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Chapter 14: Q4RQ (page 768)
Question: What types of transactions are reported in the non-cash investing and financing activities section of the statement of cash flows?
Answer
The non-cash investing and financing activities record those transaction which does not involve cash
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Question: What is free cash flow, and how is it calculated?
Preparing the statement of cash flows鈥攊ndirect method with non-cash transactions the 2018 income statement and comparative balance sheet of Sweet Valley, Inc. follow:
Additionally, Sweet Valley purchased land of \(20,900 by financing it 100% with long-term notes payable during 2018. During the year, there were no sales of land, no retirements of stock, and no treasury stock transactions. A plant asset was disposed of for \)0. The cost and the accumulated depreciation of the disposed asset were $13,240. Plant asset was acquired 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: Preparing operating activities cash flow鈥攄irect method
The accounting records of Four Seasons Parts reveal the following:
Payment of salaries and wages \( 34,000
Net income \) 21,000
Depreciation expense 10,000
Payment of income tax 16,000
Payment of interest 17,000
Collection of dividend revenue 5,000
Payment of dividends 5,000
Payment to suppliers 51,000
Collections from customers 116,000
Compute cash flows from operating activities using the direct method for the year ended December 31, 2018.
Preparing the statement of cash flows鈥攊ndirect method The income statement of Boost Plus, Inc. follows: Gross Profit Net Sales Revenue Cost of Goods Sold Salaries Expense 137,000 94,000 3,000 56,000 \( 54,000 81,000 Depreciation Expense鈥撯�揚lant Assets Net Income Before Income Taxes Income Tax Expense Net Income Total Operating Expenses 27,000 \) 53,000 BOOST PLUS, INC. Income Statement Year Ended September 30, 2018 Operating Expenses: \( 231,000 Additional data follow: a. Acquisition of plant assets is \)124,000. Of this amount, \(108,000 is paid in cash and \)16,000 by signing a note payable. b. Cash receipt from sale of land totals \(20,000. There was no gain or loss. c. Cash receipts from issuance of common stock total \)36,000. d. Payment of notes payable is \(15,000. e. Payment of dividends is \)5,000. f. From the balance sheet: September 30 2018 2017 Cash \( 39,000 \) 13,000 Accounts Receivable 46,000 61,000 Merchandise Inventory 94,000 88,000 Land 82,000 102,000 Plant Assets 214,000 90,000 Accumulated Depreciation (61,000) (34,000) Accounts Payable 32,000 15,000 Accrued Liabilities 12,000 20,000 Notes Payable (long-term) 16,000 15,000 Common Stock, no par 40,000 4,000 Retained Earnings 314,000 266,000 Prepare Boost Plus鈥檚 statement of cash flows for the year ended September 30, 2018, using the indirect method. Include a separate section for non-cash investing and financing 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?
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