500)
Cash paid for other expenses
(20,000)
Net cash provided by operating activities
$147,500
Cash flows from investing activities
Cash received from sale of equipment
$60,250
Cash paid for store equipment
(24,750)
Net cash provided by investing activities
35,500
Cash flows from financing activities
Cash paid to retire long-term notes payable
($100,000)
Cash received in exchange for six-month note payable 35,000
Cash dividends paid
(10,000)
Net cash used by financing activities
Net increase in cash
Cash and cash equivalents balance, December 31, 2012
Cash and cash equivalents balance, December 31, 2013
Noncash investing and financing activities:
Bonds payable retired by issuing common stock
(no gain or loss on retirement)
Land purchased by issuing long-term note payable
Exercise 12-15 page 550
(75,000)
$108,000
40,000
$148,000
$185,500
$105,250
12-75
Cash and cash equivalents balance, December 31, 2012
Cash and cash equivalents balance, December 31, 2013
Cash received as interest
Cash paid for salaries
Bonds payable retired by issuing common stock (no gain or loss on retirement)
Cash paid to retire long-term notes payable
Cash received from sale of equipment
Cash received in exchange for six-month note payable
Land purchased by issuing long-term note payable
Cash paid for store equipment
Cash dividends paid
Cash paid for other expenses
Cash received from customers
Cash paid for merchandise
$21,000
59,052
2,100
60,900
145,000
105,000
51,450
21,000
84,100
19,950
12,600
33,600
407,400
211,848
Use the above information about the cash flows of Ferron Company to prepare a complete
statement of cash flows (direct method) for the year ended December 31, 2013.
Exercise 12-15 page 550 Algorithm
12-76
Bondspurchased
Land
Cash
and
dividends
received
payable
cashfrom
as
retired
equivalents
paid
byinterest
issuing
sale
customers
byof
issuing
long-term
equipment
balance,
common
December
note stock
payable
31,
(no2012
gain or loss on retirement)
Cash paid
and cash
received
to retire
for
salaries
store
other
merchandise
inequivalents
exchange
long-term
equipment
expenses
balance,
for
notes
six-month
payable
December
note payable
31, 2013
$407,400
$145,000
$21,000
$51,450
$84,100
$12,600
$2,100
$105,000
$211,848
$59,052
$60,900
$21,000
$19,950
$33,600
FERRON COMPANY
Statement of Cash Flows - Direct Method
For the year ended December 31, 2013
Cash flows from operating activities
Cash received from customers
$407,400
Cash received as interest
2,100
Cash paid for merchandise
(211,848)
Cash paid for salaries
(60,900)
Cash paid for other expenses
(33,600)
Net cash provided by operating activities
$103,152
Cash flows from investing activities
Cash received from sale of equipment
$51,450
Cash paid for store equipment
(19,950)
Net cash provided by investing activities
31,500
Cash flows from financing activities
Cash paid to retire long-term notes payable
($105,000)
Cash received in exchange for six-month note payable
21,000
Cash dividends paid
(12,600)
Net cash used by financing activities
Net increase in cash
Cash and cash equivalents balance, December 31, 2012
Cash and cash equivalents balance, December 31, 2013
Noncash investing and financing activities:
Bonds payable retired by issuing common stock
Land purchased by issuing long-term note payable
Exercise 12-15 page 550 Algorithm
(96,600)
$38,052
21,000
$59,052
$145,000
$84,100
12-77
Exercise 12-16 page 551
12-78
The following summarized Cash T-account reflects the total debits and total credits to the Cash account of Thomas Corporation for
calendar year 2013.
Cash
Balance, Dec. 31, 2012
Receipts from customers
Receipts from dividends
Receipts from land sale
Receipts from machinery sale
Receipts from issuing stock
Receipts from borrowing
333,000
5,000,000
208,400
220,000
710,000
1,540,000
3,600,000
Balance, Dec. 31, 2013
2,883,400
?
Payments for merchandise
Payments for wages
Payments for rent
Payments for interest
Payments for taxes
Payments for machinery
Payments for long-term investments
Payments for note payable
Payments for dividends
Payments for treasury stock
2,590,000
550,000
320,000
218,000
450,000
2,236,000
1,260,000
386,000
500,000
218,000
Use this information to prepare a complete statement of cash flows for year 2013. The cash provided or used by operating activities
should be reported using the direct method.
Exercise 12-16 page 551
12-79
Cash
Balance, Dec. 31, 2012
Receipts from customers
Receipts from dividends
Receipts from land sale
Receipts from machinery sale
Receipts from issuing stock
Receipts from borrowing
333,000
5,000,000
208,400
220,000
710,000
1,540,000
3,600,000
Balance, Dec. 31, 2013
2,883,400
Payments for merchandise
Payments for wages
Payments for rent
Payments for interest
Payments for taxes
Payments for machinery
Payments for long-term investments
Payments for note payable
Payments for dividends
Payments for treasury stock
2,590,000
550,000
320,000
218,000
450,000
2,236,000
1,260,000
386,000
500,000
218,000
THOMAS COMPANY
Statement of Cash Flows - Direct Method
For the year ended December 31, 2013
Cash flows from operating activities
Cash received from customers
$5,000,000
Cash received from dividends
208,400
Cash paid for merchandise
(2,590,000)
Cash paid for wages
(550,000)
Cash paid for rent
(320,000)
Cash paid for interest
(218,000)
Cash paid for taxes
(450,000)
Net cash provided by operating activities
$1,080,400
Cash flows from investing activities
Cash received from sale of land
Cash received from sale of machinery
Cash paid for purchases of machinery
Cash paid for purchases of LT investments
Net cash used by investing activities
Cash flows from financing activities
Cash received from issuing stock
Cash received from borrowing
Cash paid for note payable
Cash paid for dividends
Cash paid for treasury stock purchases
Net cash provided by financing activities
Net increase in cash
Beginning balance of cash
Ending balance of cash
Exercise 12-16 page 551
220,000
710,000
(2,236,000)
(1,260,000)
(2,566,000)
1,540,000
3,600,000
(386,000)
(500,000)
(218,000)
4,036,000
$2,550,400
333,000
$2,883,400
12-80
The following summarized Cash T-account reflects the total debits and total credits to the Cash account of Thomas Corporation for
calendar year 2013.
Cash
Balance, Dec. 31, 2012
Receipts from customers
Receipts from dividends
Receipts from land sale
Receipts from machinery sale
Receipts from issuing stock
Receipts from borrowing
Balance, Dec. 31, 2013
174,500
6,980,000
209,000
314,000
942,000
2,094,000
2,513,000
Payments for merchandise
Payments for wages
Payments for rent
Payments for interest
Payments for taxes
Payments for machinery
Payments for long-term investments
Payments for note payable
Payments for dividends
Payments for treasury stock
2,094,000
1,152,000
419,000
105,000
963,000
2,830,000
1,130,000
2,010,000
1,060,000
840,000
623,500
Use this information to prepare a complete statement of cash flows for year 2013. The cash provided or used by operating activities
should be reported using the direct method.
Exercise 12-16 page 551 Algorithm
12-81
THOMAS COMPANY
Statement of Cash Flows - Direct Method
For the year ended December 31, 2013
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Beginning balance of cash
Ending balance of cash
Exercise 12-16 page 551 Algorithm
174,500
$623,500
12-82
Cash
Balance, Dec. 31, 2012
Receipts from customers
Receipts from dividends
Receipts from land sale
Receipts from machinery sale
Receipts from issuing stock
Receipts from borrowing
Balance, Dec. 31, 2013
174,500
6,980,000
209,000
314,000
942,000
2,094,000
2,513,000
Payments for merchandise
Payments for wages
Payments for rent
Payments for interest
Payments for taxes
Payments for machinery
Payments for long-term investments
Payments for note payable
Payments for dividends
Payments for treasury stock
2,094,000
1,152,000
419,000
105,000
963,000
2,830,000
1,130,000
2,010,000
1,060,000
840,000
623,500
THOMAS COMPANY
Statement of Cash Flows - Direct Method
For the year ended December 31, 2013
Cash flows from operating activities
Cash received from customers
$6,980,000
Cash received from dividends
209,000
Cash paid for merchandise
(2,094,000)
Cash paid for wages
(1,152,000)
Cash paid for rent
(419,000)
Cash paid for interest
(105,000)
Cash paid for taxes
(963,000)
Exercise 12-16 page 551 Algorithm
Cash flows from investing activities
Cash received from sale of land
Cash received from sale of machinery
Cash paid for purchases of machinery
Cash paid for purchases of long-term investments
314,000
942,000
(2,830,000)
(1,130,000)
Cash flows from financing activities
Cash received from issuing stock
Cash received from borrowing
Cash paid for note payable
Cash paid for dividends
Cash paid for treasury stock purchases
2,094,000
2,513,000
(2,010,000)
(1,060,000)
(840,000)
12-83
THOMAS COMPANY
Statement of Cash Flows - Direct Method
For the year ended December 31, 2013
Cash flows from operating activities
Cash received from customers
$6,980,000
Cash received from dividends
209,000
Cash paid for merchandise
(2,094,000)
Cash paid for wages
(1,152,000)
Cash paid for rent
(419,000)
Cash paid for interest
(105,000)
Cash paid for taxes
(963,000)
Net cash provided by operating activities
$2,456,000
Cash flows from investing activities
Cash received from sale of land
314,000
Cash received from sale of machinery
942,000
Cash paid for purchases of machinery
(2,830,000)
Cash paid for purchases of long-term investments (1,130,000)
Net cash used by investing activities
(2,704,000)
Cash flows from financing activities
Cash received from issuing stock
Cash received from borrowing
Cash paid for note payable
Cash paid for dividends
Cash paid for treasury stock purchases
Net cash provided by financing activities
Net increase in cash
Beginning balance of cash
Ending balance of cash
Exercise 12-16 page 551 Algorithm
2,094,000
2,513,000
(2,010,000)
(1,060,000)
(840,000)
697,000
449,000
174,500
$623,500
12-84
Exercise 12-17 page 551
12-85
A company reported average total assets of $1,240,000 in 2012 and $1,510,000 in
2013. Calculate its cash flow on total assets ratio for both years.
Average total assets
Net operating cash flow
2012
2013
$1,240,000 $1,510,000
$102,920
$138,920
Net operating cash flow
Average total assets
2012
2013
Exercise 12-17 page 551
$102,920 / $1,240,000 =
$138,920 / $1,510,000 =
Cash Flow on Total Assets
8.3%
9.2%
12-86
A company reported average total assets of $260,000 in 2012 and $286,000 in
2013. Calculate its cash flow on total assets ratio for both years.
Average total assets
Net operating cash flow
2012
2013
Exercise 12-17 page 551 Algorithm
2012
$260,000
$18,460
2013
$286,000
$22,308
Net operating cash flow
Average total assets
Cash Flow on Total Assets
$18,460 / $260,000 =
$22,308 / $286,000 =
7.1%
7.8%
12-87
Exercise 12-18 page 551
12-88
Peugeot, S.A. reports the following financial information for the year ended December 31, 2011 (euros in millions).
Net income
Net decrease in working capital
Depreciation and amortization
Gains on disposals and other
Cash paid for dividends
€ 784
1,183
3,037
883
290
Cash paid for purchase of treasury stock and other
Cash paid for other financing activities
Cash from disposal of plant assets and intangibles
Cash paid for plant assets and intangibles
Cash and cash equivalents, December 31, 2010
€ 199
2,282
189
3,921
10,442
Prepare its statement of cash flows for 2011 using the indirect method.
Peugeot, S.A. Company
Statement of Cash Flows - Indirect Method
For the year ended December 31, 2011
Cash flows from operating activities
Net income
Adjustments to reconcile net income to operating cash flow:
Net decrease in working capital
€ 1,183
Depreciation and amortization
3,037
Gains on disposals and other
(883)
Net cash provided by operating activities
Cash flows from investing activities
Cash from disposal of plant assets and intangibles
189
Cash paid for plant assets and intangibles
(3,921)
Net cash used by investing activities
Cash flows from financing activities
Cash paid for dividends
(290)
Cash paid for purchase of treasury stock and other
(199)
Cash paid for other financing activities
(2,282)
Net cash used by financing activities
Net decrease in cash
Cash and cash equivalents, December 31, 2010
Cash and cash equivalents, December 31, 2011
Exercise 12-18 page 551
€ 784
4,121
(3,732)
(2,771)
(2,382)
10,442
€ 8,060
12-89
Peugeot, S.A. reports the following financial information for the year ended December 31, 2011
(euros in millions).
Net income
Net decrease in working capital
Depreciation and amortization
Gains on disposals and other
Cash paid for dividends
€ 984
1,383
5,037
1,083
490
Cash paid for purchase of treasury stock and other € 399
Cash paid for other financing activities
4,282
Cash from disposal of plant assets and intangibles
389
Cash paid for plant assets and intangibles
5,921
Cash and cash equivalents, December 31, 2010
13,042
Prepare its statement of cash flows for 2011 using the indirect method.
Exercise 12-18 page 551 Algorithm
12-90
Net income
Net decrease in working capital
Depreciation and amortization
Gains on disposals and other
Cash paid for dividends
€ 984
1,383
5,037
1,083
490
Cash paid for purchase of treasury stock and other € 399
Cash paid for other financing activities
4,282
Cash from disposal of plant assets and intangibles
389
Cash paid for plant assets and intangibles
5,921
Cash and cash equivalents, December 31, 2010
13,042
Peugeot, S.A. Company
Statement of Cash Flows - Indirect Method
For the year ended December 31, 2011
Cash flows from operating activities
Net income
Adjustments to reconcile net income to operating cash flow:
Net decrease in working capital
€ 1,383
Depreciation and amortization
5,037
Gains on disposals and other
(1,083)
Net cash provided by operating activities
Cash flows from investing activities
Cash from disposal of plant assets and intangibles
389
Cash paid for plant assets and intangibles
(5,921)
Net cash used by investing activities
Cash flows from financing activities
Cash paid for dividends
(490)
Cash paid for purchase of treasury stock and other
(399)
Cash paid for other financing activities
(4,282)
Net cash used by financing activities
Net decrease in cash
Cash and cash equivalents, December 31, 2010
Cash and cash equivalents, December 31, 2011
Exercise 12-18 page 551 Algorithm
€ 984
6,321
(5,532)
(5,171)
(4,382)
13,042
€ 8,660
12-91
12-92
12-93
12-94
12-95