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Chapter 23: Q8Q (page 1372)
Why is it necessary to convert accrual-based net income to a cash basis when preparing a statement of cash flows?
Net income contains elements that do not supply or utilize cash; hence it is necessary to convert accrual-based net income to a cash basis.
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The transactions below took place during the year 2017.
1. Convertible bonds payable with a par value of \(300,000 were exchanged for unissued common stock with a par value of \)300,000. The market price of both types of securities was par.
2. The net income for the year was \(410,000.
3. Depreciation expense for the building was \)90,000.
4. Some old office equipment was traded in on the purchase of some dissimilar office equipment, and the following entry was made.
Equipment 50,000
Accum. Depreciation鈥擡quipment 30,000
Equipment 40,000
Cash 34,000
Gain on Disposal of Plant Assets 6,000
The Gain on Disposal of Plant Assets was included in income before income taxes.
5. Dividends in the amount of $123,000 were declared. They are payable in January of next year.
Instructions
Show by journal entries the adjustments that would be made on a worksheet for a statement of cash flows.
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: 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?
Differentiate between investing activities, financing activities, and operating activities.
Question: Collinsworth Co. reported sales on an accrual basis of \(100,000. If accounts receivable increased \)30,000 and the allowance for doubtful accounts increased \(9,000 after a write-off of \)2,000, compute cash sales.
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