ExErcisEs: sEt B - Cengage · ExErcisEs: sEt B Classification of Cash Flow Transactions ... The T...
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© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. EXERCISES: SET B Classification of Cash Flow Transactions E1B. CONCEPT ▶ Hugo Corporation engaged in the transactions listed below. Identify each transaction as (a) an operating activity, (b) an investing activity, (c) a financing activity, (d) a noncash transaction, or (e) not on the statement of cash flows. Assume the indirect method is used. (Hint: More than one answer may apply.) 1. Declared and paid a cash dividend. 2. Purchased a long-term investment. 3. Increased accounts receivable. 4. Paid interest. 5. Sold equipment at a loss. 6. Issued long-term bonds for plant assets. 7. Increased dividends receivable. 8. Issued common stock. 9. Declared and issued a stock dividend. 10. Repaid notes payable. 11. Decreased wages payable. 12. Purchased a 60-day Treasury bill. 13. Purchased land. Cash Flows from Operating Activities: Indirect Method E2B. The condensed single-step income statement for the year ended December 31, 2014, of Shapiro Chemical Company, a distributor of farm fertilizers and herbicides, follows. Sales $13,000,000 Less: Cost of goods sold $7,600,000 Operating expenses (including depreciation of $820,000) 3,800,000 Income taxes expense 400,000 11,800,000 Net income $ 1,200,000 Selected accounts from Shapiro Chemical’s balance sheets for 2014 and 2013 follow. 2014 2013 Accounts receivable $2,400,000 $1,700,000 Inventory 840,000 1,020,000 Prepaid expenses 260,000 180,000 Accounts payable 960,000 720,000 Accrued liabilities 60,000 100,000 Income taxes payable 140,000 120,000 Prepare a schedule of cash flows from operating activities using the indirect method. Computing Cash Flows from Operating Activities: Indirect Method E3B. During 2014, Alvin Corporation had net income of $41,000. Included on its income statement were depreciation expense of $2,300 and amortization expense of $300. During the year, Accounts Receivable increased by $3,400, Inventories decreased by $1,900, Prepaid Expenses decreased by $200, Accounts Payable increased by $5,000, and Accrued Liabilities decreased by $450. Determine net cash flows from operating activities using the indirect method. LO 1 LO 2 LO 2 Chapter Assignments 1 CHE-NEEDLES_MA-12-0109-013-WEB.indd 1 03/01/13 7:15 PM
Transcript of ExErcisEs: sEt B - Cengage · ExErcisEs: sEt B Classification of Cash Flow Transactions ... The T...
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
ExErcisEs: sEt BClassification of Cash Flow TransactionsE1B. concEpt ▶ Hugo Corporation engaged in the transactions listed below. Identify each transaction as (a) an operating activity, (b) an investing activity, (c) a financing activity, (d) a noncash transaction, or (e) not on the statement of cash flows. Assume the indirect method is used. (Hint: More than one answer may apply.)
1. Declared and paid a cash dividend. 2. Purchased a long-term investment. 3. Increased accounts receivable. 4. Paid interest. 5. Sold equipment at a loss. 6. Issued long-term bonds for plant assets. 7. Increased dividends receivable. 8. Issued common stock. 9. Declared and issued a stock dividend. 10. Repaid notes payable. 11. Decreased wages payable. 12. Purchased a 60-day Treasury bill. 13. Purchased land.
Cash Flows from Operating Activities: Indirect MethodE2B. The condensed single-step income statement for the year ended December 31, 2014, of Shapiro Chemical Company, a distributor of farm fertilizers and herbicides, follows.
Sales $13,000,000Less: Cost of goods sold $7,600,000Operating expenses (including depreciation of $820,000) 3,800,000Income taxes expense 400,000 11,800,000Net income $ 1,200,000
Selected accounts from Shapiro Chemical’s balance sheets for 2014 and 2013 follow.
2014 2013Accounts receivable $2,400,000 $1,700,000Inventory 840,000 1,020,000Prepaid expenses 260,000 180,000Accounts payable 960,000 720,000Accrued liabilities 60,000 100,000Income taxes payable 140,000 120,000
Prepare a schedule of cash flows from operating activities using the indirect method.
Computing Cash Flows from Operating Activities: Indirect MethodE3B. During 2014, Alvin Corporation had net income of $41,000. Included on its income statement were depreciation expense of $2,300 and amortization expense of $300. During the year, Accounts Receivable increased by $3,400, Inventories decreased by $1,900, Prepaid Expenses decreased by $200, Accounts Payable increased by $5,000, and Accrued Liabilities decreased by $450. Determine net cash flows from operating activities using the indirect method.
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Chapter Assignments 1
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2 Chapter 13: The Statement of Cash Flows
Preparing a Schedule of Cash Flows from Operating Activities: Indirect MethodE4B. For the year ended June 30, 2014, net income for Ramiro’s Corporation was $7,400. Depreciation expense was $2,000. During the year, Accounts Receivable increased by $4,400, Inventories increased by $7,000, Prepaid Rent decreased by $1,400, Accounts Payable increased by $14,000, Salaries Payable increased by $1,000, and Income Taxes Payable decreased by $600. Use the indirect method to prepare a schedule of cash flows from operating activities.
Computing Cash Flows from Investing Activities: InvestmentsE5B. Sahan Company’s T account for long-term available-for-sale investments at the end of 2014 follow.
Investments
Dr. Cr.Beg. Bal. 152,000 Sales of Investments 156,000Purchases of Investments 232,000End. Bal. 228,000
In addition, Sahan’s income statement shows a loss on the sale of investments of $26,000. Compute the amounts to be shown as cash flows from investing activities, and show how they appear in the statement of cash flows.
Computing Cash Flows from Investing Activities: Plant AssetsE6B. The T accounts for plant assets and accumulated depreciation for Caruso Company at the end of 2014 follow.
Plant Assets Accumulated DepreciationDr. Cr. Dr. Cr.
Beg. Bal. 260,000 Disposals 92,000 Disposals 58,800 Beg. Bal. 138,000Purchases 134,400 Depreciation 40,800End. Bal. 302,400 End. Bal. 120,000
In addition, Caruso’s income statement shows a gain on sale of plant assets of $17,600. Compute the amounts to be shown as cash flows from investing activities, and show how they appear on the statement of cash flows.
Determining Cash Flows from Financing Activities: Notes PayableE7B. All transactions involving Notes Payable and related accounts of Dimond Company during 2014 follow.
Dr. Cr.Cash 18,000
Notes Payable 18,000Bank loan
Dr. Cr.Patent 30,000
Notes Payable 30,000Purchase of patent by issuing note payable
Dr. Cr.Notes Payable 5,000Interest Expense 500
Cash 5,500Repayment of note payable at maturity
Determine the amounts of the transactions affecting financing activities and show how they appear on the statement of cash flows for 2014.
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Chapter Assignments 3
Preparing the Statement of Cash Flows: Indirect MethodE8B. Prima Corporation’s income statement for the year ended June 30, 2014, and its comparative balance sheets for June 30, 2014 and 2013, follow.
Prima CorporationIncome Statement
For the Year Ended June 30, 2014Sales $244,000Cost of goods sold 148,100Gross margin $ 95,900Operating expenses 45,000Operating income $ 50,900Interest expense 2,800Income before income taxes $ 48,100Income taxes expense 12,300Net income $ 35,800
Prima CorporationComparative Balance Sheets
June 30, 2014 and 20132014 2013
AssetsCash $139,800 $ 25,000Accounts receivable (net) 42,000 52,000Inventory 86,800 96,800Prepaid expenses 6,400 5,200Furniture 110,000 120,000Accumulated depreciation—furniture (18,000) (10,000)Total assets $367,000 $289,000
Liabilities and Stockholders’ Equity
Accounts payable $ 26,000 $ 28,000Income taxes payable 2,400 3,600Notes payable (long-term) 74,000 70,000Common stock, $10 par value 230,000 180,000Retained earnings 34,600 7,400Total liabilities and stockholders’ equity $367,000 $289,000
Prima issued a $44,000 note payable for purchase of furniture; sold at carrying value furniture that cost $54,000 with accumulated depreciation of $30,600; recorded depre-ciation on the furniture for the year, $38,600; repaid a note in the amount of $40,000; issued $50,000 of common stock at par value; and paid dividends of $8,600. Prepare Prima’s statement of cash flows for the year 2014 using the indirect method.
Cash-Generating Efficiency Ratios and Free Cash FlowE9B. BusinEss ApplicAtion ▶ In 2014, Optima Corporation had year-end assets of $1,200,000, sales of $1,650,000, net income of $140,000, net cash flows from operat-ing activities of $195,000, dividends of $60,000, purchases of plant assets of $250,000, and sales of plant assets of $45,000. In 2013, year-end assets were $1,050,000. Calcu-late free cash flow and the cash-generating efficiency ratios of cash flow yield, cash flows to sales, and cash flows to assets. (Round to one decimal place or to the nearest tenth of a percent.)
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