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CHAPTER17

Statementof Cash Flows

ANSWERSTO QUESTIONS

1. (a) The statement of cash flows reports the cash receipts, cash payments, and net change in cresulting from the operating, investing, and financing activities of a company durinperiod.

(b) Disagree. The statement of cash flows is required. It is the fourth basic financial stateme

2. The statement of cash flows answers the following questions about cash: (a) Where did the ccome from during the period? (b) What was the cash used for during the period? and (c) What wthe change in the cash balance during the period?

3. The three types of activities are:Operatingactivitiesinclude the cash effects of transactions that create revenues and expenses thus enter into the determination of net income.Investing activities include: (a) acquiring and disposing of investments and property, plant equipment and (b) lending money and collecting loans.Financingactivities include: (a) obtaining cash from issuing debt and repaying amounts borrowed andobtaining cash from stockholders, repurchasing shares, and paying dividends.

4. (a) Major inflows of cash in a statement of cash flows include cash from operations; issuancdebt; collection of loans; issuance of capital stock; sale of investments; and the saleproperty, plant, and equipment.

(b) Major outflows of cash include purchase of inventory, payment of wages and other operaexpenses, payment of cash dividends; redemption of debt; purchase of investments; maloans; redemption of capital stock; and the purchase of property, plant, and equipment.

5. The statement of cash flows presents investing and financing activities so that even nonctransactions of an investing and financing nature are disclosed in the financial statements. If taffect financial conditions significantly, the FASB requires that they be disclosed in either a separschedule at the bottom of the statement of cash flows or in a separate note or supplementschedule to the financial statements.

6. Examples of significant noncash activities are: (1) issuance of stock for assets, (2) conversionbonds into common stock, (3) issuance of bonds or notes for assets, and (4) noncash exchanof property, plant, and equipment.

7. Comparative balance sheets, a current income statement, and certain transaction data all proinformation necessary for preparation of the statement of cash flows. Comparative balance sheindicate how assets, liabilities, and equities have changed during the period. A current incostatement provides information about the amount of cash provided or used by operations. Certransactions provide additional detailed information needed to determine how cash was provior used during the period.

8. The advantage of the direct method is that it presents the major categories of cash receipts cash payments in a format that is similar to the income statement and familiar to statement users

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principal disadvantage is that the necessary data can be expensive and time-consuming to accumulate.

The advantage of the indirect methodis it is often considered easier to prepare, and it focuses onthe differences between net income and net cash provided by operating activities. It also tends toreveal less company information to competitors. Its primary disadvantage is the difficulty inunderstanding the adjustments that comprise the reconciliation.

Both methods are acceptable but the FASB expressed a preference for the direct method. Yet,the indirect method is the overwhelming favorite of companies.

7-2 Copyright 2011 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 10/e, Solutions Manual ( For Instructor Use Only)

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QuestionsChapter17 (Continued)

9. When total cash inflows exceed total cash outflows, the excess is identified as a net increase in canear the bottom of the statement of cash flows.

10. The indirect method involves converting accrual net income to net cash provided by operating activThis is done by starting with accrual net income and adding or subtracting noncash items inclu

in net income. Examples of adjustments include depreciation and other noncash expenses, gand losses on the sale of noncurrent assets, and changes in the balances of current asset current liability accounts from one period to the next.

11.It is necessary to convert accrual-based net income to cash-basis income because the unadjustedincome includes items that do not provide or use cash. An example would be an increaseaccounts receivable. If accounts receivable increased during the period, revenues reportedthe accrual basis would be higher than the actual cash revenues received. Thus, accrual-basis income must be adjusted to reflect the net cash provided by operating activities.

12. A number of factors could have caused an increase in cash despite the net loss. These are (1) hcash revenues relative to low cash expenses; (2) sales of property, plant, and equipment; (3) sof investments; (4) issuance of debt or capital stock, and (5) differences between cash and accaccounting, e.g. depreciation.

13. Depreciation expense.Gain or loss on sale of a noncurrent asset.Increase/decrease in accounts receivable.Increase/decrease in inventory.Increase/decrease in accounts payable.

14. Under the indirect method, depreciation is added back to net income to reconcile net income tocash provided by operating activities because depreciation is an expense but not a cash payme

15. The statement of cash flows is useful because it provides information to the investors, creditand other users about: (1) the companys ability to generate future cash flows, (2) the companys abto pay dividends and meet obligations, (3) the reasons for the difference between net income net cash provided by operating activities, and (4) the cash investing and financing transactduring the period.

16. This transaction is reported in the note or schedule entitled Noncash investing and financing activias follows: Retirement of bonds payable through issuance of common stock, $1,700,000.

*17. A worksheet is desirable because it allows the accumulation and classification of data thatappear on the statement of cash flows. It is an optional but efficient device that aids in the pre

ration of the statement of cash flows.

*18. Net cash provided by operating activities under the direct approach is the difference between crevenues and cash expenses. The direct approach adjusts the revenues and expenses direto reflect the cash basis. This results in cash net income, which is equal to net cash providedoperating activities.

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QuestionsChapter17 (Continued)

+ Decrease in accounts receivable19. (a) Cash receipts from customers = Revenues from sales

Increase in accounts receivable

+ Increase in inventory(b) Purchases = Cost of goods sold

Decrease in inventory

+ Decrease in accounts payableCash payments to suppliers = Purchases

Increase in accounts payable

20. Sales........................................................................................................................ $2,000,000Add: Decrease in accounts receivable.................................................................... 200,000Cash receipts from customers................................................................................. $2,200,000

21. Depreciation expense is not listed in the direct method operating activities section because it is nota cash flow itemit does not affect cash.

22. In its 2009 statement of cash flows, PepsiCo reported $6,796 million net cash provided by

operating activities, $2,401 million used for investing activities, and $2,497 million used forfinancing activities.


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SOLUTIONSTO BRIEFEXERCISES

BRIEFEXERCISE17-1

(a) Cashinflowfromfinancingactivity, $200,000.(b) Cashoutflowfrominvestingactivity, $150,000.(c) Cashinflowfrominvestingactivity, $20,000.(d) Cashoutflowfromfinancingactivity, $50,000.

BRIEFEXERCISE17-2

(a) Investingactivity. (d) Operatingactivity.

(b) Investingactivity. (e) Financingactivity.(c) Financingactivity. (f) Financingactivity.

BRIEFEXERCISE17-3

CashflowsfromfinancingactivitiesProceedsfromissuanceof bondspayable..................................... $300,00Paymentof dividends.................................................................. (50,00

Net cash providedby financingactivities................................ $250,00

BRIEFEXERCISE17-4

Net income................................................................ $2,500,0Adjustmentsto reconcile net income to net cashprovidedby operatingactivities

Depreciationexpense......................................... $160,000Accountsreceivabledecrease............................. 350,000

Accountspayabledecrease................................ (280,000) 230,0Net cashprovidedby operatingactivities................. $2,730,0

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BRIEFEXERCISE17-5

CashflowsfromoperatingactivitiesNet income.................................................................. $280,000Adjustmentsto reconcile net income to net cashprovidedby operatingactivities

Depreciationexpense........................................... $ 70,000

Loss on sale of plant assets.................................. 12,000 82,000Net cashprovidedby operatingactivities................... $362,000

BRIEFEXERCISE17-6

Net income......................................................................... $200,000Adjustmentsto reconcile net incometo net

cash providedby operatingactivitiesDecreasein accountsreceivable.................................... $ 80,000)

Increasein prepaidexpenses........................................ (28,000)Increasein inventory.................................................... (30,000) 22,000Net cash providedby operatingactivities....................... $222,000

BRIEFEXERCISE17-7

Original cost of equipmentsold............................................. $22,000Less: Accumulateddepreciation........................................... 5,500Bookvalue of equipmentsold............................................... 16,500

Less: Loss on sale of equipment.......................................... 5,500Cashreceivedfromsale of equipment.................................... $11,000BRIEFEXERCISE17-8

Free cash flow = $155,793,000 $132,280,000 $0 = $23,513,000

BRIEFEXERCISE17-9

Free cash flow = $360,000 $200,000 $0 = $160,000

BRIEFEXERCISE17-10

Free cash flow = $45,600,000 $1,600,000= $44,000,000


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BRIEFEXERCISE17-11

Free cash flow is cash providedby operationsless capital expendituresand cash dividendspFor Radar Inc. this would be $384,000($734,000 $280,000 $70,000). Since it has positive cash flow that far exceedsits dividend,an increasein the dividendmight be possible. Howeother factors shouldbe considered. For example, it must have adequate retained earnin

and it should be convinced that a larger dividend can be sustained over future yearscould also use the free cash flow to expandits operationsor pay downits debt.

*BRIEFEXERCISE17-12

Balance1/1/12

ReconcilingItems Balanc12/31/1BalanceSheet Accounts Debit Credit

PrepaidexpensesAccruedexpensespayable

18,600 8,200 (a) 6,600(b) 2,400 12,0010,60Statementof CashFlowEffects

OperatingactivitiesDecreasein prepaidexpensesIncreasein accruedexpenses

payable(a) 6,600

(b) 2,4009,000

0,0009,000

*BRIEFEXERCISE17-13

+ Decreasein accountsreceivableReceiptsfrom

customers=

Salesrevenues

Increasein accountsreceivable

$1,033,678,000= $1,095,307,000 $61,629,000(Increasein accountsreceivable)

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BRIEFEXERCISE17-14

+ Decreasein incometaxes payableCashpayment

for incometaxes=

IncomeTaxExpense

Increasein incometaxes payable

$95,000,000= $340,000,000 $245,000,000*

$522,000,000 $277,000,000= $245,000,000(Increasein incometaxespayable)

BRIEFEXERCISE17-15

+ Increasein prepaidexpenses

Cashpaymentsfor

operatingexpenses

=

Operatingexpenses,

excludingdepreciation

Decreasein prepaidexpenses

and

+ Decreasein accruedexpensespayable

Increasein accruedexpensespayable

$69,000= $80,000 $6,600 $4,400

SOLUTIONSTO DO IT! REVIEWEXERCISES

DO IT! 17-1

1. Financingactivity2. Operatingactivity3. Financingactivity4. Investingactivity5. Investingactivity


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DO IT! 17-2

CashflowsfromoperatingactivitiesNet income................................................................... $100,0Adjustmentsto reconcile net incometo net

cash providedby operatingactivities:

Depreciationexpense............................................ $6,000Amortizationexpense............................................ 2,000Gain on sale of equipment...................................... (3,600)Decreasein accountsreceivable............................. 6,000Increasein accountspayable.................................. 3,200 13,6

Net cash providedby operatingactivities...................................................... $113,6

DO IT! 17-3

(a) Free cash flow = $73,700 $27,000 $15,000= $31,700

(b) Cash provided by operating activities fails to take into account that a companyminvest in new plant assets just to maintain the current level of operations. Compamust also maintain dividendsat current levels to satisfy investors. The measuremefree cash flow provides additional insight regarding a companys cash-generaability.

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SOLUTIONSTO EXERCISES

EXERCISE17-1

a) Financingactivities.b) Noncashinvestingand financingactivities.

c) Noncashinvestingand financingactivities.d) Financingactivities.e) Investingactivities.f) Operatingactivities.g) Operatingactivities.

EXERCISE17-2

a)b)

c)d)e)f)g)h)

Operatingactivity.Noncashinvestingandfinancingactivity.Investingactivity.Financingactivity.Operatingactivity.Operatingactivity.Operatingactivity.Financingactivity.

(i)(j)

(k)(l)

(m)

(n)

Operatingactivity.Noncashinvestingand financingactivity.Investingactivity.Noncashinvestingand financingactivity.Operatingactivity (loss); investingactivity (cash proceedsfromsale).Financingactivity.

EXERCISE17-3 (b)

1. (b) The cashreceipt($15,000)is reportedin the investingsection.The gain ($3,000) isdeductedfromnet incomein the operatingsection.

2. (b) The cash receipt ($20,000) is reportedin the financingsection.

3. (b) Depreciationexpense($17,000)is addedto net incomein the operatingsection.

4. (b) Salariesand wagesexpenseis not reportedseparatelyon the statementof cashlows. It is part of the computationof net incomein the incomestatement,and is includedin

he net incomeamounton the statementof cash flows.5. (b) The issuance of commonstock for equipment ($8,000) is reported as a noncashinancingand investingactivity at the bottomof the statementof cash flows.

6. (b) The cash receipt ($1,200) is reported in the investing section. The loss ($1,800) isaddedto net incomein the operatingsection.


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EXERCISE17-4

BRACEWELLCOMPANYPartial Statementof CashFlows

For the Year EndedDecember31, 2012

CashflowsfromoperatingactivitiesNet income.................................................................... $195,0Adjustmentsto reconcile net incometo net

cash providedby operatingactivitiesDepreciationexpense.............................................. $45,000Loss on sale of equipment....................................... 5,000Increasein accountspayable................................... 17,000Decreasein accountsreceivable.............................. 15,000Decreasein prepaidexpenses.................................. 4,000 86,0Net cashprovidedby operatingactivities.................... $281,0

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EXERCISE17-5

NASREENINC.Partial Statementof CashFlows


CashflowsfromoperatingactivitiesNet income................................................................ $153,000Adjustmentsto reconcile net incometo net

cash providedby operatingactivitiesDepreciationexpense.......................................... $24,000)Decreasein inventory.......................................... 14,000)Increasein accruedexpensespayable.................. 10,000)Increasein prepaidexpenses............................... (5,000 )Decreasein accountspayable.............................. (7,000)Increasein accountsreceivable............................ (21,000) 15,000Net cashprovidedby operatingactivities.................. $168,000


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EXERCISE17-6

CHAUDRYCORPPartial Statementof CashFlows


CashflowsfromoperatingactivitiesNet income............................................................. $ 67,00Adjustmentsto reconcile net income

to net cash providedby operatingactivities

Depreciationexpense....................................... $ 28,000)Loss on sale of equipment................................ 5,000) 33,00Net cash providedby operating

activities ..................................................... 100,00Cashflowsfrominvestingactivities

Sale of equipment.................................................... 14,000*Constructionof equipment....................................... (53,000)Purchaseof equipment............................................ (70,000)

Net cash used by investingactivities.................. (109,00

CashflowsfromfinancingactivitiesPaymentof cash dividends....................................... (14,00

*Cost of equipmentsold........................................... $ 49,000)*Accumulateddepreciation....................................... (30,000)*Bookvalue............................................................ 19,000)*Loss on sale of equipment....................................... (5,000)*Cashproceeds....................................................... $ 14,000)

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EXERCISE17-7

a) MEERACORPORATIONStatementof CashFlows


Cashflows fromoperatingactivitiesNet income................................................................ $ 22,630)Adjustmentsto reconcile net income

to net cashprovidedby operatingactivitiesDepreciationexpense......................................... $ 5,000)Loss on sale of land............................................ 1,100Decreasein accountsreceivable.......................... 2,200Decreasein accountspayable.............................. (18,730) (10,430)

Net cash providedby operatingactivities...................... 12,200

Cashflows frominvestingactivitiesSale of land............................................................... 4,900

Cashflows fromfinancingactivitiesIssuanceof commonstock.......................................... $ 6,000Paymentof dividends................................................. (19,500)Net cash used by financingactivities............................ (13,500)

Net increasein cash.......................................................... 3,600Cashat beginningof period............................................... 10,700Cashat end of period........................................................ $ 14,300

b) $12,200 $0 $19,500= ($7,300)


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*EXERCISE17-10

ERISAMAGAMBOCOMPANYWorksheet

Statementof CashFlowsFor the Year EndedDecember31, 2012

Balance12/31/11

ReconcilingItems Balan12/31/BalanceSheet Accounts Debit Credit

Debits

CashAccountsreceivableInventoryLandEquipment

Total

22,000 76,000189,000100,000200,000587,000

(k) 41,000(a) 9,000

(f) 60,000

(b) 9,000(e) 25,000

63,0 85,0180,0 75,0260,0663,0

Credits

AccumulateddepreciationequipmentAccountspayableBondspayableCommonstockRetainedearnings

Total

42,000 47,000200,000164,000134,000587,000

(c) 13,000(h) 50,000

(g) 60,000

(d) 24,000

(i) 50,000(j) 125,000

66,0 34,0150,0214,0199,0663,0

Statementof CashFlowEffects

Operatingactivities

Net incomeIncreasein accountsreceivableDecreasein inventoryDecreasein accountspayableDepreciationexpense

InvestingactivitiesSale of landPurchaseof equipment

FinancingactivitiesPaymentof dividendsRedemptionof bondsIssuanceof commonstock

TotalsIncreasein cash

Totals

(j) 125,000

(b) 9,000(d) 24,000

(e) 25,000

(i) 50,000

466,000466,000

(a) 9,000(c) 13,000

(f) 60,000

(g) 60,000(h) 50,000

425,000(k) 41,000

466,000

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EXERCISE17-11

Revenues........................................................................ $192,000)Deduct: Increasein accountsreceivable............................ (60,000)

Cashreceiptsfromcustomers*.................................. $132,000Operatingexpenses......................................................... 78,000 )Deduct: Increasein accountspayable................................ (23,000)

Cashpaymentsfor operatingexpenses**.................... 55,000Net cash providedby operatingactivities............................ $ 77,000

** AccountsReceivableBalance, Beginningof year 0Revenuesfor the year 192,000 Cash receiptsfor year 132,000Balance, End of year 60,000

**AccountsPayable

Paymentsfor the year 55,000Balance, Beginningof year 0Operatingexpensesfor year 78,000Balance, End of year 23,000

EXERCISE17-12

a) Cashpaymentsto suppliersCost of goodssold......................................... $4,852.7 millionAdd: Increasein inventory.............................. 18.1Cost of purchases.......................................... $4,870.8 millionDeduct: Increasein accountspayable................. (136.9)Cashpaymentsto suppliers............................ $4,733.9 million

b) Cashpaymentsfor operatingexpensesOperatingexpensesexclusive

of depreciation ........................................... $9,470.5 million($10,671.5 $1,201)

Add: Increasein prepaidexpenses.................. $ 56.3)Deduct: Increasein accrued

expensespayable........................... (160.9) (104.6)Cashpaymentsfor operatingexpenses................ $9,365.9 million


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*EXERCISE17-13

CashflowsfromoperatingactivitiesCashreceiptsfrom

Customers........................................................ $230,000*Dividendrevenue............................................... 18,000 *

$248,00Less cash payments:

To suppliersfor merchandise.............................. 115,000For salaries and wages....................................... 53,000For operatingexpenses...................................... 28,000For incometaxes............................................... 12,000For interest....................................................... 10,000 218,00Net cashprovidedby operatingactivities................. $ 30,00

*$48,000+ $182,000

*EXERCISE17-14

Cashpaymentsfor rentalsRent expense............................................................ $ 40,00Add: Increasein prepaidrent..................................... 3,10Cashpaymentsfor rent.............................................. $ 43,10

Cashpaymentsfor salariesSalariesexpense....................................................... $ 54,00Add: Decreasein salaries payable.............................. 2,00Cashpaymentsfor salaries......................................... $ 56,00

CashreceiptsfromcustomersRevenuefromsales................................................... $170,00Add: Decreasein accountsreceivable......................... 9,00Cashreceiptsfromcustomers.................................... $179,00

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SOLUTIONSTO PROBLEMS

PROBLEM17-1B

Transaction SCF Activity Affected Cashinflow, outflow,or no cashflow effect?

(a) Recordeddepreciationexpenseon the

plant assets.

O No cash flow effect

(b) Incurreda loss on disposalof plant assets. O No cash flow effect

(c) Acquireda buildingby payingcash. I Cashoutflow

(d) Madeprincipal repaymentson a mortgage. F Cashoutflow

(e) Issuedcommonstock F Cashinflow

(f) Purchasedsharesof another

companyto be held as a long-termequityinvestment.

I Cashoutflow

(g) Paid cash dividendsto common

stockholders.

F Cashoutflow

(h) Soldinventoryon credit. Thecompanyuses a

perpetualinventorysystem.

O No cash flow effect

(i) Purchasedinventoryon credit. O No cash flow effect

(j) Paid wagesto employees. O Cashoutflow


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PROBLEM17-2B

(a) Cashinflows(outflows)relatedto plant assets 2012:

Equipmentpurchase ($95,000)Land purchase (30,000)Proceedsfromequipmentsales 11,000*

*Cost of equipmentsold $240,000+ $95,000 $300,000= $35,000

Accumulateddepreciationremovedfromaccountsfor sale of equipment

AccumulatedDepreciation

Equipment 96,000Plug 16,000 64,000 DepreciationExpense

144,000

Cashproceeds= Cost $35,000 accumulateddepreciation$16,000 loss $8,000= $11

Note to instructorsome students may find journal entries helpful in understanding exercise.

Equipment.................................................................... 95,000Cash.................................................................... 95,0

Land.................................................................. 30,000Cash.................................................................... 30,0

Cash(plug) .................................................................. 11,000AccumulatedDepreciationEquipment........................... 16,000Loss on Disposalof Plant Assets.................................... 8,000

Equipment........................................................... 35,0

(b) Equipmentpurchase Investingactivities (outflow)Land purchase Investingactivities (outflow)Proceedsfromequipmentsale Investingactivities (inflow)

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PROBLEM17-3B

ASQUITHCOMPANYPartial Statementof CashFlows


CashflowsfromoperatingactivitiesNet income............................................................... $1,020,000Adjustmentsto reconcile net income to net cashprovidedby operatingactivities

Depreciationexpense........................................ $105,000Amortizationexpense........................................ 20,000Decreasein accountsreceivable......................... 320,000Increasein accruedexpensespayable.................... 155,000

Increasein accountspayable.............................. 50,000Increasein inventory......................................... (120,000)Increasein prepaidexpenses............................. (175,000) 355,000Net cashprovidedby operatingactivities................. $1,375,000


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*PROBLEM17-4B

ASQUITHCOMPANYPartial Statementof CashFlows


CashflowsfromoperatingactivitiesCashreceiptsfromcustomers................... $5,720,000Less cash payments:

To suppliers.................................... $3,380,000 (2)For operatingexpenses.................... 965,000 (3) 4,345,000

Net cash providedby operatingactivities ............................................. $1,375,000

Computations:

(1) CashreceiptsfromcustomersSales...................................................................... $5,400,000Add: Decreasein accountsreceivable....................... 320,000Cashreceiptsfromcustomers................................... $5,720,000

(2) Cashpaymentsto suppliers

Cost of goodssold.................................................. $3,310,000Add: Increasein inventory........................................ 120,000Cost of purchases................................................... 3,430,000Deduct: Increasein accountspayable....................... (50,000)Cashpaymentsto suppliers...................................... $3,380,000

(3) Cashpaymentsfor operatingexpensesOperatingexpenses......................... $ 945,000Add: Increasein prepaid

expenses.............................. $ 175,000

Deduct: Increasein accruedexpensespayable............. (155,000) 20,000

Cashpaymentsfor operatingexpenses .................................... $ 965,000

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PROBLEM17-5B

ANNEDROIDINC.Partial Statementof CashFlows


CashflowsfromoperatingactivitiesNet income................................................................ $109,000Adjustmentsto reconcile net income to net cashprovidedby operatingactivities

Decreasein accountsreceivable.......................... $ 20,000Increasein incometaxes payable......................... 6,000Decreasein accountspayable............................. (21,000) 5,000Net cash providedby operating

activities........................................................ $114,000


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*PROBLEM17-6B

ANNEDROIDINC.Partial Statementof CashFlows


CashflowsfromoperatingactivitiesCashreceiptsfromcustomers....................... $565,000Less cash payments:

For operatingexpenses........................ $421,000 (2)For incometaxes................................. 30,000 (3) 451,000

Net cash providedby operatingactivities ................................................. $114,000

(1) Computationof cash receipts fromcustomersRevenues............................................................................... $545,000Add: Decreasein accountsreceivable

($70,000 $50,000)....................................................... 20,000Cashreceiptsfromcustomers.................................................. $565,000

(2) Computationof cashpaymentsfor operatingexpensesOperatingexpenses................................................................ $400,000Add: Decreasein accountspayable

($51,000 $30,000)....................................................... 21,000Cashpaymentsfor operatingexpenses..................................... $421,000

(3) Incometax expense................................................................ $ 36,000Deduct: Increasein incometaxes payable

($10,000 $4,000).................................................... (6,000)Cashpaymentsfor incometaxes.............................................. $ 30,000

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PROBLEM17-7B

a) ROCASTLECOMPANYStatementof CashFlows


CashflowsfromoperatingactivitiesNet income......................................................... $28,000Adjustmentsto reconcile net income


Depreciationexpense.................................. $ 8,000Increasein incometaxes payable.................. 4,000Increasein accountsreceivable.................... (11,000)

Decreasein accountspayable....................... (12,000)Increasein inventory................................... (16,000) (27,000)Net cash providedby operating

activities ................................................. 1,000Cashflowsfrominvestingactivities

Sale of equipment............................................... 10,000Purchaseof equipment........................................ (7,000)

Net cash providedby investing

activities ................................................. 3,000Cashflowsfromfinancingactivities

Issuanceof bonds............................................... 10,000Paymentof cash dividends.................................. (23,000)

Net cash used by financingactivities ................................................. (13,000)

Net decreasein cash................................................... (9,000)Cashat beginningof period......................................... 33,000Cashat end of period.................................................. $24,000

b) $1,000 $7,000 $23,000= ($29,000)


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*PROBLEM17-8B

(a) ROCASTLECOMPANYStatementof CashFlows


CashflowsfromoperatingactivitiesCashreceiptsfromcustomers.................. $275,000Less cash payments:

To suppliers................................... $232,000 (2)For operatingexpenses

($37,000 $8,000) ........................ 29,000For interest.................................... 7,000For incometaxes............................ 6,000 (3) 274,000Net cash providedby

operatingactivities ...................... 1,000Cashflowsfrominvestingactivities

Sale of equipment................................... 10,000Purchaseof equipment............................ (7,000 )

Net cash providedbyinvestingactivities ...................... 3,000

CashflowsfromfinancingactivitiesIssuanceof bonds.................................. 10,000Paymentof cash dividends...................... (23,000)

Net cash used by financingactivities .................................... (13,000)

Net decreasein cash....................................... (9,000 )Cashat beginningof period............................. 33,000Cashat end of period...................................... $ 24,000

Computations:

(1) CashreceiptsfromcustomersSales.................................................................... $286,000Deduct: Increasein accountsreceivable.................. (11,000)Cashreceiptsfromcustomers................................. $275,000

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PROBLEM17-8B (Continued)

(2) Cashpaymentsto suppliersCost of goodssold....................................................... $204,000Add: Increasein inventory............................................ 16,000Cost of purchases........................................................ 220,000Add: Decreasein accountspayable............................... 12,000Cashpaymentsto suppliers.......................................... $232,000

(3) Cashpaymentsfor incometaxesIncometax expense..................................................... $ 10,000Deduct: Increasein incometaxes payable...................... (4,000)Cashpaymentsfor incometaxes................................... $ 6,000

b) $1,000 $7,000 $23,000= ($29,000)


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PROBLEM17-9B

MINNIEHOOPERCOMPANYStatementof CashFlows


CashflowsfromoperatingactivitiesNet income............................................................. $ 112,66Adjustmentsto reconcile net income


Depreciationexpense...................................... $ 30,500Gain on sale of plant assets.............................. (5,000 )Increasein accountspayable............................ 9,420Decreasein accruedexpenses

payable ...................................................... (3,730 )Increasein accountsreceivable........................ (23,800)Increasein inventory....................................... (24,250) (16,86Net cash providedby operating

activities ..................................................... 95,80Cashflowsfrominvestingactivities

Sale of investments................................................. 27,500

Sale of plant assets................................................. 15,000Purchaseof plant assets.......................................... (146,000)

Net cash used by investingactivities ..................................................... (103,50

CashflowsfromfinancingactivitiesIssuanceof bonds................................................... 75,000Sale of commonstock............................................. 50,000Paymentof cash dividends...................................... (48,000)

Net cash providedby financingactivities ..................................................... 77,00

Net increasein cash........................................................ 69,30Cashat beginningof period............................................. 33,40Cashat end of period...................................................... $ 102,70

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*PROBLEM17-10B

MINNIEHOOPERCOMPANYStatementof CashFlows


CashflowsfromoperatingactivitiesCashreceiptsfromcustomers....................... $273,700 (1)Less cash payments:

To suppliers......................................... $ 114,290 (2)For incometaxes.................................. 37,270For operatingexpenses......................... 23,400 (3)For interest.......................................... 2,940 177,900Net cash providedby operating

activities .......................................... 95,800Cashflowsfrominvestingactivities

Sale of plant assets...................................... 15,000Sale of investments...................................... 27,500Purchaseof plant assets............................... (146,000)

Net cash used by investingactivities .......................................... (103,500)

CashflowsfromfinancingactivitiesSale of commonstock................................... 50,000Issuanceof bonds........................................ 75,000Paymentof cash dividends............................ (48,000)

Net cash providedbyfinancingactivities ............................ 77,000

Net increasein cash............................................. 69,300Cashat beginningof period................................... 33,400Cashat end of period........................................... $102,700


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*PROBLEM17-10B (Continued)

Computations:

(1) CashreceiptsfromcustomersSales................................................................................... $297,50Deduct: Increasein accountsreceivable................................. (23,80Cashreceiptsfromcustomers................................................ $273,70

(2) Cashpaymentsto suppliersCost of goodssold................................................................ $ 99,46Add: Increasein inventory..................................................... 24,25Cost of purchases................................................................. 123,71Deduct: Increasein accountspayable..................................... (9,42Cashpaymentsto suppliers................................................... $114,29

(3) Cashpaymentsfor operatingexpensesOperatingexpenses.............................................................. $ 19,67Add: Decreasein accruedexpensespayable........................... 3,73Cashpaymentsfor operatingexpenses................................... $ 23,40

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PROBLEM17-11B

VERNETCOMPANYStatementof CashFlows


CashflowsfromoperatingactivitiesNet income................................................................. $47,890Adjustmentsto reconcile net income to net cashprovidedby operatingactivities

Depreciationexpense.......................................... $ 55,000Gain on sale of equipment.................................... (4,000)*Increasein accountspayable................................ 13,000Decreasein prepaidexpenses.............................. 4,400Increasein accountsreceivable............................ (13,000)Increasein inventory........................................... (32,000) 23,400Net cashprovidedby operatingactivities.................. 71,290

CashflowsfrominvestingactivitiesSale of land................................................................ 40,000Sale of equipment....................................................... 37,000Purchaseof equipment................................................ (80,000)

Net cash used by investingactivities..................... (3,000)

CashflowsfromfinancingactivitiesPaymentof cash dividends........................................... (84,290)

Net decreasein cash........................................................... (16,000)Cashat beginningof period................................................. 57,000Cashat end of period.......................................................... $41,000

Noncashinvestingand financingactivitiesConversionof bondsby issuanceof stock..................... $30,000

*($37,000 $33,000)


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ch 17-sm

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