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Chapter 14: 16E (page 732)

Classifying cash flow items Consider the following transactions:

  1. Purchased equipment for \(130,000 cash.
  2. Issued \)14 par preferred stock for cash.
  3. Cash received from sales to customers of \(35,000.
  4. Cash paid to vendors, \)17,000.
  5. Sold building for \(19,000 gain for cash.
  6. Purchased treasury stock for \)28,000.
  7. Retired a notes payable with 1,250 shares of the company鈥檚 common stock.

Identify the category of the statement of cash flows in which each transaction would be reported.

Short Answer

Expert verified
  1. Investing
  2. Financing
  3. Operating
  4. Operating
  5. Investing
  6. Investing

Non-cash

Step by step solution

01

Cash flow from operating activities

Cash Flow From Operating Activities

Amount($)

Cash received from sales to customers of

35,000

Cash paid to vendors

(17,000)

Cash flow provided by operating activities

18,000

02

Cash flow from investing activities

Cash Flow From Investing Activities

Amount($)

Purchased equipment for $130,000 cash.

(35,000)

Sold building for $19,000 gain for cash.

19,000

Purchased treasury stock

(28,000).

Cash used by investing activities

44,000

03

Cash flow from financing activities

Cash Flow From Financing Activities

Amount($)

Issued $14 par preferred stock for cash.

14

Net cash provided by financing activities

14

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Most popular questions from this chapter

Using a spreadsheet to prepare the statement of cash flows鈥� indirect method The 2018 comparative balance sheet and income statement of Attleboro Group, Inc. follow. Attleboro disposed of a plant asset at book value in 2018.

Prepare the spreadsheet for the 2018 statement of cash flows. Format cash flows from operating activities by the indirect method. A plant asset was disposed of for \(0. The cost and accumulated depreciation of the disposed asset was \)13,600. There were no sales of land, no retirement of common stock, and no treasury stock transactions. Assume plant asset and land acquisitions were for cash.

Question: Muench, Inc.鈥檚 accountant has partially completed the spreadsheet for the statement of cash flows. Fill in the remaining missing information.

The comparative balance sheet of Jackson Educational Supply at December 31, 2018, reported the following:


20182017
Current

Assets:
Cash\( 87,700
\) 23,500
Accounts Receivable15,30022,000
Merchandise Inventory
62,600
60,400
Current

Liabilities:
Accounts Payable
28,100
26,100
Accrued Liabilities
10,600
11,300

Jackson鈥檚 transactions during 2018 included the following:

Payment of cash dividends \( 16,200

Depreciation expense \) 16,700

Purchase of equipment with cash 54,700

Purchase of building with cash 98,000

Issuance of long-term notes payable to borrow cash 48,000

Net income 57,600

Issuance of common stock for cash 105,000

Requirements

  1. Prepare the statement of cash flows of Jackson Educational Supply for the year ended December 31, 2018. Use the indirect method to report cash flows from operating activities.
  2. Evaluate Jackson鈥檚 cash flows for the year. Mention all three categories of cash flows, and give the reason for your evaluation.
  3. If Jackson plans similar activity for 2019, what is its expected free cash flow?

Why might a spreadsheet be helpful when completing the statement of cash flows?

Preparing operating activities using the direct method Amy鈥檚 Learning Center has assembled the following data for the year ended June 30, 2018:

Payments to suppliers $ 115,000

Cash payment for purchase of equipment 39,000

Payments to employees 66,000

Payment of notes payable 34,000

Payment of dividends 7,500

Cash receipt from issuance of stock 22,000

Collections from customers 188,000

Cash receipt from sale of land 58,000

Cash balance, June 30, 2017 41,000 Prepare the operating activities section of the business鈥檚 statement of cash flows for the year ended June 30, 2018, using the direct method.
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