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Chapter 14: Q14-6SE (page 772)

Question: Computing cash flows from investing and financing activities Use the data in Short Exercise S14-5 to complete this exercise. Prepare Winding Road Cellular鈥檚 statement of cash flows using the indirect method for the year ended April 30, 2018. Assume beginning and ending Cash are \(48,000 and \)52,200, respectively.

Short Answer

Expert verified

Answer

Net Increase/(Decrease) in cash is $4,200.

Step by step solution

01

Cash flow from operating activities

Cash flows from operating activities

Net Income

$55,000

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:

Depreciation expense

$2,000

Increase in current assets other than cash

($27,000)

Decrease in current liabilities

($20,000)

Net cash provided by operating activities

$10,000

02

Statement of cash flows- Indirect method

Winding Road Cellular

Statement of cash flows

Year ended 31st December, 2018

Cash flows from operating activities

Net Income

$55,000

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:

Depreciation expense

$2,000

Increase in current assets other than cash

($27,000)

Decrease in current liabilities

($20,000)

Net cash provided by operating activities

$10,000

Cash flows from investing activities

Cash receipt from sale of land

$27,000

Cash purchase of equipment

($44,000)

Net cash used for investing activities

($17,000)

Cash flows from financing activities

Cash receipt from issuance of common stock

$17,000

Cash payment of dividends

($5,800)

Net cash provided by financing activities

$11,200

Net Increase/(Decrease) in cash

$4,200

Cash balance, December 31, 2017

$48,000

Cash balance, December 31, 2018

$52,200

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Most popular questions from this chapter

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.

Jennifer鈥檚 Wedding Shops earned net income of \(27,000, which included depreciation of \)16,000. Jennifer鈥檚 acquired a \(119,000 building by borrowing \)119,000 on a long-term note payable.

Requirements

  1. How much did Jennifer鈥檚 cash balance increase or decrease during the year?
  2. Were there any non-cash transactions for the company? If so, show how

they would be reported in the statement of cash flows.

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?

Preparing the statement of cash flows鈥攄irect method The income statement and additional data of Value Corporation follow:

  1. Collections from customers are \(13,000 more than sales.
  2. Dividend revenue, interest expense, and income tax expense equal their cash amounts.
  3. Payments to suppliers are the sum of cost of goods sold plus advertising expense.
  4. Payments to employees are \)3,000 more than salaries expense.
  5. Cash payment for the acquisition of plant assets is \(102,000.
  6. Cash receipts from sale of land total \)29,000.
  7. Cash receipts from issuance of common stock total \(38,000.
  8. Payment of long-term notes payable is \)10,000.
  9. Payment of dividends is \(9,000.
  10. Cash balance at June 30, 2017, was \)21,000; at June 30, 2018, it was $43,000.
    Prepare Value Corporation鈥檚 statement of cash flows for the year ended June 30, 2018. Use the direct method.

Question: If current assets other than cash increase, what is the effect on cash? What about a decrease in current assets other than cash?
See all solutions

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