Learning Materials
Features
Discover
Chapter 23: Q12E (page 1377)
Question: (SCF鈥擠irect Method) Data for Pat Metheny Company are presented in E23-11.
Instructions
Prepare a statement of cash flows using the direct method. (Do not prepare a reconciliation schedule.)
Answer
Cash flow from operating activities totals$860.
Over 30 million students worldwide already upgrade their learning with 91影视!
All the tools & learning materials you need for study success - in one app.
Get started for free
Unlike the other major financial statements, the statement of cash flows is not prepared from the adjusted trial balance. From what sources does the information to prepare this statement come, and what information does each source provide?
Question: ETHICS (Cash Flow Reporting)
Brockman Guitar Company is in the business of manufacturing top-quality, steelstring folk guitars. In recent years, the company has experienced working capital problems resulting from the procurement of factory equipment, the unanticipated buildup of receivables and inventories, and the payoff of a balloon mortgage on a new manufacturing facility. The founder and president of the company, Barbara Brockman, has attempted to raise cash from various financial institutions, but to no avail because of the company鈥檚 poor performance in recent years. In particular, the company鈥檚 lead bank, First Financial, is especially concerned about Brockman鈥檚 inability to maintain a positive cash position. The commercial loan officer from First Financial told Barbara, 鈥淚 can鈥檛 even consider your request for capital financing unless I see that your company is able to generate positive cash flows from operations.鈥� Thinking about the banker鈥檚 comment, Barbara came up with what she believes is a good plan: With a more attractive statement of cash flows, the bank might be willing to provide long-term financing. To 鈥渨indow dress鈥� cash flows, the company can sell its accounts receivables to factors and liquidate its raw materials inventories. These rather costly transactions would generate lots of cash. As the chief accountant for Brockman Guitar, it is your job to tell Barbara what you think of her plan.
Instructions
Answer the following questions.
(a) What are the ethical issues related to Barbara Brockman鈥檚 idea?
(b) What would you tell Barbara Brockman?
Question: You have completed the field work in connection with your audit of Alexander Corporation for the year ended December 31, 2017. The balance sheet accounts at the beginning and end of the year are shown below.
Dec 31, 2017 | Dec 31, 2016 | Increase or (decrease) | |
Cash | \(277,900 | \)298,000 | (\(20,100) |
Accounts receivable | 469,424 | 353,000 | 116,424 |
Inventory | 741,700 | 610,000 | 131,700 |
Prepaid expenses | 12,000 | 8,000 | 4,000 |
Investment in subsidiary | 110,500 | 0 | 110,500 |
Cash surrender value of life insurance | 2,304 | 1,800 | 504 |
Machinery | 207,000 | 190,000 | 17,000 |
Buildings | 535,200 | 407,900 | 127,300 |
Land | 52,500 | 52,500 | 0 |
Patents | 69,000 | 64,000 | 5,000 |
Copyrights | 40,000 | 50,000 | (10,000) |
Bond discount and issue costs | 4,502 | 0 | 4,502 |
Total | \)2,522,030 | \(2,035,200 | \)486,830 |
Income tax payable | \(90,250 | \)79,600 | \(10,650 |
Account payable | 299,280 | 280,000 | 19,280 |
Dividend payable | 70,000 | 0 | 70,000 |
Bond payable 鈥� 8% | 125,000 | 0 | 125,000 |
Bond payable 鈥� 12% | 0 | 100,000 | (100,000) |
Allowance for doubtful accounts | 35,300 | 40,000 | (4,700) |
Accumulated depreciation 鈥� building | 424,000 | 400,000 | 24,000 |
Accumulated depreciation 鈥� machinery | 173,000 | 130,000 | 43,000 |
Premium on bond payable | 0 | 2,400 | (2,400) |
Common stock 鈥� no par | 1,176,200 | 1,453,200 | (277,000) |
Paid-in-capital in excess of par 鈥� common stock | 109,000 | 0 | 109,000 |
Retained earnings 鈥� unappropriated | 20,000 | (450,000) | 470,000 |
Total | \)2,522,030 | \(2,035,200 | \)486,830 |
STATEMENT OF RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 2017 | ||
January 1, 2017 | Balance (deficit) | (\(450,000) |
March 31, 2017 | Net income for first quarter of 2017 | 25,000 |
April 1, 2017 | Transfer from paid-in capital | 425,000 |
Balance | 0 | |
December 31, 2017 | Net income for last three quarters of 2017 | 90,000 |
Dividend declared鈥攑ayable January 21, 2018 | (70,000) | |
Balance | \)20,000 | |
Your working papers from the audit contain the following information:
1. On April 1, 2017, the existing deficit was written off against paid-in capital created by reducing the stated value of the nopar stock.
2. On November 1, 2017, 29,600 shares of no-par stock were sold for \(257,000. The board of directors voted to regard \)5 per share as stated capital.
3. A patent was purchased for \(15,000.
4. During the year, machinery that had a cost basis of \)16,400 and on which there was accumulated depreciation of \(5,200 was sold for \)9,000. No other plant assets were sold during the year.
5. The 12%, 20-year bonds were dated and issued on January 2, 2005. Interest was payable on June 30 and December 31. They were sold originally at 106. These bonds were redeemed at 100.9 plus accrued interest on March 31, 2017.
6. The 8%, 40-year bonds were dated January 1, 2017, and were sold on March 31 at 97 plus accrued interest. Interest is payable semiannually on June 30 and December 31. Expense of issuance was \(839.
7. Alexander Corporation acquired 70% control in Crimson Company on January 2, 2017, for \)100,000. The income statement of Crimson Company for 2017 shows a net income of \(15,000.
8. Major repairs to buildings of \)7,200 were charged to Accumulated Depreciation鈥擝uildings. 9. Interest paid in 2017 was \(10,500 and income taxes paid were \)34,000.
Instructions
From the information given, prepare a statement of cash flows using the indirect method. A worksheet is not necessary, but the principal computations should be supported by schedules or general ledger accounts. The company uses straight-line amortization for bond interest.
Question: The Procter & Gamble Company (P&G)
The financial statements of P&G are presented in Appendix B. The company鈥檚 complete annual report, including the notes to the financial statements, is available online.
Instructions
Refer to P&G鈥檚 financial statements and the accompanying notes to answer the following questions.
(a) Which method of computing net cash provided by operating activities does P&G use? What were the amounts of net cash provided by operating activities for the years 2012, 2013, and 2014? Which two items were most responsible for the decrease in net cash provided by operating activities in 2014?
(b) What was the most significant item in the cash flows used for investing activities section in 2014?
What was the most significant item in the cash flows used for financing activities section in 2014?
(c) Where is 鈥渄eferred income taxes鈥� reported in P&G鈥檚 statement of cash flows? Why does it appear in that section of the statement of cash flows?
(d) Where is depreciation reported in P&G鈥檚 statement of cash flows? Why is depreciation added to net income in the statement of cash flows?
Stansfield Corporation had the following activities in 2017.
1. Payment of accounts payable \(770,000. | 4. Collection of note receivable \)100,000. |
2. Issuance of common stock \(250,000. | 5. Issuance of bonds payable \)510,000. |
3. Payment of dividends \(350,000. | 6. Purchase of treasury stock \)46,000. |
Compute the amount Stansfield should report as net cash provided (used) by financing activities in its 2017 statement of cash flows.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Flashcards 
91影视 AI 
Notes 
Study Plans 
Study Sets 
Find a degree 
Magazine