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Chapter 23: Q21Q (page 1372)
Question: Why is it desirable to use a worksheet when preparing a statement of cash flows? Is a worksheet required to prepare a statement of cash flows?
Answer
Yes, the worksheet is desirablefor preparing the statement of cash flow because it provides relevant information in a classified manner.
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For purposes of the statement of cash flows, under IFRS interest paid is treated as:
Question:The comparative balance sheets for Hinckley Corporation show the following information.
| December 31 | ||
2017 | 2016 | |
Cash | \(33,500 | \)13,000 |
Accounts receivable | 12,250 | 10,000 |
Inventory | 12,000 | 9,000 |
Available-for-sale debt investment | 0 | 3,000 |
Building | 0 | 29,750 |
Equipment | 45,000 | 20,000 |
Patents | 5,000 | 6,250 |
\(107,750 | \)91,000 | |
Allowance for doubtful accounts | \(3,000 | \)4,500 |
Accumulated depreciation 鈥� equipment | 2,000 | 4,500 |
Accumulated depreciation 鈥� building | 0 | 6,000 |
Accounts payable | 5,000 | 3,000 |
Dividend payable | 0 | 5,000 |
Notes payable, short-term (non-trade) | 3,000 | 4,000 |
Long-term note payable | 31,000 | 25,000 |
Common stock | 43,000 | 33,000 |
Retained earnings | 20,750 | 6,000 |
\(107,750 | \)91,000 | |
Additional data related to 2017 are as follows.
1. Equipment that had cost \(11,000 and was 40% depreciated at time of disposal was sold for \)2,500.
2. \(10,000 of the long-term note payable was paid by issuing common stock.
3. Cash dividends paid were \)5,000.
4. On January 1, 2017, the building was completely destroyed by a flood. Insurance proceeds on the building were \(30,000 (net of \)2,000 taxes).
5. Investments (available-for-sale) were sold at \(1,700 above their cost. The company has made similar sales and investments in the past.
6. Cash was paid for the acquisition of equipment.
7. A long-term note for \)16,000 was issued for the acquisition of equipment.
8. Interest of \(2,000 and income taxes of \)6,500 were paid in cash.
Instructions
Prepare a statement of cash flows using the indirect method. Flood damage is unusual and infrequent in that part of the country
Question: (SCF鈥擠irect Method) Los Lobos Corp. uses the direct method to prepare its statement of cash flows. Los Lobos鈥檚 trial balances at December 31, 2017 and 2016, are as follows.
| Debits | December 31 | |
| 2017 | 2016 | |
Cash | \(35,000 | \)32,000 |
Accounts receivables | 33,000 | 30,000 |
Inventory | 31,000 | 47,000 |
Property, plant and equipment | 100,000 | 95,000 |
Unamortized bond discount | 4,500 | 5,000 |
Cost of goods sold | 250,000 | 380,000 |
Selling expenses | 141,500 | 172,000 |
General and administration expenses | 137,000 | 151,300 |
Interest expenses | 4,300 | 2,600 |
Income tax expenses | 20,400 | 61,200 |
\(756,700 | \)976,100 | |
| Credits | December 31 | |
| 2017 | 2016 | |
Allowance for doubtful accounts | \(1,300 | \)1,100 |
Accumulated depreciation 鈥� Plant assets | 16,500 | 15,000 |
Account payable | 25,000 | 15,500 |
Income tax payable | 21,000 | 29,100 |
Deferred tax liability | 5,300 | 4,600 |
8% callable bonds payable | 45,000 | 20,000 |
Common stock | 50,000 | 40,000 |
Paid-in-capital in excess of par | 9,100 | 7,500 |
Retained earnings | 44,700 | 64,600 |
Sales revenue | 538,800 | 778,700 |
\(756,700 | \)976,100 | |
Additional information:
1. Los Lobos purchased \(5,000 in equipment during 2017.
2. Los Lobos allocated one-third of its depreciation expense to selling expenses and the remainder to general and administrative expenses.
3. Bad debt expense for 2017 was \)5,000, and write-offs of uncollectible accounts totalled $4,800.
Instructions
Determine what amounts Los Lobos should report in its statement of cash flows for the year ended December 31, 2017, for the following items.
(a) Cash collected from customer | (d) Cash paid for income tax |
(b) Cash paid to suppliers | (e) Cash paid for selling expenses |
(c) Cash paid for interest |
Question: (L01,4) (Classification of Transactions) Following are selected balance sheet accounts of Allman Bros. Corp. at December 31, 2017 and 2016, and the increases or decreases in each account from 2016 to 2017. Also presented is selected income statement information for the year ended December 31, 2017, and additional information.
2017 | 2016 | Increase (Decrease) | |
Selected balance sheet accounts | |||
Assets | |||
Accounts receivables | \(34,000 | \)24,000 | \(10,000 |
Property, plant and equipment | 277,000 | 247,000 | 30,000 |
Accumulated depreciation 鈥� plant assets | (178,000) | (167,000) | (11,000) |
Liabilities and stockholder鈥檚 equity | |||
Bonds payable | \)49,000 | \(46,000 | \)3,000 |
Dividend payable | 8,000 | 5,000 | 3,000 |
Common stock, \(1 par | 22,000 | 19,000 | 3,000 |
Additional paid-in-capital | 9,000 | 3,000 | 6,000 |
Retained earnings | 104,000 | 91,000 | 13,000 |
Selected income statement information for the year ended December 31, 2017:
Sales revenue | \)155,000 |
Depreciation | 33,000 |
Gain on sale of equipment | 14,500 |
Net income | 31,000 |
Additional information:
1. During 2017, equipment costing \(45,000 was sold for cash.
2. Accounts receivable relate to sales of merchandise.
3. During 2017, \)20,000 of bonds payable were issued in exchange for property, plant, and equipment. There was no amortization of bond discount or premium.
Instructions
Determine the category (operating, investing, or financing) and the amount that should be reported in the statement of cash flows for the following items.
(a) Payments for purchase of property, plant, and equipment.
(b) Proceeds from the sale of equipment.
(c) Cash dividends paid.
(d) Redemption of bonds payable.
The income statement of Vince Gill Company is shown below.
VINCE GILL COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2017
Sales revenue \(6,900,000
Cost of goods sold
Beginning inventory \)1,900,000
Purchases 4,400,000
Goods available for sale 6,300,000
Ending inventory 1,600,000
Cost of goods sold 4,700,000
Gross profit 2,200,000
Operating expenses
Selling expenses 450,000
Administrative expenses 700,000 1,150,000
Net income \(1,050,000
Additional information:
1. Accounts receivable decreased \)360,000 during the year.
2. Prepaid expenses increased \(170,000 during the year.
3. Accounts payable to suppliers of merchandise decreased \)275,000 during the year.
4. Accrued expenses payable decreased \(100,000 during the year.
5. Administrative expenses include depreciation expense of \)60,000.
Instructions
Prepare the operating activities section of the statement of cash flows for the year ended December 31, 2017, for Vince Gill Company, using the indirect method.
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