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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: What are some of the arguments in favor of using the indirect (reconciliation) method as opposed to the direct method for reporting a 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.
Question: E23-13 (L02,3) (SCF鈥擠irect Method) Brecker Inc., a greeting card company, had the following statements prepared as of December 31, 2017.
BRECKER INC. COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2017 AND 2016 | ||
12/31/17 | 12/31/16 | |
Cash | \(6,000 | \)7,000 |
Accounts receivable | 62,000 | 51,000 |
Short-term-debt (available for sale) | 35,000 | 18,000 |
Inventory | 40,000 | 60,000 |
Prepaid rent | 5,000 | 4,000 |
Equipment | 154,000 | 130,000 |
Accumulated depreciation 鈥� Equipment | (35,000) | (25,000) |
Copyrights | 46,000 | 50,000 |
Total assets | \(313,000 | \)295,000 |
Account payable | \(46,000 | \)40,000 |
Income tax payable | 4,000 | 6,000 |
Salaries and wages payable | 8,000 | 4,000 |
Short-term loans payable | 8,000 | 10,000 |
Long-term loans payable | 60,000 | 69,000 |
Common stock, \(10 par | 100,000 | 100,000 |
Contributed capital, Common stock | 30,000 | 30,000 |
Retained earnings | 57,000 | 36,000 |
Total liability and stockholders equity | \)313,000 | \(295,000 |
BRECKER INC. INCOME STATEMENT FOR THE YEAR ENDING DECEMBER 31, 2017 | ||
Sales revenue | \)338,150 | |
Cost of goods sold | (175,000) | |
Gross profit | 163,150 | |
Operating expenses | (120,000) | |
Operating income | 43,150 | |
Interest expenses | \(11,400 | |
Gain on sale of equipment | 2,000 | 9,400 |
Income before taxes | 33,750 | |
Income tax expenses | 6,750 | |
Net income | \)27,000 | |
Additional information:
1. Dividends in the amount of \(6,000 were declared and paid during 2017.
2. Depreciation expense and amortization expense are included in operating expenses.
3. No unrealized gains or losses have occurred on the investments during the year.
4. Equipment that had a cost of \)20,000 and was 70% depreciated was sold during 2017.
Instructions
Prepare a statement of cash flows using the direct method. (Do not prepare a reconciliation schedule.)
Question: Which of the following is true regarding the statement of cash flows under IFRS?
Question: During 2017, Simms Company redeemed \(2,000,000 of bonds payable for \)1,880,000 cash. Indicate how this transaction would be reported on a statement of cash flows, if at all.
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