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Chapter 14: Q14-13RQ (page 769)
Question: What should the net change in cash section of the statement of cash flows always reconcile with?
Answer
The net change in cash section of the statement of cash flows always reconcile with the closing balance of the cash in the balance sheet.
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Preparing the direct method statement of cash flows Use the data in Short Exercise S14A-12 and your results. Prepare the business鈥檚 complete statement of cash flows for the year ended June 30, 2018, using the direct method for operating activities.
Preparing the statement of cash flows鈥攊ndirect method with non-cash transactions the 2018 income statement and comparative balance sheet of Rolling Hills, Inc. follow:
Additionally, Rolling Hills purchased land of \(21,100 by financing it 100% with long-term notes payable during 2018. During the year, there were no sales of land, no retirements of stock, and no treasury stock transactions. A plant asset was disposed of for \)0. The cost and the accumulated depreciation of the disposed asset was $13,410. The plant acquisition was for cash.
Requirements
1. Prepare the 2018 statement of cash flows, formatting operating activities by the indirect method.
2. How will what you learned in this problem help you evaluate an investment?
Question: Big Island, Inc. began 2018 with cash of \(40,000. During the year, Big Island earned revenue of \)200,000 and collected \(120,000 from customers. Expenses for the year totaled \)160,000, of which Big Island paid \(65,000 in cash to suppliers and \)80,000 in cash to employees. The company received \(2,000 cash for interest revenue and paid \)10,000 for income taxes. Big Island also paid \(35,000 to purchase equipment and a cash dividend of \)15,000 to its stockholders during 2018. Prepare the company鈥檚 operating activities section of the statement of cash flows for the year ended December 31, 2018. Use the direct method.
Question: Computing cash flows from operating activities鈥攊ndirect method
Winding Road Cellular accountants have assembled the following data for the year ended April 30, 2018:
Cash receipt from sale of land \( 27,000
Net income \) 55,000
Depreciation expense 2,000
Cash purchase of equipment 44,000
Cash payment of dividends 5,800
Decrease in current liabilities 20,000
Cash receipt from issuance of common stock 17,000
Increase in current assets other than cash 27,000
Prepare the operating activities section using the indirect method for Winding Road Cellular鈥檚 statement of cash flows for the year ended April 30, 2018.
Classifying cash flow items Consider the following transactions:
Identify the category of the statement of cash flows in which each transaction would be reported.
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