CHAPTER 4: REPORTING AND ANALYZING CASH FLOWS

Transcription

1 M4-22. a. Cash flow from an operating activity. b. Cash flow from an investing activity. c. Cash flow from an investing activity. d. Cash flow from an operating activity. e. Cash flow from a financing activity. f. Cash flow from a financing activity. g. Cash flow from an investing activity. M4-23. DOLE FOOD COMPANY, INC. Selected Items from the Cash Flow Statement 1 Long-term debt repayments Financing 2 Change in receivables Operating 3 Depreciation and amortization Operating 4 Change in accrued liabilities Operating 5 Dividends paid Financing 6 Change in income taxes payable Operating 7 Cash received from sales of assets and businesses Investing 8 Net income Operating 9 Change in accounts payable Operating 10 Short-term debt borrowings Financing 11 Capital expenditures Investing Solutions Manual, Chapter 4 4-1

2 M4-25. a. Transaction Cash Asset Accts. Receivable Balance Sheet Inventories = Accts. Payable Contrib. Capital Income Statement Earned Capital Revenue - Expenses = Net Income (1) 507,400 = 507, ,400 - = 507,400 (2) 91,500 = 91,500 91,500 - = 91,500 (3) 320,100 = 320, ,100 = 320,100 (4) 63,400 = 63,400-63,400 = 63,400 (5) 351,600 = 351,600 - = (6) -47,700 47,700 = - = (7) 483, ,400 = - = (8) 340,200 = 340,200 - = (9) -172,300 = -172, ,300 = -172,300 Total 14,700 24,000 15,800 = 11,400 43, , ,800 = 43,100 b. Net income was 43,100 (from the net income column), and cash flow from operating activities was 14,700 (from the cash column). c. 1. Accounts receivable increased by 24,000, 2. Inventories increased by 15,800, and 3. Accounts payable increased by 11,400. d. The accounting equation is kept with every entry, so it is kept for the totals over the period. Cash flow change in accounts receivable change in inventory = Change in accounts payable net income. This relationship can be presented in the following indirect method cash flow from operating activities. Net income 43,100 - Change in accounts receivable 24,000 - Change in inventories 15,800 Change in accounts payable 11,400 Cash flow from operating activities 14, Financial Accounting, 5 th Edition

3 M4-28. Net loss $(21,000) Add (deduct) items to convert net loss to cash basis Add back depreciation 8,600 Subtract change in operating assets: Accounts receivable 9,000 Inventory 3,000 Prepaid expenses 3,000 Add change in operating liabilities: Accounts payable 4,000 Accrued liabilities (2,600) Net cash provided by operating activities $ 4,000 Weber Company's 2016 operating activities provided $4,000 cash. The dividend paid to shareholders affects cash flows from financing activities. Solutions Manual, Chapter 4 4-3

4 M4-29. A indicates that the amount is added and a - indicates that it is subtracted when preparing the cash flow statement using the indirect method. NORDSTROM, INC. Consolidated Statement of Cash Flows Selected Items 1 Increase in accounts receivable Operating - 2 Capital expenditures Investing - 3 Proceeds from long-term borrowings Financing 4 Increase in deferred income tax net liability Operating 5 Principal payments on long-term borrowings Financing - 6 Increase in merchandise inventories Operating - 7 Decrease in prepaid expenses and other assets Operating 8 Proceeds from issuances under stock compensation plans Financing 9 Increase in accounts payable Operating 10 Net earnings Operating 11 Payments for repurchase of common stock Financing - 12 Increase in accrued salaries, wages and related benefits Operating 13 Cash dividends paid Financing - 14 Depreciation and amortization expenses Operating 4-4 Financial Accounting, 5 th Edition

5 M4-30. a. Rent expense $ 60,000 Prepaid rent decrease (2,000) = Cash paid for rent $ 58,000 Transaction Cash Begin Balance Make rent payment Record rent expense -X Noncash Assets 10,000 Prepaid Rent X Prepaid Rent -60,000 Prepaid Rent Balance Sheet = Liabilities Contr. Capital Earned Surplus Income Statement Revenue - Expenses = = - = = - = = -60,000 Retained Earnings - 60,000 Rent Expense End Balance 8,000 = - = Net Income = -60,000 X must equal $58,000 to make the FSET balance. b. Interest income $ 16,000 Interest receivable increase (700) = Cash received as interest $ 15,300 Transaction Cash Begin Balance Record interest income Receive interest payment Noncash Assets 3,000 Interest Receivable 16,000 Interest Receivable Balance Sheet = Liabilities Contr. Capital Earned Surplus Income Statement Revenue - Expenses = = - = = 16,000 Retained Earnings Net Income 16,000 Interest income - = 16,000 X -X = - = End Balance 3,700 = - = X must equal $15,300 to make the FSET balance. Solutions Manual, Chapter 4 4-5

6 c. Cost of goods sold $ 98,000 Inventory increase 3,000 Accounts payable decrease 4,000 = Cash paid for merchandise purchased $105,000 Transaction Cash Begin Balance Purchase inventory Pay supplier Recognize Cost of Goods Sold Noncash Assets 19,000 Inventory Balance Sheet = Liabilities = 11,000 Accounts Payable Contr. Capital Earned Surplus Income Statement Revenue - Expenses = - = X = X - = -Y = -98,000 Inventory -Y Accounts Payable = - = -98,000 Retained Earnings - 98,000 Cost of Goods Sold End Balance 22,000 = 7,000 - = Net Income = -98,000 To make the inventory account work properly, X (purchases) must equal $101,000. If purchases were $101,000, then Y (payments to suppliers) must equal $105, Financial Accounting, 5 th Edition

7 P4-52. a. Cash and cash equivalents, December 31, $19,000 Cash and cash equivalents, December 31, ,000 Cash and cash equivalents decrease during $ 6,000 b. RAINBOW COMPANY Statement of Cash Flows For Year Ended December 31, 2016 Cash flow from operating activities Net income $ 90,000 Add (deduct) items to convert net income to cash basis Depreciation 39,000 Patent amortization 7,000 Loss on sale of equipment 5,000 Gain on sale of investments (3,000) Accounts receivable increase (10,000) Inventory increase (26,000) Prepaid expenses increase (4,000) Accounts payable increase 4,000 Interest payable increase 1,000 Income tax payable decrease (2,000) Net cash provided by operating activities $101,000 Cash flows from investing activities Sale of investments 60,000 Purchase of land (90,000) Improvements to building (95,000) Sale of equipment 14,000 Net cash used by investing activities (111,000) Cash flows from financing activities Issuance of bonds payable 30,000 Issuance of common stock 24,000 Payment of dividends (50,000) Net cash provided by financing activities 4,000 Net decrease in cash and cash equivalents (6,000) Cash and cash equivalents at beginning of year. 25,000 Cash and cash equivalents at end of year $ 19,000 Solutions Manual, Chapter 4 4-7

8 c. (1) Supplemental Cash Flow Disclosures Cash paid for interest $ 12,000* Cash paid for income taxes $ 46,000 * Interest expense $13,000 - Interest payable increase (1,000) Cash paid for interest $12,000 Income tax expense $44,000 Income tax payable decrease 2,000 Cash paid for income taxes $46,000 (2) Schedule of noncash investing and financing activities Issuance of preferred stock to acquire patent $ 25,000 d. (1) $101,000/[($34,000 $31,000)/2] = (2) $101,000/$185,000 = (3): $101,000 ($90,000 $95,000 - $14,000) = -$70, Financial Accounting, 5 th Edition

9 P4-53. a. Cash and cash equivalents, December 31, $19,000 Cash and cash equivalents, December 31, ,000 Cash and cash equivalents decrease during $ 6,000 b. RAINBOW COMPANY Statement of Cash Flows (Direct Method) For Year Ended December 31, 2016 Cash flows from operating activities Cash received from customers $740,000 Cash received as dividends.. 15,000 $755,000 Cash paid for merchandise purchased.. 462,000 Cash paid for wages and other operating expenses 134,000 Cash paid for interest.. 12,000 Cash paid for income taxes 46,000 (654,000) Net cash provided by operating activities.. 101,000 Cash flows from investing activities Sale of investments.. 60,000 Purchase of land (90,000) Improvements to building (95,000) Sale of equipment.. 14,000 Net cash used by investing activities... (111,000) Table continued on next page Solutions Manual, Chapter 4 4-9

10 Table continued RAINBOW COMPANY Statement of Cash Flows (Direct Method) For Year Ended December 31, 2016 Cash flows from financing activities Issuance of bonds payable. 30,000 Issuance of common stock. 24,000 Payment of dividends (50,000) Net cash provided by financing activities 4,000 Net decrease in cash and cash equivalents.. (6,000) Cash and cash equivalents at beginning of year. 25,000 Cash and cash equivalents at end of year. $ 19,000 c. (1) Reconciliation of net income to net cash flow from operating activities Net income $ 90,000 Add (deduct) items to convert net income to cash basis Depreciation 39,000 Patent amortization 7,000 Loss on sale of equipment 5,000 Gain on sale of investments (3,000) Accounts receivable increase (10,000) Inventory increase (26,000) Prepaid expenses increase (4,000) Accounts payable increase 4,000 Interest payable increase 1,000 Income tax payable decrease (2,000) Net cash provided by operating activities $101,000 (2) Schedule of noncash investing and financing activities Issuance of preferred stock to acquire patent $ 25, Financial Accounting, 5 th Edition