Learning Materials
Features
Discover
Chapter 23: Q6Q (page 1372)
Identify the following items as (1) operating, (2) investing, or (3) financing activities: purchase of land, payment of dividends, cash sales, and purchase of treasury stock.
The two items come under financing activities, and the rest two of them comes under operating and investing activities.
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: (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).
What are some of the key obstacles for the FASB and IASB within their accounting guidance in the area of cash flow reporting? Explain.
Question: GROUPWORK (Analysis of Transactions鈥� Effect on SCF) Each of the following items must be considered in preparing a statement of cash flows for Cruz Fashions Inc. for the year ended December 31, 2017.
Instructions
For each item, state where it is to be shown in the statement and then how you would present the necessary information, including the amount. Consider each item to be independent of the others. Assume that correct entry were made for all transactions as they took place.
In 2017, Elbert Corporation had net cash provided by operating activities of \(531,000, net cash used by investing activities of \)963,000, and net cash provided by financing activities of \(585,000. At January 1, 2017, the cash balance was \)333,000. Compute December 31, 2017, cash
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
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