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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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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.
Question: Michaels Company had available at the end of 2017 the following information.
MICHAELS COMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31, 2017 AND 2016 | ||
2017 | 2016 | |
Cash | \(10,000 | \)4,000 |
Accounts receivable | 20,500 | 12,950 |
Short-term investments | 22,000 | 30,000 |
Inventory | 42,000 | 35,000 |
Prepaid rent | 3,000 | 12,000 |
Prepaid insurance | 2,100 | 900 |
Supplies | 1,000 | 750 |
Land | 125,000 | 175,000 |
Building | 350,000 | 350,000 |
Accumulated depreciation 鈥� building | (105,000) | (87,500) |
Equipment | 525,000 | 400,000 |
Accumulated depreciation 鈥� equipment | (130,000) | (112,000) |
Patents | 45,000 | 50,000 |
Total assets | \(910,600 | \)871,100 |
Account payable | \(22,000 | \)32,000 |
Income tax payable | 5,000 | 4,000 |
Salaries and wages payable | 5,000 | 3,000 |
Short-term note payable | 10,000 | 10,000 |
Long-term note payable | 60,000 | 70,000 |
Bond payable | 400,000 | 400,000 |
Premium on bond payable | 20,303 | 25,853 |
Common stock | 240,000 | 220,000 |
Paid-in-capital in excess of par 鈥� common stock | 25,000 | 17,500 |
Retained earnings | 123,297 | 88,747 |
Total liabilities and stockholders equity | \(910,600 | \)871,100 |
MICHAELS COMPANY INCOME STATEMENT AND DIVIDEND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2017 | ||
Sales revenue | \(1,160,000 | |
Cost of goods sold | 748,000 | |
Gross margin | 412,000 | |
Operating expenses | ||
Selling expenses | \)79,200 | |
Administrative expenses | 156,700 | |
Depreciation/Amortization expenses | 40,500 | |
Total operating expenses | 276,400 | |
Income from operations | 135,600 | |
Other revenue/expenses | ||
Gain on sale of land | 8,000 | |
Gain on sale of short-term investment | 4,000 | |
Dividend revenue | 2,400 | |
Interest expenses | (51,750) | (37,350) |
Income before tax | 98,250 | |
Income tax expenses | 39,400 | |
Net income | 58,850 | |
Dividend to common stockholders | (24,300) | |
To Retained earnings | $34,550 | |
Instructions
Prepare a statement of cash flows for Michaels Company using the direct method accompanied by a reconciliation schedule. Assume the short-term investments are debt securities, classified as available-for-sale
The balance sheet data of Brown Company at the end of 2017 and 2016 follow.
2017 2016
Cash \( 30,000 \) 35,000
Accounts receivable (net) 55,000 45,000
Inventory 65,000 45,000
Prepaid expenses 15,000 25,000
Equipment 90,000 75,000
Accumulated depreciation鈥攅quipment (18,000) (8,000)
Land 70,000 40,000
\(307,000 \)257,000
Accounts payable \( 65,000 \) 52,000
Accrued expenses 15,000 18,000
Notes payable鈥攂ank, long-term 鈥�0鈥� 23,000
Bonds payable 30,000 鈥� 0鈥�
Common stock, \(10 par 189,000 159,000
Retained earnings 8,000 5,000
\)307,000 \(257,000
Land was acquired for \)30,000 in exchange for common stock, par \(30,000, during the year; all equipment purchased was for cash. Equipment costing \)10,000 was sold for \(3,000; book value of the equipment was \)6,000. Cash dividends of $10,000 were declared and paid during the year.
Instructions
Compute net cash provided (used) by:
(a) Operating activities.
(b) Investing activities.
(c) Financing activities.
In 2017, Wild Corporation reported a net loss of \(70,000. Wild鈥檚 only net income adjustments were depreciation expense \)81,000, and increase in accounts receivable $8,100. Compute Wild鈥檚 net cash provided (used) by operating activities.
Wainwright Corporation had the following activities in 2017:
1. Sale of land \(180,000. | 4. Purchase of equipment \)415,000. |
2. Purchase of inventory \(845,000. | 5. Issuance of common stock \)320,000. |
3. Purchase of treasury stock \(72,000. | 6. Purchase of available-for-sale debt securities \)59,000. |
Compute the amount Wainwright should report as net cash provided (used) by investing activities in its 2017 statement of cash flows.
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