Exam 12: Reporting and Analyzing Cash Flows

Explain how the operating activities section of the statement of cash flows is prepared when using the indirect method.

The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for common stock is:

Wessen Company reports net income of $200,000 for the year ended December 31, 2013.It also reports $40,000 depreciation expense, $22,500 amortization expense, and a $15,000 loss on the sale of machinery.Its comparative balance sheets reveal a $225,700 increase in accounts receivable, $31,600 decrease in accounts payable, $15,000 decrease in prepaid expenses, and $48,100 decrease in wages payable.What net cash flows are provided (used)by operating activities using the indirect method?

The payment of cash dividends never changes the balance of retained earnings.

Based on the following information provided about a company's operations, calculate its cost of goods purchased and its cash paid for merchandise. Cost of goods sold \ 413,000 Merchandise inventory, beginning year 70,000 Accounts payable, beginning year 52,000 Merchandise inventory, end-of-year 67,000 Accounts payable, end-of-year 48,000

A company had wage expense of $750,000 during a given period.Compute cash paid for wages during this period given the following data: Begirnirg Balarice Erding Balarice Wages Payable \ 100,000 \ 25,500

A company's income statement showed the following: net income, $124,000; depreciation expense, $30,000, and gain on sale of plant assets, $14,000.An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,400; merchandise inventory increased $18,000; prepaid expenses decreased $6,200; accounts payable increased $3,400.Calculate the net cash provided or used by operating activities.

A purchase of land in exchange for shares of stock is disclosed on the statement of cash flows or in a note to the statement.

A noncash investing transaction should be disclosed as either a footnote or small schedule attached to the statement of cash flows.

A company reported average total assets of $496,000 in 2012 and $604,000 in 2013.Its net operating cash flow was $41,150 in 2012 and $55,500 in 2013.Calculate its cash flow on total assets ratio for both years.Comment on the results.

If a company borrows money from a bank, the interest paid on this loan should be reported on the statement of cash flows as a(n):

Fabulous Furniture's inventory increased during the year by $6.0 million.Its accounts payable increased by $4.0 million during the same period.What is the amount of cash Fabulous Furniture paid to suppliers of merchandise during the reporting period if its cost of goods sold was $26.0 million?

Assume the following information was available for the current year's operations of the shoe company founded by Blake Mycoskie, TOMS.Use these data to calculate the cash paid for merchandise. Cost of goods sold \ 226,000 Merchandise inventory, January 1 54,800 Merchandise inventory, December 31 57,400 Accounts payable, January 1 54,400 Accounts payable, December 31 59,800

Define and explain significant noncash investing and financing activities and the method of reporting them on the statement of cash flows.

The following information is available for the Arthur Corporation: ARTHUR CORPORATION Balance Sheets At December 31 2013 2012 Assets: Cash \ 24,640 \ 23,040 Accounts receivable 32,180 29,400 Merchandise inventory 73,125 61,710 Long-term investments 55,900 56,400 Equipment 175,500 145,500 Accumulated depreciation (33,550) (31,200) Total assets \ 327,795 \ \ 284,850 Liabilities: Accounts payable \ 65,000 \ 40,380 Income taxes payable 10,725 10,200 Bonds payable Total liabilities \ 124,475 \ 116,580 Equity: Common stock 117,000 96,000 Contributed capital in excess of par 13,000 9,000 Retained earnings Total equity Total liabilities and equity \ 327,795 \ 284,850 ARTHUR CORPORATION Income Statement For Year Ended December 31, 2013 Sales \ 240,000 Cost of goods sold \ 80,900 Depreciation expense 29,400 Other operating expenses 48,000 Interest expense 2,000 (160,300) Other gains (losses): Loss on sale of equipment (8,400) Income before taxes 71,300 Income taxes expense (27,650) Net income \ 43,650 Additional information: (1)There was no gain or loss on the sales of the long-term investments, nor on the bonds retired. (2)Old equipment with an original cost of $37,550 was sold for $2,100 cash. (3)New equipment was purchased for $67,550 cash. (4)Cash dividends of $33,600 were paid. (5)Additional shares of stock were issued for cash. Required: Prepare a complete statement of cash flows for the 2013 calendar year using the direct method.

Spirit Company, a merchandiser, recently completed its 2013 calendar year.For the year, (1)all sales are credit sales, (2)all credits to Accounts Receivable reflect cash receipts from customers, (3)all purchases of inventory are on credit, (4)all debits to Accounts Payable reflect cash payments for inventory, and (5)Other Expenses are paid in advance and are initially debited to Prepaid Expenses.The company's balance sheet and income statement follow: SPIRIT COMPANY Comparative Balance Sheet December 31, 2013 and 2012 2013 2012 Assets Cash \ 49,200 \ 73,500 Accounts receivable 65,830 51,000 Merchandise inventory 276,000 252,500 Prepaid expenses 1,000 1,600 Equipment 159,000 106,500 Accum. depreciation-Equipment (31,000) (40,000) Total assets \ 520,030 \ 445,100 Liabilities and Equity Accounts payable \ 58,555 \ 112,000 Short-term notes payable 9,000 7,000 Long-term notes payable 65,000 48,500 Common stock, \5 par value 162,750 150,750 Paid-in capital in excess of par, common 36,000 0 tock Retained earnings 188,725 126,850 Total liabilities and equity \ 520,030 \ 445,100 SPIRIT COMPANY Income Statement For Year Ended December 31, 2013 Sales \ 584,000 Cost of goods sold Gross profit 301,000 Operating expenses Depreciation expense \ 20,000 Other expenses 152,400 Other gains (losses) Loss on sale of equipment Income before taxes \ 142,725 Income taxes expense Net income Additional information on year 2013 transactions: a.The loss on the cash sale of equipment was $5,875 (details in b). b.Sold equipment costing $46,500, for a loss of $5,875. c.Purchased equipment costing $99,000 by paying $35,000 cash and signing a long-term note payable for the balance. d.Borrowed $2,000 cash by signing a nonsales-related short-term note payable. e.Paid $47,500 cash to reduce the long-term notes payable. f.Issued 2,400 shares of common stock for $20 cash per share. g.Net income and dividends were the only items that affected retained earnings. -Required: Determine the cash received by Spirit for the equipment sold in item B above.

The indirect method reports individual operating cash outflows and cash inflows by activity.

The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the direct method is used.

Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss of $10,000.This implies that $90,000 cash was received from the sale.

The FASB requires the reporting of cash flows per share as a measure of earnings performance.