Chapter 14
The Statement of Cash Flows
Short Exercises
(10 min.) S 14-1
Req. 1
a. The statement of cash flows helps predict future cash flows by reporting
past cash receipts and payments, which are good predictors of future
cash flows.
b. The statement of cash flows helps evaluate management decisions by
reporting on managers' investments.
c. The statement of cash flows helps predict the ability to make debt
payments to lenders and pay dividends to stockholders by reporting
where cash came from and how the cash was spent.
(10 min.) S 14-2
Req. 1
a. 1. Operating activities
2. Investing activities
3. Financing activities
4. Noncash investing and financing activities
b. The "key reconciling figure" for the statement of cash flows is the
increase or decrease in cash.
Where do you get this figure? the balance sheet.
c. The first dollar amount reported on the indirect method statement of
cash flows is net income.
(10 min.) S 14-3
Req. 1
" O+ "a. "Increase in accounts " O+ "f. "Loss on sale of land "
" " "payable " " " "
" F "b. "Payment of dividends " O+ "g. "Depreciation expense "
" O "c. "Decrease in accrued " O "h. "Increase in inventory "
" " "liabilities " " " "
" F+"d. "Issuance of common " O+ "i. "Decrease in accounts "
" " "stock " " "receivable "
" O "e. "Gain on sale of building " "j. "Purchase of equipment "
" " " "I " " "
(10 min.) S 14-4
Req. 1
"OMD Equipment, Inc. "
"Statement of Cash Flows—Partial "
"Year Ended 2012 "
"Cash flows from operating activities: " " "
" Net income " "$44,000 "
" Adjustments to reconcile net income to " " "
" net cash provided by operating activities: " " "
" Depreciation "$ 8,000 " "
" Increase in accounts receivable "(7,000) " "
" Decrease in accounts payable " (4,000)" (3,000)"
" Net cash provided by operating activities " "$41,000 "
(10 min.) S 14-5
Req. 1
"One Way Cellular "
"Statement of Cash Flows--Partial "
"Year ended September 30, 2012 "
"Cash flows from operating activities: " " "
" Net income " "$55,000 "
" Adjustments to reconcile net income to " " "
" net cash provided by operating activities: " " "
" Depreciation "$ 20,000 " "
" Increase in current assets other than cash "(14,000) " "
" Decrease in current liabilities " (19,000)" (13,000)"
" Net cash provided by operating activities " "$42,000 "
(15 min.) S 14-6
Req. 1
"One Way Cellular "
"Statement of Cash Flows "
"Year Ended September 30, 2012 "
"Cash flows from operating activities: " " "
" Net income " "$55,000 "
" Adjustments to reconcile net income to " " "
" net cash provided by operating activities: " " "
" Depreciation "$ 20,000 " "
" Increase in current assets other than cash "(14,000) " "
" Decrease in current liabilities " (19,000)" (1,000) "
" Net cash provided by operating activities " "$42,000 "
" " " "
"Cash flows from investing activities: " " "
" Acquisition of equipment "$(39,000) " "
" Cash receipt from sale of land " 34,000 " "
" Net cash used for investing activities " "$(5,000) "
" " " "
"Cash flows from financing activities: " " "
" Cash receipt from issuance of common stock "$ 30,000 " "
" Payment of cash dividends " (6,100) " "
" Net cash provided by financing activities " " 23,900 "
"Net increase in cash " "$60,900 "
(10 min.) S 14-7
Req. 1
Acquisitions = $16,600
"a. "Equipment, net (let X = Acquisitions) "
" " " " " " " " "
" "Beginning "+ "Acquisitions " "Depreciation "= "Ending "
" " " " " " " " "
" "$67,000 "+ "X " "$5,600 "= "$78,000 "
" " " " " " " " "
" " " " X = $16,600 " " " "
"Equipment, net "
"Beginning "67,000 "Depreciation "5,600 "
"Acquisitions "16,600 " " "
"Ending "78,000 " " "
Req. 2
Payment = $11,300
"b. "Long-term notes payable (let X = Payment) "
" " " " " " " " "
" "Beginning "+ " Issuance " "Payment "= "Ending "
" " " " " " " " "
" "$15,000 "+ " $5,300 " "X "= "$9,000 "
" " " " " " " " "
" " " " " X = $11,300 " "
"Long-term notes payable "
"Payment "11,300 "Beginning "15,000 "
" " "Issuance "5,300 "
" " "Ending "9,000 "
(15-20 min.) S 14-8
Req. 1
"Kyler Media Corporation "
"Statement of Cash Flows "
"Year Ended December 31, 2012 "
"Cash flows from operating activities: " " "
" Net income " "$ 25,400 "
" Adjustments to reconcile net income to " " "
" net cash provided by operating activities: " " "
" Depreciation "$ 5,600 " "
" Increase in accounts receivable "(5,500) " "
" Increase in accounts payable " 5,000 " 5,100 "
" Net cash provided by operating activities " "$30,500 "
" " " "
"Cash flows from investing activities: " " "
" Acquisition of equipment " " "
" (from Short Exercise S 13-7) "$ (16,600) " "
" Net cash used for investing activities " " (16,600) "
" " " "
"Cash flows from financing activities: " " "
" Payment of cash dividends "$(11,900)* " "
" Payment of note payable " " "
" (from Short Exercise S 13-7) "(11,300) " "
" Cash receipt from issuance of note " " "
" payable (from Short Exercise S 13-7) "5,300 " "
" Cash receipt from issuance of common " " "
" stock ($22,000 $17,000) " 5,000 " "
" Net cash used for financing activities " " (12,900) "
"Net increase in cash " " $ 1,000 "
"Cash balance, December 31, 2011 " " 3,800 "
"Cash balance, December 31, 2012 " "$ 4,800 "
__________
"*"Retained Earnings (let X = Dividends) "
" "Beginning "+ "Net Income " "Dividends "= "Ending "
" "$38,900 "+ "$25,400 " "X "= "$52,400 "
" " " " " " X = $11,900* "
(5 min.) S 14-9
Req. 1
" "Net income………………………......................... "$ 22,000 "
"+ "Depreciation………………………………………. "14,000 "
" "Purchase of building with a long-term note payable… " 0 "
"= "Increase in cash………………………………….. "$ 36,000 "
Req. 2
Were there any noncash transactions for the company? Yes
Acquisition of building with long-term note payable is reported in the
noncash investing and financing activities.
(5 min.) S 14-10
Req. 1
" "Net cash provided by operating activities….. "$158,000 "
"- "Cash payment for planned investment……... "(80,000) "
"- "Payment of cash dividends…………………… " (10,000) "
"= "Free cash flow…………………………………… "$68,000 "
Exercises
(10 min.) E 14-11
Req. 1
The CFO is right because depreciation is a noncash expenditure.
Req. 2
Assuming all other things are equal, the cash flow should be about the same
as the previous year.
(10 min.) E 14-12
Req. 1
"a. "Investing activities " "e. "Investing activities "
" " " " " "
"b. "Financing activities " "f. "Financing activities "
" " " " " "
"c. "Operating activities " "g. "Noncash investing and "
" " " " " financing activity "
"d. "Operating activities " " " "
" " " " " "
(5-10 min.) E 14-13
Req. 1
" O+ "a."Loss on sale of land " " I+ "i. "Cash sale of land "
" " " " " " " "
"NIF "b."Acquisition of equipment " " F+ "j. "Issuance of long-term note "
" " "by issuance of note " " " "payable to borrow cash "
" " "payable " " " " "
" " " " " " " "
" F– "c."Payment of long-term debt " " O+ "k. "Depreciation "
" " " " " " " "
"NIF "d."Acquisition of building by " " F– "l. "Purchase of treasury stock "
" " "issuance of common stock " " " " "
" " " " " " " "
" O+ "e."Increase in salary payable " " F+ "m. "Issuance of common stock "
" " " " " " " "
" O+ "f."Decrease in inventory " " O+ "n. "Increase in accounts "
" " " " " " "payable "
" " " " " " " "
" O– "g."Increase in prepaid " " O+ "o. "Net income "
" " "expenses " " " " "
" " " " " " " "
" O– "h."Decrease in accrued " " F– "p. "Payment of cash dividend "
" " "liabilities " " " " "
(5-10 min.) E 14-14
Req. 1
"a. "Financing activity " "g. "Investing activity "
" " " " " "
"b. "Financing activity " "h. "Investing activity "
" " " " " "
"c. "Operating activity " "i. "Financing activity "
" " " " " "
"d. "Investing activity " "j. "Noncash investing and "
" " " " " financing activity "
"e. "Operating activity " " " "
" " " "k. "Operating activity "
"f. "Financing activity " " " "
(10-15 min.) E 14-15
Req. 1
"McKnight Color Engraving "
"Statement of Cash Flows—Partial "
"Year Ended 2012 "
"Cash flows from operating activities: " " "
" Net income " "$ 38,000 "
" Adjustments to reconcile net income to " " "
" net cash provided by operating activities: " " "
" Depreciation "$ 4,000 " "
" Loss on sale of land "5,000 " "
" Increase in current assets other " " "
" than cash "(14,000) " "
" Decrease in current liabilities " (28,000) " (33,000) "
" Net cash provided by operating activities " "$ 5,000 "
Req. 2
Evaluation: Operating cash flow is strong, as shown by the net
cash provided by the operating activities.
(15-20 min.) E 14-16
Req. 1
"DVD Sales, Inc. "
"Statement of Cash Flows—Partial "
"For the Month Ended July 2012 "
"Cash flows from operating activities: " " "
" Net income " "$65,000 "
" Adjustments to reconcile net income to " " "
" net cash provided by operating activities: " " "
" Depreciation "$ 3,000 " "
" Decrease in accounts receivable "4,000 " "
" Increase in inventory "(3,500) " "
" Increase in accounts payable " 5,000 " 8,500 "
" Net cash provided by operating activities " "$73,500 "
(20-30 min.) E 14-17
Req. 1
"Minerals Plus, Inc. "
"Statement of Cash Flows "
"Year Ended September 30, 2012 "
"Cash flows from operating activities: " " "
" Net income " "$51,000 "
" Adjustments to reconcile net income to " " "
" net cash provided by operating activities: " " "
" Depreciation "$ 26,000 " "
" Decrease in accounts receivable "18,000 " "
" Increase in inventory "(4,000) " "
" Increase in accounts payable "13,000 " "
" Decrease in accrued liabilities "(13,000) " 40,000 "
" Net cash provided by operating activities " "$91,000 "
" " " "
"Cash flows from investing activities: " " "
" Acquisition of plant assets "$(100,000) " "
" Cash receipt from sale of land "28,000 " "
" Net cash used for investing activities " "(72,000) "
" " " "
"Cash flows from operating activities: " " "
" Cash receipt from issuance of common stock "$29,000 " "
" Payment of note payable "(18,000) " "
" Payment of dividends " (8,000) " "
" Net cash provided by financing activities " " 3,000 "
"Net increase in cash " "$22,000 "
"Cash balance, September 30, 2011 " " 8,000 "
"Cash balance, September 30, 2012 " "$30,000 "
" " " "
"Noncash investing and financing activities: " " "
" Acquisition of plant assets by issuing note payable " "$18,000 "
" Total noncash investing and financing activities " "$18,000 "
(10-15 min.) E 14-18
Req. 1
Cash dividends are $35,000*
"* Retained earnings (let Dividends = X) "
"Beginning "+ "Net income " "Dividends "= "Ending "
"$44,000 "+ "$61,000 " "X "= "$70,000 "
" " " " X = "
" " " "$35,000 "
"Retained earnings "
" Cash dividends "35,000 "Beginning "44,000 "
" " "Net income "61,000 "
" " "Ending "70,000 "
Req. 2
"* "Plant assets, net (let X = Book value sold) "
" " " " " " "Book value " "
" "Beginning "+ "Acquisitions " "Depreciation " "sold "= "Ending "
" "$104,000 "+ "$28,000 " "$17,000 " "X "= "$109,000 "
" " " " " " " X = $ "
" " " " " " "6,000 "
The cash receipt from the sale plant assets is $11,000*.
(Gain on sale $5,000 + Book value $6,000)
"Plant assets, net "
"Beginning "104,000 "Depreciation "17,000 "
"Acquisitions " 28,000 "Book value sold "6,000 "
"Ending "109,000 " " "
(10 min.) E 14-19
Req. 1
The acquisition of plant assets amounts to $90,000
"* "Plant assets, net "
" "Beginning "+ "Acquisitions " "Depreciation " " "= "Ending "
" "$183,000 "+ " X " "$52,000 " " "= "$221,000 "
" " " "X = $90,000 " " " " " " "
" " " " " " " "
"Plant assets, net "
"Beginning "183,000 "Depreciation "52,000 "
"Acquisition "90,000 " " "
"Ending "221,000 " " "
(15 min.) E 14-20
Req. 1
a. The payment of long-term notes payable is $7,000
($66,000 $59,000)
b. Issuance of common stock is $13,000
($47,000 $34,000)
c. Payment of cash dividends is $60,000
"Retained earnings (let X = Dividends) "
" " " " " " " "
"Beginning " "Net " " " "Ending "
" " "income " " " " "
"Retained "+ " " "Dividends "= "Retained "
"earnings " " " " " "earnings "
" " " " " " " "
"$239,000 "+ "$110,000 " "X "= "$289,000 "
" " " " " " " "
" " " " " X = $60,000 "
"Retained earnings "
" Dividends "60,000 "Beginning "239,000 "
" " "Net income "110,000 "
" " "Ending "289,000 "
(15 min.) E 14-21
Req. 1
"McKnight Exercise Equipment, Inc. "
"Statement of Cash Flows "
"Year Ended December 31, 2012 "
"Cash flows from operating activities: " " "
" Net income " "$110,000 "
" Adjustments to reconcile net income to " " "
" net cash provided by operating activities: " " "
" Depreciation "$52,000 " "
" Increase in accounts receivable " (5,000) " "
" Decrease in inventory " 8,000 " "
" Increase in accounts payable " 1,000 " "
" Decrease in salary payable " (3,000) " 53,000 "
" Net cash provided by operating activities " "$163,000 "
" " " "
"Cash flows from investing activities: " " "
" Acquisition of plant assets (Exercise E14-19)"$(90,000) " "
" Purchase of investments ($95,000 $77,000) " (18,000) " "
" Net cash used for investing activities " "(108,000) "
" " " "
"Cash flows from financing activities: " " "
" Payment of cash dividends (Exercise E14-20) "$(60,000) " "
" Payment of notes payable (Exercise E14-20) " (7,000) " "
" Cash receipt from issuance of common " " "
" stock (Exercise E14-20) " 13,000 " "
" Net cash used for financing activities " " (54,000)"
"Net increase in cash " "$ 1,000 "
"Cash balance, December 31, 2011 " " 18,000 "
"Cash balance, December 31, 2012 " "$19,000 "
(15 min.) E 14-22
Req. 1
"Dirtbikes "
"Statement of Cash Flows (partial) "
"Year ended December 31, 2012 "
"Noncash investing and financing activities: " "
" Acquired building by issuing common stock "$101,000 "
" Acquired truck by issuing long-term note payable "28,000 "
" Payment of short-term note payable by issuing common stock " "
" "23,000 "
" Total noncash investing and financing activities "$152,000 "
(15 min.) E 14-23
Req. 1
" "Net cash provided by operating activities….. " $163,000 "
"- "Cash payments for planned investment…... " (150,000)* "
"- "Payment of cash dividends for next year…… " 0 "
"= "Free cash flow…………………………………… " $13,000 "
" " " "
*Plans to purchase a truck $29,000 + a forklift $121,000
Problems
Group A
(40-50 min.) P 14-24A
Req. 1
The purpose of the cash flow statement is to show where cash came from and
how cash was spent during the period.
Req. 2
"Classic Reserve Rare Coins "
"Income Statement "
"Year Ended December 31, 2012 "
"Revenue: " " "
" Sales revenue (2,100 × $350) " "$735,000 "
"Expenses " " "
" Cost of goods sold "$260,000 " "
" Salary expense "94,000 " "
" Income tax expense " 23,000 " "
" Depreciation expense* "10,800 " "
" Rent expense " 10,000 " "
" Total expenses " "397,800 "
"Net income " "$337,200 "
* ($54,000 x 1/5 x 12/12) = $10,800
(continued) P 14-24A
Req. 3
"Classic Reserve Rare Coins "
"Balance Sheet "
"December 31, 2012 "
"Assets "Liabilities "
"Current assets: " "Current liabilities: " "
" Cash "$362,000* " Accounts payable " "
" Accounts receivable " " ($243,000 $163,000) "$80,000 "
" (2,100 × $350 × .20) "147,000 " Salary payable " "
" " " "4,000 "
" Inventory " " Total current "$84,000 "
" "253,000** "liabilities " "
" Total current assets "$762,000 " " "
" " "Stockholders' Equity "
"Property, plant, and equipment:" "Common stock "$425,000"
" Store fixtures "$54,000 " "Retained earnings " "
" Less: Accumulated " " " ($337,200 $41,000) "296,200 "
" depreciation"10,800 " 43,200" Total stockholders' " "
" " " "equity "721,200 "
" " "Total liabilities and " "
"Total assets " $805,200" stockholders' equity "$805,200"
__________
*$425,000 $54,000 $270,000 $10,000 $163,000 + $588,000 $90,000
$23,000
$41,000 = $362,000
**$270,000 + $243,000 - $260,000 = $253,000
(continued) P 14-24A
Req. 4
"Classic Reserve Rare Coins "
"Statement of Cash Flows "
"Year Ended December 31, 2012 "
"Cash flows from operating activities: " " "
" Net income " "$ 337,200 "
" Adjustments to reconcile net income to " " "
" net cash provided by operating activities: " " "
" Depreciation "$ 10,800 " "
" Increase in accounts receivable "(147,000) " "
" Increase in inventory "(253,000) " "
" Increase in accounts payable "80,000 " "
" Increase in salary payable " 4,000"(305,200) "
" Net cash provided by operating activities " "$32,000 "
" " " "
"Cash flows from investing activities: " " "
" Purchase of store fixtures "$ (54,000) " "
" Net cash used for investing activities " "(54,000) "
" " " "
"Cash flows from financing activities: " " "
" Cash receipt from issuance of common stock "$425,000 " "
" Payment of cash dividend " (41,000)" "
" Net cash provided by financing " " 384,000 "
"activities " " "
"Net Increase in cash " "$362,000 "
"Cash balance, January 1, 2012 " " "
" " "0 "
"Cash balance, December 31, 2012 " "$362,000 "
(35-45 min.) P 14-25A
Req. 1
"Johnson, Inc. "
"Statement of Cash Flows "
"Year Ended December 31, 2012 "
"Cash flows from operating activities: " " "
" Net income " "$ 70,500"
" Adjustments to reconcile net income to " " "
" net cash provided by operating activities: " " "
" Depreciation "$ 25,000 " "
" Gain on sale of building "(5,500) " "
" Decrease in accounts receivable "4,700 " "
" Increase in inventory "(7,000) " "
" Increase in accounts payable "1,700 " "
" Decrease in income tax payable " " 16,200"
" "(2,700) " "
" Net cash provided by operating activities " "$ 86,700 "
"Cash flows from investing activities: " " "
" Acquisition of equipment "$(75,000) " "
" Cash receipts from sale of building " " "
" "58,500* " "
" Net cash used for investing activities " "(16,500) "
"Cash flows from financing activities: " " "
" Cash receipt from issuance of common stock "$40,000 " "
" Cash receipt from issuance of note payable "67,000 " "
" Payment of cash dividends "(54,000) " "
" Payment of note payable " " "
" "(48,100) " "
" Net cash provided by financing activities " " "
" " "4,900 "
"Net increase in cash and cash equivalents " "$75,100 "
"Cash and cash equivalents balance, December 31, 2011 " " 17,000"
"Cash and cash equivalents balance, December 31, 2012 " "$92,100 "
" " " "
"Noncash investing and financing activities: " " "
" Acquisition of land by issuing long-term note payable " "$122,000 "
"Total noncash investing and financing activities " "$122,000 "
(35-45 min.) P 14-26A
Req. 1
"Jackson Educational Supply "
"Statement of Cash Flows "
"Year Ended December 31, 2012 "
"Cash flows from operating activities: " " "
" Net income " "$ 59,600 "
" Adjustments to reconcile net income to " " "
" net cash provided by operating activities: " " "
" Depreciation " $ 16,700 " "
" Decrease in accounts receivable "7,300 " "
" Increase in inventories "(3,200) " "
" Increase in accounts payable "1,500 " "
" Decrease in accrued liabilities " (600) " 21,700"
" Net cash provided by operating activities " "$81,300 "
" " " "
"Cash flows from investing activities: " " "
" Acquisition of equipment "$(54,400) " "
" Acquisition of building " (100,000) " "
" Net cash used for investing activities " "(154,400) "
" " " "
"Cash flows from financing activities: " " "
" Cash receipt from issuance of long-term note "$ 50,000 " "
"payable " " "
" Cash receipt from issuance of common stock "106,000 " "
" Payment of cash dividends " (17,200)" "
" Net cash provided by financing activities " " 138,800 "
"Net increase in cash and cash equivalents " "$ 65,700 "
"Cash and cash equivalents balance, December 31, 2011 " " 22,500"
"Cash and cash equivalents balance, December 31, 2012 " "$ 88,200 "
(continued) P 14-26A
Req. 2
Evaluation:
Operations are generating cash.
The company is investing in new plant assets.
There is more financing by issuing stock than by borrowing.
Cash increased during the year.
For the reasons given above, Jackson's cash flows look strong.
Req. 3
" "Net cash provided by operating activities….. "$81,300 "
"- "Cash payments for planned investment…... "(154,400) "
"- "Payment of cash dividends…………………… " (17,200) "
"= "Free cash flow…………………………………… "$(90,300) "
(35-45 min.) P 14-27A
Req. 1
"Rolling Hills, Inc. "
"Statement of Cash Flows "
"Year Ended December 31, 2012 "
"Cash flows from operating activities: " " "
" Net income " "$97,800 "
" Adjustments to reconcile net income to " " "
" net cash provided by operating activities: " " "
" Depreciation "$14,400 " "
" Increase in accounts receivable "(1,200) " "
" Decrease in inventories "11,900 " "
" Increase in accounts payable " 4,900 " "
" Decrease in accrued liabilities " (2,100) " 27,900 "
" Net cash provided by operating " "$125,700 "
"activities " " "
"Cash flows from investing activities: " " "
" Acquisition of equipment "*$(28,600) " "
" Net cash used for investing activities " "(28,600) "
"Cash flows from financing activities: " " "
" Payment of dividends "**$(63,900)" "
" Payment of notes payable "(46,600) " "
" Cash receipt from issuance of common stock " 23,900 " "
" Net cash used for financing activities " " (86,600)"
"Net increase in cash and cash equivalents " "$10,500 "
"Cash and cash equivalents balance, December 31, " " 15,900 "
"2011 " " "
"Cash and cash equivalents balance, December 31, " "$26,400 "
"2012 " " "
" " " "
"Noncash investing and financing activities: " " "
" Acquisition of land by issuing long-term note " "$23,600 "
"payable " " "
" Total noncash investing and financing activities " "$23,600 "
*$103,900 - $89,700 + $14,400 = $28,600
**$6,600 + $97,800 $40,500 = $63,900
(continued) P 14-27A
Req. 2
This problem will help evaluate an investment because I will learn how
companies prepare the statement of cash flows and I will learn how
operating activities, investing activities, and financing activities
generate cash receipts and cash payments.
Problems
Group B
(40-50 min.) P 14-28B
Req. 1
The purpose of the cash flow statement is to show where cash came from and
how cash was spent during the period.
Req. 2
"National Reserve Rare Coins "
"Income Statement "
"Year Ended December 31, 2012 "
"Revenue: " " "
" Sales revenue (2,500 × $400) " "$1,000,000 "
"Expenses: " " "
" Cost of goods sold " $320,000 " "
" Salary expense " 80,000 " "
" Income tax expense " 20,000 " "
" Rent expense " 17,000 " "
" Depreciation expense* " 11,000" "
" Total expenses " "448,000 "
"Net income " " $552,000 "
*($55,000 x 1/5 x 12/12) = $11,000
(continued) P 14-28B
Req. 3
"National Reserve Rare Coins "
"Balance Sheet "
"December 31, 2012 "
"Assets "Liabilities "
"Current assets: " "Current liabilities: " "
" Cash "$683,000* " Accounts payable " "
" Accounts receivable " " ($244,000 $164,000) "$80,000 "
" (2,500 × $400 × .15) " " Salary payable " "
" "150,000 " "3,000 "
" Inventory " " Total current "$83,000 "
" "244,000** "liabilities " "
" Total current assets " " " "
" "$1,077,000" " "
" " "Stockholders' Equity "
"Property, plant, and " "Common stock "$525,000 "
"equipment: " " " "
" Store fixtures "$55,000 " "Retained earnings " "
" Less : Accumulated " " " ($552,000 $39,000) " 513,000"
" " 11,000 " " "1,038,000"
"depreciation " "44,000 " " "
" " "Total liabilities and " "
"Total assets "$1,121,000" stockholders' equity "$1,121,00"
" " " "0 "
__________
*$525,000 $55,000 $320,000 $17,000 $164,000 + $850,000 $77,000
$20,000
$39,000 = $683,000.
**$320,000 + $244,000 – $320,000 = $244,000
(continued) P 14-28B
Req. 4
"National Reserve Rare Coins "
"Statement of Cash Flows "
"Year Ended December 31, 2012 "
"Cash flows from operating activities: " " "
" Net income " "$552,000 "
" Adjustments to reconcile net income to " " "
" net cash provided by operating activities: " " "
" Depreciation "$ 11,000 " "
" Increase in accounts receivable "(150,000 " "
" Increase in inventory "(244,000) " "
" Increase in accounts payable "80,000 " "
" Increase in salary payable " 3,000 "(300,000) "
" Net cash provided by for operating activities " "$252,000 "
" " " "
"Cash flows from investing activities: " " "
" Acquisition of store fixtures "$(55,000) " "
" Net cash used for investing activities " "(55,000) "
" " " "
"Cash flows from financing activities: " " "
" Cash receipt from issuance of common stock "$525,000 " "
" Payment of cash dividends " (39,000)" "
" Net cash provided by financing activities " "486,000 "
" " "________ "
"Increase in cash " "$683,000 "
"Cash balance, January 1, 2012 " " "
" " "0 "
"Cash balance, December 31, 2012 " "$683,000 "
(35-45 min.) P 14-29B
Req. 1
"Smithson, Inc. "
"Statement of Cash Flows "
"Year Ended December 31, 2012 "
"Cash flows from operating activities: " " "
" Net income " "$ 68,500"
" Adjustments to reconcile net income to " " "
" net cash provided by operating activities: " " "
" Depreciation "$ 18,000 " "
" Gain on sale of building " (3,500) " "
" Decrease in accounts receivable "4,600 " "
" Increase in inventory "(5,000) " "
" Increase in accounts payable "1,600 " "
" Decrease in income tax payable " (2,500)" 13,200 "
" Net cash provided by operating activities " "$81,700 "
"Cash flows from investing activities: " " "
" Acquisition of equipment "$(70,000) " "
" Proceeds from sale of building " 53,500 " "
" Net cash used for investing activities " "(16,500) "
"Cash flows from financing activities: " " "
" Cash receipt from issuance of common stock "$45,000 " "
" Cash receipt from issuance of note payable "68,000 " "
" Payment of cash dividends "(52,000) " "
" Payment of note payable " (46,100)" "
" Net cash provided by financing activities " " "
" " "14,900 "
"Net increase in cash and cash equivalents " "$ 80,100"
"Cash and cash equivalents balance, December 31, 2011 " " "
" " "26,000 "
"Cash and cash equivalents balance, December 31, 2012 " "$106,100 "
" " " "
"Noncash investing and financing activities: " " "
" Acquisition of land by issuing long-term note payable " "$113,000 "
"Total noncash investing and financing activities " "$113,000 "
(35-45 min.) P 14-30B
Req. 1
"Morgensen Educational Supply "
"Statement of Cash Flows "
"Year Ended December 31, 2012 "
"Cash flows from operating activities: " " "
" Net income " "$ 57,600 "
" Adjustments to reconcile net income to " " "
" net cash provided by operating activities: " " "
" Depreciation "$ 17,300 " "
" Decrease in accounts receivable " 7,400" "
" Increase in inventories "(2,800) " "
" Increase in accounts payable "2,500 " "
" Decrease in accrued liabilities " (500) " 23,900"
" Net cash provided by operating activities " "$ 81,500 "
" " " "
"Cash flows from investing activities: " " "
" Acquisition of equipment "$(55,200) " "
" Acquisition of building "(103,000) " "
" Net cash used for investing activities " "(158,200) "
" " " "
"Cash flows from financing activities: " " "
" Cash receipt from issuance of long-term note "$45,000 " "
"payable " " "
" Cash receipt from issuance of common stock "111,000 " "
" Payment of cash dividends "(14,200) " "
" Net cash provided by financing activities " "141,800 "
"Net increase in cash and cash equivalents " "$65,100 "
"Cash and cash equivalents balance, December 31, 2011 " " 24,500 "
"Cash and cash equivalents balance, December 31, 2012 " "$89,600 "
(continued) P 14-30B
Req. 2
Evaluation:
Operations are generating cash.
The company is investing in new plant assets.
There is more financing by issuing stock than by borrowing.
Cash increased during the year.
For the reasons given above, Morgensen's cash flows look strong.
Req. 3
" "Net cash provided by operating activities….. "$81,500 "
"- "Cash payments for planned investment…... "(158,200) "
"- "Payment of cash dividends…………………… " (14,200) "
"= "Free cash flow…………………………………… "$(90,900) "
(35-45 min.) P 14-31B
Req. 1
"All Wired, Inc. "
"Statement of Cash Flows "
"Year Ended December 31, 2012 "
"Cash flows from operating activities: " " "
" Net income " "$ 99,500 "
" Adjustments to reconcile net income to " " "
" net cash provided by operating activities: " " "
" Depreciation " $ 14,500 " "
" Increase in accounts receivable "(1,200) " "
" Decrease in inventories "12,000 " "
" Increase in accounts payable " 5,100" "
" Decrease in accrued liabilities " " 28,700 "
" "(1,700) " "
" Net cash provided by operating " "$128,200 "
"activities " " "
"Cash flows from investing activities: " " "
" Acquisition of equipment "*$(26,700) " "
" Net cash used for investing activities " "(26,700) "
"Cash flows from financing activities: " " "
" Payment of dividends " " "
" ($4,200 + $97,600 $38,700) "**$(63,800) " "
" Payment of notes payable " " "
" "(50,500) " "
" Cash receipts from issuance of common stock " " "
" "23,900 " "
" Net cash used for financing activities " " (90,400) "
"Net increase in cash and cash equivalents " "$ 11,100 "
"Cash and cash equivalents balance, December 31, 2011 " " 15,600 "
"Cash and cash equivalents balance, December 31, 2012 " "$ 26,700 "
" " " "
"Noncash investing and financing activities: " " "
" Acquisition of land by issuing long-term note " "$24,500 "
"payable " " "
" Total noncash investing and financing activities " "$24,500 "
*$102,900 - $90,700 + $14,500 = $26,700
**$6,100 + $99,500 - $41,800 = $63,800
(continued) P 14-31B
Req. 2
C. This problem will help evaluate an investment because I will learn how
operating activities, investing activities, and financing activities
generate cash receipts and cash payments, and I will learn how companies
prepare the statement of cash flows.
Continuing Exercise
(25-35 min.) E 14-32
Req. 1
"Lawlor Lawn Service, Inc. "
"Statement of Cash Flows "
"Year Ended May 31, 2013 "
"Cash flows from operating activities: " " "
" Net income " "*$ 23,225 "
" Adjustments to reconcile net income to " " "
" net cash used for operating activities: " " "
" Depreciation "**$ 2,830" "
" Increase in accounts receivable "(2,500) " "
" Increase in lawn supplies "(110) " "
" Decrease in accounts payable "(1,000) " "
" Increase in interest payable " 555 " "
" " "(225) "
" Net cash provided by operating activities " "$ 23,000 "
"Cash flows from financing activities: " " "
" Payments on mortgage payable "$(9,000) " "
" Cash receipt from issuance of common stock " 1000*** " "
" " " "
" Net cash used for investing activities " " (8,000)"
"Net increase in cash " "$15,000 "
"Cash balance, May 31, 2012 " " 2,420 "
"Cash balance, May 31, 2013 " "$17,420 "
" " " "
"Noncash investing and financing activities: " " "
" Acquisition of building by issuing mortgage payable " "$120,000 "
" " " "
" Total noncash investing and financing activities " "$120,050 "
*Retained earnings $24,005Ending - $780 Beginning = $23,225
$23,225 + $50 stock dividend (from E13-36) = $23.275 Net income
**Accumulated depreciation $2,500 + ($360 - $30) = $2,830
*** Change in common stock ($2,700 - $1,700) = $1,000 Cash receipt from
issuance of common stock
(25-35 min.) P 14-33
Req. 1
"Draper Consulting, Inc. "
"Statement of Cash Flows "
"Year Ended December 31, 2013 "
"Cash flows from operating activities: " " "
" Net income " "$ 141,235 a)"
" Adjustments to reconcile net income to " " "
" net cash provided by operating activities: " " "
" Amortization of discount on bond payable "$ 3,432 b)" "
" Depreciation " 2,653 " "
" Increase in accounts receivable " (35,750) " "
" Increase in supplies "(2,000) " "
" Increase in accounts payable "5,350 " "
" Increase in salary payable " 3,415 " "
" Increase in interest payable " 10,667 " "
" Decrease in unearned service revenue "(700) " (12,933) "
" Net cash provided by operating " "$ 128,302 "
"activities " " "
"Cash flows from investing activities: " " "
" Acquisition of building "$(125,000) " "
" Acquisition of furniture "(1,500) " "
" Acquisition of equipment " (14,200) " "
" Net cash used for investing activities" "(140,700) "
"Cash flows from financing activities: " " "
" Cash receipt from issuance of notes payable "$ 40,000 " "
" Cash receipt from issuance of bonds payable " 360,384c) " "
" Cash receipt from issuance of common stock "112,000 " "
" Payment of dividends " (1,400) " "
" Net cash provided by financing " "510,984 "
"activities " " "
"Net increase in cash " " $ 498,586 "
"Cash balance, December 31, 2012 " " 16,350 "
"Cash balance, December 31, 2013 " " $514,936 "
a)$140,000 - $165 + $1,400 = $141,235
b)$400,000 - $360,384 - $36,184 = $3,432
c) from P11-34 Req. 2
Ch 14: Apply Your Knowledge
Decision Cases
(45-60 min.) Decision Case 14-1
Req. 1
"Course of Action "Effect "Comment "
"1.Extending the estimated lives of "No effect "Depreciation is a "
"the boats " "non-cash expense that "
" " "affects income but has no"
" " "effect of cash flows. "
"2. Changing depreciation methods "No effect " "
"3. Tightening credit policies "Increases cash flows"A tighter credit policy "
" "from operating "would result in higher "
" "activities "cash flows but an "
" " "extremely tight policy "
" " "might drive agents away. "
"4. Increasing credit sales and "Increases cash flows"This course of action "
"stretching payments to vendors "from operating "would slow cash outflows "
" "activities "and would make use of "
" " "this interest-free "
" " "borrowing .Stretching "
" " "payments to vendors, even"
" " "within the due period, "
" " "might weaken "
" " "relationships with "
" " "vendors. "
"5. Issuing Stock "Increases cash flows"This is feasible, however"
" "from financing "other factors should be "
" "activities "considered such as the "
" " "effect of the issuance on"
" " "the prices of already "
" " "existing shares in the "
" " "market, potential hostile"
" " "takeovers, stock exchange"
" " "restrictions and "
" " "regulations. "
"6. Borrowing from banks "Increases cash flows"An unsustainable source "
" "from financing "of cash due to the fact "
" "activities "that a company could only"
" " "increases its debt to a "
" " "certain level; afterwards"
" " "it becomes risky and "
" " "possibly not creditworthy"
" " "for lenders. "
"7. Selling non-current assets at "Increases cash flows"An unsustainable source "
"high prices "from investing "of cash since continuing "
" "activities "selling non-current "
" " "productive assets without"
" " "replacement would "
" " "negatively affect future "
" " "operations. "
Req. 2
Yes. Profitability is assessed via the income statement which presents
revenue/gains and expenses/ losses over a period of time. However the
income statement is prepared per the accrual basis. On the contrary the
statement of cash flows presents cash inflows and outflows over the period
of time. Thus if most of a company's net income is on credit, unless the
company could externally obtain cash by selling non-current assets,
borrowing, or issuing stock it would not be able to pay its liabilities
they become due.
(15-25 min.) Decision Case 14-2
Showcase Cinema looks like the better investment because:
1. Operations provide far more cash for Showcase than for Theater by
Design. Operations should be the main source of cash for a healthy company.
This is the most significant factor for recommending Showcase Cinemas.
2. Showcase Cinema is investing more in long-term plant assets than Theater
by Design is. Showcase is laying a more solid foundation in revenue-
producing assets than Theater is.
3. Theater by Design's main source of cash is the sale of plant assets.
Sale of plant assets is not a normal and recurring kind of transaction, and
so it is not an indication of reliable future cash flows.
4. Showcase Cinema raised $30,000 of equity capital, which is good for the
overall financial stability of the company. Theaters by Design paid off
debt, which is also good for the financial stability of that company, so in
this regard, it is a positive for both companies.
Ethical Issue 14-1
Req. 1
"Cash flows from operating "Without "With "
"activities: "Reclassification "Reclassification "
" Net income………………….. " $ 60,000 "$60,000 "
" Increase in accounts " " "
" receivable…….…………... " (80,000) " — "
" Net cash (used for) provided " "
" by operating activities…. "$(20,000) "$60,000 "
" " " "
"Moss looks better with the reclassification because net cash "
"flow from operations is positive. " "
Req. 2
The reclassification would be ethical if Moss expects to collect the
receivables beyond the current operating cycle, or one year if longer.
Reclassification would be unethical if Moss expects to collect within the
current period. In that case, the reclassification would appear to be
designed to create a false picture of cash flow from operations.
Fraud Case 14-1
Solution:
1. Frank's company was not hurt by the immediate effects of this action.
However, if this kind of fraud becomes detected, there may be
criminal penalties or lawsuits.
2. Frank could be convicted of criminal fraud, if detected. But even if
not detected, Bo could use this situation to pressure Frank in future
circumstances, even to the extreme of blackmail.
3. Controls over bidding procedures can be strengthened by separation of
duties. All bids should be sent to one person who logs them in by
date and time. That person should not be involved in the evaluation
or selection of winning bids.
Financial Statement Case 14-1
(40-50 min.) Financial Statement Case
Req. 1
Indirect method. The statement of cash flows begins with net income for the
year. Also, Amazon does not report collections from customers, payments to
suppliers, and so on, which are reported under the direct method.
Req. 2 (Amounts in millions)
Operations provided cash of $3,293 in 2009. This represented an improvement
over 2008, when operations provided cash of $1,697.
Req. 3
Amazon earned $902,000,000 in net income in 2009, up 40% from 2008. Net
cash flow in 2009 was $675,000,000, up 193% from 2008. Of that amount,
$3,293,000,000 was from operations, up from the previous year (this large
cash inflow from operations was offset by cash outflows for investing and
financing). Assets totaled $13,813,000,000, up 66% from 2008. Debt
increased 52% whereas Stockholders' Equity rose to $5,257,000,000, up over
66% from 2008. All major factors mentioned above are positive indicators
of financial performance (earnings and cash flow) and strong financial
position (balance sheet.)
Team Project 14-1
Student responses will vary depending on the companies they select.
Communication Activity
Student responses will vary.
Chapter 14 Appendix A
Preparing the Statement of Cash Flows by the Direct Method
Appendix A: Short Exercises
(15 min.) S 14A-1
Req. 1
"Jelly Bean Inc. "
"Statement of Cash Flows "
"Year Ended December 31, 2012 "
"Cash flows from operating activities: " " "
" Collections from customers "$ 621,000 " "
" Payments to suppliers and employees " (427,000) " "
" Net cash provided by operating activities " "$ 194,000 "
" " " "
"Cash flows from investing activities: " " "
" Acquisition of equipment "$(145,000) " "
" Net cash used for investing activities " "(145,000) "
" " " "
"Cash flows from financing activities: " " "
" Payment of cash dividends "$ (54,000) " "
" Net cash used for financing activities " " (54,000)"
"Net decrease in cash " "$ (5,000) "
"Cash balance, December 31, 2011 " "53,000 "
"Cash balance, December 31, 2012 " "$ 48,000 "
(5 min.) S 14A-2
Req. 1
"Happy Tots' Learning Center "
"Statement of Cash Flows - Partial "
"Year ended June 30, 2012 "
"Cash flows from operating activities: " " "
" Receipts: " " "
" Collections from customers "$190,000 " "
" Total cash receipts " "$190,000 "
" Payments: " " "
" To suppliers "$(117,000) " "
" To employees " (72,000) " "
" Total cash payments " "(189,000) "
" Net cash provided by operating activities " "$1,000 "
(15 min.) S 14A-3
Req. 1
"Happy Tots' Learning Center "
"Statement of Cash Flows "
"Year ended June 30, 2012 "
"Cash flows from operating activities: " " "
" Receipts: " " "
" Collections from customers "$190,000 " "
" Total cash receipts " "$190,000 "
" Payments: " " "
" To suppliers "(117,000) " "
" To employees " (72,000) " "
" Total cash payments " "(189,000) "
" Net cash provided by operating activities " " $ 1,000 "
" " " "
"Cash flows from investing activities: " " "
" Cash receipt from sale of land " $ 60,000 " "
" Acquisition of equipment " " "
" "(42,000) " "
" Net cash provided by investing activities " "18,000 "
" " " "
"Cash flows from financing activities: " " "
" Payment of note payable "$ (25,000) " "
" Cash receipt from issuance of stock " 18,000 " "
" Payment of dividends " (7,000)" "
" Net cash used for financing activities " " (14,000) "
"Net increase in cash " "$ 5,000 "
(15 min.) S 14A-4
Req. 1
a. Collections from customers = $133,000
"Sales " "Increase in Accounts "= "Collections from "
" " " " "customers "
"revenue " "receivable " " "
" " " " " "
"$143,000 "- "$10,000 ($59,000 "= "$133,000 "
" " "$49,000) " " "
"Accounts receivable "
"Beginning "49,000 " " "
"Sales "143,000 "Collections "133,000 "
"Ending "59,000 " " "
b. Payments for inventory = $69,000
"Cost of " "Decrease in " "Increase in " " "
" " "Inventory " "Accounts payable " " "
"goods " " " " "= "Payments for "
" " " " " " "inventory "
"sold " " " " " " "
" " " " " " " "
"$80,000 " "$6,000 " "$5,000 "= "$69,000 "
" "($84,000 $78,000) "($43,000 $38,000) " " "
(10-15 min.) E 14A-5
Req. 1
"O+ "a."Collection of accounts " " F –"i. "Purchase of treasury stock "
" " "receivable " " " " "
" " " " " " " "
" F+ "b."Issuance of note payable " "F + "j. "Issuance of common stock "
" " "to borrow cash " " " "for cash "
" " " " " " " "
" N "c."Depreciation " " O –"k. "Payment of account "
" " " " " " "payable "
" " " " " " " "
" F+ "d."Issuance of preferred " "NIF "l. "Acquisition of building by "
" " "stock for cash " " " "issuance of common stock "
" " " " " I " " "
" " " " "– " " "
" F– "e."Payment of cash " " "m. "Purchase of equipment "
" " "dividend " " " " "
" " " " " " " "
" I +"f."Sale of land " " O –"n. "Payment of wages to "
" " " " " " "employees "
" " " " " " " "
" NIF"g."Acquisition of equipment " " O +"o. "Collection of cash interest "
" " "by issuing note payable " " " " "
" " " " " " " "
" F– "h."Payment of note payable " " I "p. "Sale of building "
" " " " "+ " " "
(5-10 min.) E 14A-6
Req. 1
"a. "Investing activities " "g. "Operating activities "
" " " " " "
"b. "Investing activities " "h. "Financing activities "
" " " " " "
"c. "Financing activities " "i. "Financing activities "
" " " " " "
"d. "Noncash investing and " "j. "Operating activities "
" "financing activities " " " "
" " " " " "
"e. "Operating activities " "k. "Investing activities "
" " " " " "
"f. "Financing activities " "l. "Operating activities "
" " " " " "
(10-15 min.) E 14A-7
Req. 1
"Fuzzy Dice Auto Parts "
"Statement of Cash Flows - Partial "
"Year Ended 2012 "
"Cash flows from operating activities: " " "
" Receipts: " " "
" Collections from customers "$117,000 " "
" Collection of dividend revenue " 6,000 " "
" Total cash receipts " "$123,000 "
" Payments: " " "
" To suppliers "$(54,000) " "
" To employees "(31,000) " "
" For interest "(16,000) " "
" For income tax " (11,000) " "
" Total cash payments " " (112,000) "
" Net cash provided by operating activities " "$ 11,000 "
(5-10 min.) E 14A-8
Req. 1
Accounts receivable: Report the cash collections as an operating cash
flow in the amount of $38,000.
Land: Report the acquisition as an investing cash flow in the amount of
$14,000.
Long-term notes payable: Report both the issuance of $84,000 and the
payment of long-term notes payable at $73,000 as a financing cash flow.
(20-30 min.) E 14A-9
Req. 1
"Best Learning Center "
"Statement of Cash Flows "
"Year Ended June 30, 2012 "
"Cash flows from operating activities: " " "
" Receipts: " " "
" Collections from customers " " "
" ($231,000 + $15,500) "$246,500 " "
" Collection of dividend revenue " " "
" "8,000 " "
" Total cash receipts " "$254,500 "
" Payments: " " "
" To suppliers ($102,000 + $13,000) "$(115,000) " "
" To employees ($48,000 + $1,000) "(49,000) " "
" For income tax "(11,000) " "
" For interest " " "
" "(3,000) " "
" Total cash payments " " (178,000)"
" Net cash provided by operating activities " " $ 76,500 "
" " " "
"Cash flows from investing activities: " " "
" Acquisition of plant assets "$(102,000) " "
" Cash receipt from sale of land " 24,000 " "
" Net cash used for investing activities " "(78,000) "
" " " "
"Cash flows from financing activities: " " "
" Cash receipt from issuance of common stock "$ 32,000 " "
" Payment of note payable "(17,000) " "
" Payments of dividends " " "
" "(10,500) " "
" Net cash provided by financing activities " " 4,500"
"Net increase in cash " "$ 3,000 "
"Cash balance, June 30, 2011 " " "
" " "25,000 "
"Cash balance, June 30, 2012 " " $ 28,000"
(10-15 min.) E 14A-10
Req. 1
a.
"Accounts receivable "
"Beginning "20,000 " " "
"Sales "62,000 "Collections "X "
"Ending "24,000 " " "
$20,000 + 62,000 – X = $24,000
X= $58,000
b. Payments for inventory = $76,000
"Cost of " "Increase in " "Decrease in " " "
" " "Inventory " "Accounts payable " " "
"goods "+ " "+ " "= "Payments for "
" " " " " " "inventory "
"sold " " " " " " "
" " " " " " " "
"$76,000 "+ "$1,000 "+ "$5,000 "= "$82,000 "
" "($28,000 $27,000) "($9,000 $14,000) " " "
(20-30 min.) E 14A-11
a.
"Accounts receivable "
"Beginning "619 " " "
"Sales "25,118 "Collections "X "
"Ending "799 " " "
$619 + 25,118 – X = $799
Collections from customers: X= $24,938
b. Payments for inventory = $18,558
"Cost of " "Increase in " "Increase in " " "
" " "Inventory " "Accounts payable " " "
"sales "+ " "- " "= "Payments for "
" " " " " " "inventory "
" " " " " " " "
" " " " " " " "
"$18,088 "+ "$650 "- "$180 "= "$18,558 "
" "($3,489 - $2,839) "($1,544 $1,364) " " "
c.
"Accrued liabilities "
" " "Beginning "853 "
"Payments "X "Sales "4,411 "
" " "Ending "941 "
$853 + 4,411 – X = $941
Payments of other operating expenses: X= $4,323
d.
"Property and equipment, net "
"Beginning "3,436 " " "
"Acquisitions "X "Depreciation "273 "
"Ending "4,346 " " "
$3,436 + X – 273 = $4,346
Acquisitions of property and equipment: X= $1,183
e.
"Long-term liabilities "
" " "Beginning "468 "
"Note payments "0 "New notes issued "X "
" " "Ending "479 "
$468 + X – 0 = $479
Cash receipt from issuance of long-term liabilities: X= $11
f.
"Common stock "
" " "Beginning "443 "
"Retirements "0 "Issuance "X "
" " "Ending "671 "
$443 + X – 0 = $671
Cash receipt from issuance of common stock: X= $228
g.
"Retained earnings "
" " "Beginning "3,779 "
"Dividends "X "Net income "1,810 "
" " "Ending "5,014 "
$3,779 + 1,810 - X = $5,014
Payment of dividends: X= $575
Appendix A: Problems A
(35-45 min.) P 14A-12A
"MPG, Inc. "
"Statement of Cash Flows "
"Year Ended April 30, 2012 "
"Cash flows from operating activities: " " "
" Receipts: " " "
" Collections from customers "$ 605,500 " "
" Collection of dividend revenue " " "
" "4,800 " "
" Total cash receipts " "$ 610,300 "
" Payments: " " "
" To suppliers "$(374,300) " "
" To employees "(88,000) " "
" For interest "(12,000) " "
" For income tax " " "
" "(37,000) " "
" Total cash payments " " (511,300)"
" Net cash provided by operating activities" " $99,000 "
" " " "
"Cash flows from investing activities: " " "
" Acquisition of plant assets "$(59,400) " "
" Cash receipt from sale of plant assets " " "
" "24,500 " "
" Net cash used for investing activities " "(34,900) "
" " " "
"Cash flows from financing activities: " " "
" Cash receipt from issuance of notes payable "$ 46,100 " "
" Cash receipt from issuance of stock " " "
" "64,900 " "
" Payment of notes payable "(44,000) " "
" Payment of dividends " " "
" "(49,400) " "
" Net cash provided by financing activities" " 17,600"
"Net increase in cash " "$ 81,700 "
"Cash balance, April 30, 2011 " " 40,000"
"Cash balance, April 30, 2012 " "$ 121,700 "
(40 min.) P 14A-13A
Req. 1
" "Classic Reserve Rare Coins "
" "Income Statement "
" "Year Ended December 31, 2012 "
"Revenue: " " "
" Sales revenue (2,100 × $350) " "$735,000 "
"Expenses: " " "
" Cost of goods sold " $260,000" "
" Salary expense " 94,000 " "
" Income tax expense " 23,000 " "
" Depreciation expense* " 10,800 " "
" Rent expense " 10,000 " "
" Total expenses " "397,800 "
"Net income " " $337,200 "
*($54,000 x 1/5 x 12/12) = $10,800
(continued) P 14A-13A
Req. 2
"Classic Reserve Rare Coins "
"Balance Sheet "
"December 31, 2012 "
"Assets "Liabilities "
"Current assets: " "Current liabilities: " "
" Cash "$362,000* " Accounts payable " "
" Accounts receivable " " ($243,000 $163,000) "$80,000 "
" (2,100 × $350 × .20) "147,000 " Salary payable " "
" " " "4,000 "
" Inventory " " Total current "$84,000 "
" "253,000** "liabilities " "
" Total current assets "$762,000 " " "
" " "Stockholders' Equity "
"Property, plant, and equipment:" "Common stock "$425,000"
" Store fixtures "$54,000 " "Retained earnings " "
" Less: Accumulated " " " ($337,200 $41,000) "296,200 "
" depreciation"10,800 " 43,200" Total stockholders' " "
" " " "equity "721,200 "
" " "Total liabilities and " "
"Total assets " $805,200" stockholders' equity "$805,200"
_______
*$425,000 $54,000 $270,000 $10,000 $163,000 + $588,000 $90,000
$23,000
$41,000 = $362,000
**$270,000 + $243,000 - $260,000 = $253,000
(continued) P 14A-13A
Req. 3
"Classic American Reserve Rare Coins "
"Statement of Cash Flows "
"Year Ended December 31, 2012 "
"Cash flows from operating activities: " " "
" Receipts: " " "
" Collections from customers (2,100 × $350 × "$ 588,000 " "
".80) " " "
" Total cash receipts " "$588,000 "
" Payments: " " "
" To suppliers ($270,000 + $163,000 + $10,000)"$(443,000)" "
" To employees ($94,000 – $4,000) "(90,000) " "
" For income tax " " "
" "(23,000) " "
" Total cash payments " " (556,000)"
" Net cash provided by operating activities " "$32,000 "
" " " "
"Cash flows from investing activities: " " "
" Acquisition of store fixtures " " "
" "$(54,000) " "
" Net cash used for investing activities " "(54,000) "
" " " "
"Cash flows from financing activities: " " "
" Cash receipt from issuance of common stock " $425,000" "
" Payment of dividends " (41,000) " "
" Net cash provided by financing activities " " 384,000"
"Net increase in cash " "$ 362,000 "
"Cash balance, January 1, 2012 " " "
" " "0 "
"Cash balance, December 31, 2012 " "$ 362,000 "
(30-40 min.) P 14A-14A
Req. 1
"Rolling Hills, Inc. "
"Statement of Cash Flows "
"Year Ended December 31, 2012 "
"Cash flows from operating activities: " " "
" Receipts: " " "
" Collections from customers ($436,000 "$ 434,800 " "
"$1,200) " " "
" Interest received " 8,000 " "
" Total cash receipts " "$ 442,800 "
" Payments: " " "
" To suppliers for inventories "a)$(185,400)" "
" To suppliers for operating expenses "b) (12,300) " "
" To employees "(78,400) " "
" For interest "(21,900) " "
" For income tax " (19,100)" "
" Total cash payments " " (317,100)"
" Net cash provided by operating activities " "$125,700 "
" " " "
"Cash flows from investing activities: " " "
" Acquisition of equipment "c)$ " "
" "(28,600) " "
" Net cash used for investing activities " "(28,600) "
" " " "
"Cash flows from financing activities: " " "
" Payment of dividends ($6,600 + $97,800 $40,500)"$ (63,900) " "
" Payment of notes payable ($23,000 + $23,600) "(46,600) " "
" Cash receipt from issuance of common stock " 23,900" "
" Net cash used for financing activities " " "
" " "(86,600) "
"Net increase in cash and cash equivalents " "$ 10,500"
"Cash and cash equivalents balance, December 31, 2011 " " "
" " "15,900 "
"Cash and cash equivalents balance, December 31, 2012 " "$ 26,400"
" " " "
"Noncash investing and financing activities: " " "
" Acquisition of land by issuing long-term note " "$23,600 "
"payable " " "
" Total noncash investing and financing activities " "$23,600 "
a)($202,200 $11,900 $4,900) = $(185,400)
b)($10,200 + $2,100) = $(12,300)
c)$89,700 depreciation expense of $14,400 = $75,300; $103,900 $75,300 =
$28,600
(continued) P 14A-14A
Req. 2
C. This problem will help evaluate an investment because I will learn how
operating activities, investing activities, and financing activities
generate cash receipts and cash payments, and I will learn how companies
prepare the statement of cash flows.
(45-60 min.) P 14A-15A
"E-Mobile, Inc. "
"Statement of Cash Flows "
"Year Ended December 31, 2012 "
"Cash flows from operating activities: " " "
" Receipts: " " "
" Collections from customers "$ 308,400 " "
" Receipts of Interest revenue " 16,100 " "
" Total cash receipts " "$ 324,500 "
" Payments: " " "
" To suppliers ($101,600 + $46,800) "$(148,400) " "
" To employees "(64,500) " "
" For interest "(21,700) " "
" For income tax " (7,500) " "
" Total cash payments " " (242,100) "
" Net cash provided by operating " "$ 82,400 "
"activities " " "
" " " "
"Cash flows from investing activities: " " "
" Acquisition of equipment "$ (49,500) " "
" Net cash used for investing activities " "(49,500) "
" " " "
"Cash flows from financing activities: " " "
" Cash receipt from issuance of common stock "$ 60,200 " "
" Payment of note payable "(79,000) " "
" Payment of dividends " (1,400) " "
" Net cash used for financing activities " " (20,200)"
"Net increase in cash " "$ 12,700 "
"Cash balance, December 31, 2011 " " 87,200 "
"Cash balance, December 31, 2012 " "$ 99,900 "
Appendix A: Problems B
(35-45 min.) P 14A-16B
"KSG, Inc. "
"Statement of Cash Flows "
"Year Ended June 30, 2012 "
"Cash flows from operating activities: " " "
" Receipts: " " "
" Collections from customers "$ 607,000 " "
" Collection of dividend revenue " " "
" "4,300 " "
" Total cash receipts " "$ 611,300 "
" Payments: " " "
" To suppliers "$(371,300) " "
" To employees "(92,000) " "
" For interest "(13,500) " "
" For income tax " " "
" "(38,000) " "
" Total cash payments " " (514,800)"
" Net cash provided by operating activities" "$ 96,500 "
" " " "
"Cash flows from investing activities: " " "
" Acquisition of plant assets "$(57,400) " "
" Cash receipt from sale of plant assets " " "
" "23,500 " "
" Net cash used for investing activities " "(33,900) "
" " " "
"Cash flows from financing activities: " " "
" Cash receipt from issuance of notes payable "$ 48,100 " "
" Cash receipt from issuance of stock " " "
" "65,900 " "
" Payment of notes payable "(45,000) " "
" Payment of dividends " " "
" "(45,400) " "
" Net cash provided by financing activities" " 23,600"
"Net increase in cash " "$ 86,200 "
"Cash balance, June 30, 2011 " " 39,300"
"Cash balance, June 30, 2012 " "$ 125,500 "
(40 min.) P 14A-17B
Req. 1
"National Reserve Rare Coins "
"Income Statement "
"Year Ended December 31, 2012 "
"Revenue: " " "
" Sales revenue (2,500 × $400) " "$1,000,000 "
"Expenses: " " "
" Cost of goods sold " $320,000 " "
" Salary expense " 80,000 " "
" Income tax expense " 20,000 " "
" Rent expense " 17,000 " "
" Depreciation expense* " 11,000" "
" Total expenses " "448,000 "
"Net income " " $552,000 "
*($55,000 x 1/5 x 12/12) = $11,000
(continued) P 14A-17B
Req. 2
"National Reserve Rare Coins "
"Balance Sheet "
"December 31, 2012 "
"Assets "Liabilities "
"Current assets: " "Current liabilities: " "
" Cash "$683,000* " Accounts payable " "
" Accounts receivable " " ($244,000 $164,000) "$80,000 "
" (2,500 × $400 × .15) " " Salary payable " "
" "150,000 " "3,000 "
" Inventory " " Total current "$83,000 "
" "244,000** "liabilities " "
" Total current assets " " " "
" "$1,077,000" " "
" " "Stockholders' Equity "
"Property, plant, and " "Common stock "$525,000 "
"equipment: " " " "
" Store fixtures "$55,000 " "Retained earnings " "
" Less : Accumulated " " " ($552,000 $39,000) " 513,000"
" " 11,000 " " "1,038,000"
"depreciation " "44,000 " " "
" " "Total liabilities and " "
"Total assets "$1,121,000" stockholders' equity "$1,121,00"
" " " "0 "
_______
*$525,000 $55,000 $320,000 $17,000 $164,000 + $850,000 $77,000
$20,000
$39,000 = $683,000.
**$320,000 + $244,000 – $320,000 = $244,000
(continued) P 14A-17B
Req. 3
"National Reserve Rare Coins "
"Statement of Cash Flows "
"Year Ended December 31, 2012 "
"Cash flows from operating activities: " " "
" Receipts: " " "
" Collections from customers (2,500 x $400 x "$850,000 " "
".85) " " "
"Total cash receipts " "$850,000 "
" Payments: " " "
" To suppliers ($320,000 + $164,000 + $17,000)"$(501,000)" "
" To employees ($80,000 – $3,000) "(77,000) " "
" For income tax " " "
" "(20,000) " "
" Total cash payments " " (598,000)"
" Net cash provided by operating activities " "$252,000 "
" " " "
"Cash flows from investing activities: " " "
" Acquisition of store fixtures " " "
" "(55,000) " "
" Net cash used for investing activities " "(55,000) "
" " " "
"Cash flows from financing activities: " " "
" Cash receipt from issuance of common stock " $525,000" "
" Payment of dividends " " "
" "(39,000) " "
" Net cash provided by financing activities " " 486,000"
"Net increase in cash " "$ 683,000 "
"Cash balance, January 1, 2012 " " "
" " "0 "
"Cash balance, December 31, 2012 " "$ 683,000 "
(30-40 min.) P 14A-18B
Req. 1
"All Wired, Inc. "
"Statement of Cash Flows "
"Year Ended December 31, 2012 "
"Cash flows from operating activities: " " "
" Receipts: " " "
" Collections from customers ($438,000 "$ 436,800 " "
"$1,200) " " "
" Interest received " 8,500 " "
" Total cash receipts " "$445,300 "
" Payments: " " "
" To suppliers for inventories "a)$(192,100)" "
" To suppliers for operating expenses "b) (11,700) " "
" To employees "(72,400) " "
" For interest "(21,500) " "
" For income taxes " (19,400)" "
" Total cash payments " " (317,100)"
" Net cash provided by operating activities " "$128,200 "
" " " "
"Cash flows from investing activities: " " "
" Acquisition of equipment " " "
" "c)$(26,700) " "
" Net cash used for investing activities " "(26,700) "
" " " "
"Cash flows from financing activities: " " "
" Payment of dividends ($6,100 + $99,500 "$ (63,800) " "
"$41,800) " " "
" Payment of notes payable ($26,000 + $24,500) "(50,500) " "
" Cash receipts from issuance of common stock " 23,900" "
" Net cash used for financing activities " " "
" " "(90,400) "
"Net increase in cash and cash equivalents " "$ 11,100"
"Cash and cash equivalents balance, December 31, 2011 " " "
" " "15,600 "
"Cash and cash equivalents balance, December 31, 2012 " "$ 26,700"
" " " "
"Noncash investing and financing activities: " " "
" Acquisition of land by using long-term note " "$24,500 "
"payable " " "
" Total noncash investing and financing activities " "$24,500 "
a) $209,200 $12,000 $5,100 = $192,100
b) $10,000 + $1,700 = $11,700
c) $90,700 depreciation expense of $14,500 = $76,200; $102,900 $76,200
= $(26,700)
(continued) P 14A-18B
Req. 2
C. This problem will help evaluate an investment because I will learn how
operating activities, investing activities, and financing activities
generate cash receipts and cash payments, and I will learn how companies
prepare the statement of cash flows.
(45-60 min.) P 14A-19B
Req. 1
"I-M-Mobile, Inc. "
"Statement of Cash Flows "
"Year Ended December 31, 2012 "
"Cash flows from operating activities: " " "
" Receipts: " " "
" Collections from customers "$ 308,700 " "
" Receipts of Interest revenue " 15,600 " "
" Total cash receipts " "$ 324,300 "
" Payments: " " "
" To suppliers ($101,200 + $46,200) "$(147,400) " "
" To employees "(64,500) " "
" For interest "(21,400) " "
" For income tax " (8,000) " "
" Total cash payments " " (241,300) "
" Net cash provided by operating " " $83,000 "
"activities " " "
" " " "
"Cash flows from investing activities: " " "
" Acquisition of equipment "$ (56,500) " "
" Net cash used for investing activities " "(56,500) "
" " " "
"Cash flows from financing activities: " " "
" Cash receipt from issuance of common stock "$ 60,700 " "
" Payment of note payable "(78,000) " "
" Payment of dividends " (1,200) " "
" Net cash used for financing activities " " (18,500)"
"Net increase in cash " "$ 8,000 "
"Cash balance, December 31, 2011 " " 87,900 "
"Cash balance, December 31, 2012 " "$ 95,900 "
Chapter 14 Appendix B
Appendix B Problems
(45-60 min.) P 14B-1A
Req. 1
"Appleton Group, Inc. "
"Spreadsheet for Statement of Cash Flows (Indirect Method) "
"Year Ended December 31, 2012 "
"PANEL A – BALACE SHEET "BALANCE "TRANSACTION ANALYSIS "BALANCE "
" "12/31/2011 " "12/31/2012 "
" " "DEBIT "CREDIT " "
"Cash and cash equivalents " $15,300 " "(l) $ 6,000"$ 9,300 "
"Accounts receivable " 43,200 " "(c) 1,200"42,000 "
"Inventories " 93,700 "(d) $ 3,400" "97,100 "
"Land " 16,000 "(g) 25,100" "41,100 "
"Equipment, net " 94,300 "(h) 22,400"(b) 15,500 "101,200 "
"Total assets "$262,500 " " "$290,700 "
" " " " " "
"Accounts payable " $26,600 "(e) " "$25,600 "
" " "1,000 " " "
"Accrued liabilities " 22,800 " "(f) "24,000 "
" " " "1,200 " "
"Notes payable " 62,000 "(j) " "46,000 "
" " "16,000 " " "
"Common stock " 131,400 " "(k) 8,900"140,300 "
"Retained earnings " 19,700 "(i) "(a) 63,200 " 54,800 "
" " "28,100 " " "
"Total liabilities and stockholders' equity"$262,500 " $96,000" $96,000 "$290,700 "
(continued) P 14B-1A
Req. 1
"Alden Group, Inc. "
"Spreadsheet for Statement of Cash Flows (Indirect Method) "
"Year Ended December 31, 2008 "
"PANEL B – STATEMENT OF CASH FLOWS "BALANCE "TRANSACTION ANALYSIS "BALANCE "
" "12/31/2011 " "12/31/2012 "
" " "DEBIT "CREDIT " "
"Cash flows from operating activities: " " " " "
" Net income " "(a)$63,200" " "
" Adjustments to reconcile net income to " " " " "
" cash flow from operations: " " " " "
" Depreciation " "(b) 15,500" " "
" Decrease in accounts receivable " "(c) " " "
" " "1,200 " " "
" Increase in inventory " " "(d)$ 3,400" "
" Decrease in accounts payable " " "(e) " "
" " " "1,000 " "
" Increase in accrued liabilities. " "(f) " " "
" " "1,200 " " "
" Net cash provided by operating " " " " "
"activities " " " " "
"Cash flows from investing activities: " " " " "
" Acquisition of land " " "(g) 25,100" "
" Acquisition of equipment " " "(h) 22,400" "
" Net cash used for investing " " " " "
"activities " " " " "
"Cash flows from financing activities: " " " " "
" Payment of dividends " " "(i) " "
" " " "28,100 " "
" Payment of notes payable " " "(j) " "
" " " "16,000 " "
" Cash receipt from issuance of common " "(k) 8,900"_______ " "
"stock " " " " "
" Net cash used for financing " " " " "
"activities " " " " "
" " " $90,000" " "
" " " "$96,000 " "
"Net decrease in cash and cash equivalents " "(l) " " "
" " "6,000 " " "
" " " $96,000" " "
" " " "$96,000 " "
(45-60 min.) P 14B-2A
Req. 1
"Rolling Hills, Inc. "
"Spreadsheet for Statement of Cash Flows (Indirect Method) "
"Year Ended December 31, 2012 "
"PANEL A – BALANCE SHEET "BALANCE "TRANSACTION ANALYSIS "BALANCE "
" "12/31/2011 " "12/31/2012 "
" " "DEBIT "CREDIT " "
"Cash and cash equivalents " $15,900 "(l) $10,500 " "$26,400 "
"Accounts receivable " 25,500 "(c) 1,200" "26,700 "
"Inventories " 91,700 " "(d)$11,900 "79,800 "
"Land " 11,000 "(g) 23,600 " "34,600 "
"Equipment, net " 89,700 "(h) 28,600 "(b) 14,400" 103,900 "
"Total assets " $233,800 " " "$271,400 "
" " " " " "
"Accounts payable " $30,600 " "(e) "$35,500 "
" " " "4,900 " "
"Accrued liabilities " 30,700 "(f) " "28,600 "
" " "2,100 " " "
"Notes payable " 101,000 "(j) 23,000" "78,000 "
"Common stock " 64,900 " "(k) 23,900"88,800 "
"Retained earnings " 6,600 "(i) 63,900"(a) 97,800" 40,500 "
"Total liabilities and stockholders' equity " $233,800 " $152,900 " $152,900 "$271,400 "
(continued) P 14B-2A
Req. 1
"Rolling Hills, Inc. "
"Spreadsheet for Statement of Cash Flows (Indirect Method) "
"Year Ended December 31, 2012 "
"PANEL B – STATEMENT OF CASH FLOWS "BALANCE "TRANSACTION ANALYSIS "BALANCE "
" "12/31/2011 " "12/31/2012 "
" " "DEBIT "CREDIT " "
"Cash flows from operating activities: " " " " "
" Net income " "(a)$97,800 " " "
" Adjustments to reconcile net income to " " " " "
" cash flow from operations: " " " " "
" Depreciation " "(b) 14,400" " "
" Increase in accounts receivable " " "(c)$ 1,200 " "
" Decrease in inventory " "(d) 11,900" " "
" Increase in accounts payable " "(e) " " "
" " "4,900 " " "
" Decrease in accrued liabilities " " "(f) 2,100 " "
" Net cash provided by operating " " " " "
"activities " " " " "
"Cash flows from investing activities: " " " " "
" Acquisition of land " " "(g) 23,600 " "
" Acquisition of equipment " " "(h) 28,600 " "
" Net cash used for investing " " " " "
"activities " " " " "
"Cash flows from financing activities: " " " " "
" Payment of dividends " " "(i) 63,900 " "
" Payment of note payable " " "(j) 23,000 " "
" Cash receipt from issuance of common " "(k) "________ " "
"stock " "23,900 " " "
" Net cash used for financing " " " " "
"activities " " " " "
" " "$152,900 "$142,400 " "
"Net increase in cash and cash equivalents " "________ "(l) 10,500 " "
" " " $152,900"$152,900 " "
(45-60 min.) P 14B-3B
Req. 1
"Attleboro Group, Inc. "
"Spreadsheet for Statement of Cash Flows (Indirect Method) "
"Year Ended December 31, 2012 "
"PANEL A – BALANCE SHEET "BALANCE "TRANSACTION ANALYSIS "BALANCE "
" "12/31/2011 " "12/31/2012 "
" " "DEBIT "CREDIT " "
"Cash and cash equivalents " $15,200 " "(l) $3,400 "$11,800 "
"Accounts receivable " 43,900" "(c) 1,700 "42,200 "
"Inventories " 93,500"(d) $ 3,300 " "96,800 "
"Land " 14,000"(g) 25,800 " "39,800 "
"Equipment, net " 93,800"(h) 22,400 "(b) 15,100 " 101,100 "
"Total assets " $260,400 " " "$291,700 "
" " " " " "
"Accounts payable " "(e) 1,200" "$25,100 "
" "$26,300 " " " "
"Accrued liabilities " 22,500" "(f) 1,700"24,200 "
"Notes payable " 64,000"(j) 13,000" "51,000 "
"Common stock " 128,300 " "(k) 8,300 "136,600 "
"Retained earnings " 19,300"(i) 28,900"(a) 64,400 " 54,800 "
" Total liabilities and stockholders' equity" $260,400 " $94,600 " $94,600 "$291,700 "
(continued) P 14B-3B
Req. 1
"Attleboro Group, Inc. "
"Spreadsheet for Statement of Cash Flows (Indirect Method) "
"Year Ended December 31, 2012 "
"PANEL B – STATEMENT OF CASH FLOWS "BALANCE "TRANSACTION ANALYSIS "BALANCE "
" "12/31/2011 " "12/31/2012 "
" " "DEBIT "CREDIT " "
"Cash flows from " " " " "
"operating activities: " " " " "
" Net income " "(a)$64,400 " " "
" Adjustments to reconcile net income to " " " " "
" cash flow from operations: " " " " "
" Depreciation " "(b) 15,100 " " "
" Decrease in accounts receivable " "(c) 1,700" " "
" Increase in inventory " " "(d)$ 3,300 " "
" Decrease in accounts payable " " "(e) 1,200 " "
" Increase in accrued liabilities " "(f) " " "
" " "1,700 " " "
" Net cash provided by operating " " " " "
"activities " " " " "
"Cash flows from investing activities: " " " " "
" Acquisition of land " " "(g) 25,800 " "
" Acquisition of equipment " " "(h) 22,400 " "
" Net cash used for investing " " " " "
"activities " " " " "
"Cash flows from financing activities: " " " " "
" Payment of dividends " " "(i) 28,900 " "
" Payment of note payable " " "(j) 13,000 " "
" Cash receipt from issuance of common " "(k) 8,300"________ " "
"stock " " " " "
" Net cash used for financing " " " " "
"activities " " " " "
" " " $91,200 " $94,600 " "
"Net decrease in cash and cash equivalents " "(l) "________ " "
" " "3,400 " " "
" " " $94,600 " $94,600 " "
(45-60 min.) P 14B-4B
Req. 1
"All Wired, Inc. "
"Spreadsheet for Statement of Cash Flows (Indirect Method) "
"Year Ended December 31, 2012 "
"PANEL A – BALANCE SHEET "BALANCE "TRANSACTION ANALYSIS "BALANCE "
" "12/31/2011 " "12/31/2012 "
" " "DEBIT "CREDIT " "
"Cash and cash equivalents " $15,600"(l) $11,100 " "$26,700 "
"Accounts receivable " "(c) 1,200" "26,500 "
" "25,300 " " " "
"Inventories " " "(d)$12,000 "79,900 "
" "91,900 " " " "
"Land " "(g) 24,700 " "35,500 "
" "11,000 " " " "
"Equipment, net " "(h) 26,700 "(b) 14,500 "102,900 "
" "90,700 " " " "
"Total assets " $234,500 " " "$271,500 "
" " " " " "
"Accounts payable " " "(e) 5,100 "$35,600 "
" "$30,500 " " " "
"Accrued liabilities " "(f) 1,700" "28,900 "
" "30,600 " " " "
"Notes payable " 103,000"(j) 26,000 " "77,000 "
"Common stock " " "(k) 23,900 "88,200 "
" "64,300 " " " "
"Retained earnings " "(i) 63,800 "(a) 99,500 " 41,800 "
" "6,100 " " " "
"Total liabilities and stockholders' equity" $234,500 " $155,000 " $155,000 "$271,500 "
(continued) P 14B-4B
Req. 1
"All Wired, Inc. "
"Spreadsheet for Statement of Cash Flows (Indirect Method) "
"Year Ended December 31, 2012 "
"PANEL B – STATEMENT OF CASH FLOWS "BALANCE "TRANSACTION ANALYSIS "BALANCE "
" "12/31/2011 " "12/31/2012 "
" " "DEBIT "CREDIT " "
"Cash flows from operating activities: " " " " "
" Net income " "(a)$99,500 " " "
" Adjustments to reconcile net income to " " " " "
" cash flow from operations: " " " " "
" Depreciation " "(b) 14,500 " " "
" Increase in accounts receivable " " "(c)$1,200 " "
" Decrease in inventories " "(d) 12,000 " " "
" Increase in accounts payable " "(e) 5,100" " "
" Decrease in accrued liabilities " " "(f) 1,700 " "
" Net cash provided by operating" " " " "
"activities " " " " "
"Cash flows from investing activities: " " " " "
" Acquisition of land " " "(g 24,500 " "
" Acquisition of equipment " " "(h)26,700 " "
" Net cash used for investing " " " " "
"activities " " " " "
"Cash flows from financing activities: " " " " "
" Payment of dividends " " "(i) 63,800 " "
" Payment of note payable " " "(j) 26,000 " "
" Cash receipt from issuance of common " "(k)23,900 "________ " "
"stock " " " " "
" Net cash used for financing " " " " "
"activities " " " " "
" " "$155,000 "$143,900 " "
"Net increase in cash and cash equivalents " "________ "(l)11,100 " "
" " "$155,000 "$155,000 " "