Learning Materials
Features
Discover
Chapter 23: Q6BE (page 1373)
At January 1, 2017, Eikenberry Inc. had accounts receivable of \(72,000. At December 31, 2017, accounts receivable is \)54,000. Sales revenue for 2017 total $420,000. Compute Eikenberry鈥檚 2017 cash receipts from customers.
The business entity receives$438,000 in cash from the customer.
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
Question: CA23-5 (Purpose and Elements of SCF) GAAP requires the statement of cash flows be presented when financial statements are prepared.
Instructions
(a) Explain the purposes of the statement of cash flows.
(b) List and describe the three categories of activities that must be reported in the statement of cash flows.
(c) Identify and describe the two methods that are allowed for reporting cash flows from operations.
(d) Describe the financial statement presentation of noncash investing and financing transactions. Include in your description an example of a noncash investing and financing transaction.
Question: Your roommate is puzzled. During the last year, the company in which she is a stockholder reported a net loss of \(675,000, yet its cash increased \)321,000 during the same period of time. Explain to your roommate how this situation could occur.
Question: (SCF Theory and Analysis of Improper SCF) Teresa Ramirez and Lenny Traylor are examining the following statement of cash flows for Pacific Clothing Store鈥檚 first year of operations.
PACIFIC CLOTHING STORE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JANUARY 31, 2017 | |
Sources of cash | |
From sales of merchandise | \(382,000 |
From sale of common stock | 380,000 |
From sale of investment | 120,000 |
From depreciation | 80,000 |
From issuance of note for truck | 30,000 |
From interest on investments | 8,000 |
Total sources of cash | 1,000,000 |
Uses of cash | |
For purchase of fixtures and equipment | 330,000 |
For merchandise purchased for resale | 253,000 |
For operating expenses (including depreciation) | 170,000 |
For purchase of investment | 95,000 |
For purchase of truck by issuance of note | 30,000 |
For purchase of treasury stock | 10,000 |
For interest on note | 3,000 |
Total uses of cash | 891,000 |
Net increase in cash | \)109,000 |
Teresa claims that Pacific鈥檚 statement of cash flows is an excellent portrayal of a superb first year, with cash increasing \(109,000. Lenny replies that it was not a superb first year鈥攖hat the year was an operating failure, the statement was incorrectly presented, and \)109,000 is not the actual increase in cash.
Instructions
(a) With whom do you agree, Teresa or Lenny? Explain your position.
(b) Using the data provided, prepare a statement of cash flows in proper indirect method form. The only noncash items in income are depreciation and the gain from the sale of the investment (purchase and sale are related).
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: 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?
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