23 Statement of Cash Flows EXERCISES 23
EXERCISES
E23-1 (L01) (Classification of Transactions) Red Hot Chili Peppers Co. had the following activity in its most recent year of operations.
(a) Purchase of equipment. (g) Amortization of intangible assets.
(b) Redemption of bonds payable. (h) Purchase of treasury stock.
(c) Sale of building. (i) Issuance of bonds for land.
(d) Depreciation. (j) Payment of dividends.
(e) Exchange of equipment for furniture. (k) Increase in interest receivable on notes receivable.
(f) Issuance of common stock. (l) Pension expense exceeds amount funded.
Instructions
Classify the items as (1) operating—add to net income; (2) operating—deduct from net income; (3) investing; (4) financing; or (5) significant noncash investing and financing activities. Use the indirect method.
E23-2 (L01,2) (Statement Presentation of Transactions—Indirect Method) Each of the following items must be considered in preparing a statement of cash flows (indirect method) for Turbulent Indigo Inc. for the year ended December 31, 2017.
(a) Plant assets that had cost $20,000 6 years before and were being depreciated on a straight-line basis over 10 years with no estimated scrap value were sold for $5,300.
(b) During the year, 10,000 shares of common stock with a stated value of $10 a share were issued for $43 a share.
(c) Uncollectible accounts receivable in the amount of $27,000 were written off against Allowance for Doubtful Accounts.
(d) The company sustained a net loss for the year of $50,000. Depreciation amounted to $22,000, and a gain of $9,000 was realized on the sale of land for $39,000 cash.
(e) A 3-month U.S. Treasury bill was purchased for $100,000. The company uses a cash and cash equivalent basis for its cash flow statement.
(f) Patent amortization for the year was $20,000.
(g) The company exchanged common stock for a 70% interest in Tabasco Co. for $900,000.
(h) During the year, treasury stock costing $47,000 was purchased.
Instructions
State where each item is to be shown in the statement of cash flows, if at all.
E23-3 (L02,3) EXCEL (Preparation of Operating Activities Section—Indirect Method, Periodic Inventory) The income statement of Vince Gill Company is shown below…
Instructions
Prepare the operating activities section of the statement of cash flows for the year ended December 31, 2017, for Vince Gill Company, using the indirect method.
E23-4 (L02,3) EXCEL (Preparation of Operating Activities Section—Direct Method) Data for the Vince Gill Company are presented in E23-3.
Instructions
Prepare the operating activities section of the statement of cash flows using the direct method.
E23-5 (L02,3) (Preparation of Operating Activities Section—Direct Method) Krauss Company’s income statement for the year ended December 31, 2017, contained the following condensed information.
…
Instructions
Prepare the operating activities section of the statement of cash flows using the direct method.
E23-6 (L02,3) (Preparation of Operating Activities Section—Indirect Method) Data for Krauss Company are presented in E23-5.
Instructions
Prepare the operating activities section of the statement of cash flows using the indirect method.
E23-7 (L02,3) (Computation of Operating Activities—Direct Method) Presented below are two independent situations.
Situation A: Annie Lennox Co. reports revenues of $200,000 and operating expenses of $110,000 in its first year of operations, 2017. Accounts receivable and accounts payable at year-end were $71,000 and $29,000, respectively. Assume that the accounts payable related to operating expenses. (Ignore income taxes.)
Instructions
Using the direct method, compute net cash provided by operating activities.
Situation B: The income statement for Blues Traveler Company shows cost of goods sold $310,000 and operating expenses (exclusive of depreciation) $230,000. The comparative balance sheet for the year shows that inventory increased $26,000, prepaid expenses decreased $8,000, accounts payable (related to merchandise) decreased $17,000, and accrued expenses payable increased $11,000.
Instructions
Compute (a) cash payments to suppliers and (b) cash payments for operating expenses.
E23-8 (L02,3) (Schedule of Net Cash Flow from Operating Activities—Indirect Method) Ballard Co. reported $145,000 of net income for 2017. The accountant, in preparing the statement of cash flows, noted the following items occurring during 2017 that might affect cash flows from operating activities.
1. Ballard purchased 100 shares of treasury stock at a cost of $20 per share. These shares were then resold at $25 per share.
2. Ballard sold 100 shares of IBM common at $200 per share. The acquisition cost of these shares was $145 per share. There were no unrealized gains or losses recorded on this investment in 2017.
3. Ballard revised its estimate for bad debts. Before 2017, Ballard’s bad debt expense was 1% of its net sales. In 2017, this percentage was increased to 2%. Net sales for 2017 were $500,000, and net accounts receivable decreased by $12,000 during 2017.
4. Ballard issued 500 shares of its $10 par common stock for a patent. The market price of the shares on the date of the transaction was $23 per share.
5. Depreciation expense is $39,000.
6. Ballard Co. holds 40% of the Nirvana Company’s common stock as a long-term investment. Nirvana Company reported $27,000 of net income for 2017.
7. Nirvana Company paid a total of $2,000 of cash dividends to all investees in 2017.
8. Ballard declared a 10% stock dividend. One thousand shares of $10 par common stock were distributed. The market price at date of issuance was $20 per share.
Instructions
Prepare a schedule that shows the net cash flow from operating activities using the indirect method. Assume no items other than those listed above affected the computation of 2017 net cash flow from operating activities.
E23-9 (L02,3) (SCF—Direct Method) Los Lobos Corp. uses the direct method to prepare its statement of cash flows. Los Lobos’s trial balances at December 31, 2017 and 2016, are as follows...
Instructions
Determine what amounts Los Lobos should report in its statement of cash flows for the year ended December 31, 2017, for the following items.
(a) Cash collected from customers. (d) Cash paid for income taxes.
(b) Cash paid to suppliers. (e) Cash paid for selling expenses.
(c) Cash paid for interest.
E23-10 (L01,4) (Classification of Transactions) Following are selected balance sheet accounts of Allman Bros. Corp. at December 31, 2017 and 2016, and the increases or decreases in each account from 2016 to 2017. Also presented is selected income statement information for the year ended December 31, 2017, and additional information...
Instructions
Determine the category (operating, investing, or financing) and the amount that should be reported in the statement of cash flows for the following items.
(a) Payments for purchase of property, plant, and equipment.
(b) Proceeds from the sale of equipment.
(c) Cash dividends paid.
(d) Redemption of bonds payable.
E23-11 (L02) (SCF—Indirect Method) Condensed financial data of Pat Metheny Company for 2017 and 2016 are presented below...
Instructions
Prepare a statement of cash flows using the indirect method.
E23-12 (L02) (SCF—Direct Method) Data for Pat Metheny Company are presented in E23-11.
Instructions
Prepare a statement of cash flows using the direct method. (Do not prepare a reconciliation schedule.)
E23-13 (L02,3) (SCF—Direct Method) Brecker Inc., a greeting card company, had the following statements prepared as of December 31, 2017.
Additional information:
1. Dividends in the amount of $6,000 were declared and paid during 2017.
2. Depreciation expense and amortization expense are included in operating expenses.
3. No unrealized gains or losses have occurred on the investments during the year.
4. Equipment that had a cost of $20,000 and was 70% depreciated was sold during 2017.
Instructions
Prepare a statement of cash flows using the direct method. (Do not prepare a reconciliation schedule.)
E23-14 (L02) (SCF—Indirect Method) Data for Brecker Inc. are presented in E23-13.
Instructions
Prepare a statement of cash flows using the indirect method.
E23-15 (L02) (SCF—Indirect Method) The following data are taken from the records of Alee Company...
Additional information:
1. Held-to-maturity securities carried at a cost of $43,000 on December 31, 2016, were sold in 2017 for $34,000. The loss (not unusual) was incorrectly charged directly to Retained Earnings.
2. Plant assets that cost $50,000 and were 80% depreciated were sold during 2017 for $8,000. The loss was incorrectly charged directly to Retained Earnings.
3. Net income as reported on the income statement for the year was $57,000.
4. Dividends paid amounted to $10,000.
5. Depreciation charged for the year was $20,000.
Instructions
Prepare a statement of cash flows for the year 2017 using the indirect method.
E23-16 (L01,2) (Cash Provided by Operating, Investing, and Financing Activities) The balance sheet data of Brown Company at the end of 2017 and 2016 follow...
Instructions
Compute net cash provided (used) by:
(a) Operating activities.
(b) Investing activities.
(c) Financing activities.
E23-17 (L02) (SCF—Indirect Method and Balance Sheet) Jobim Inc. had the following condensed balance sheet at the end of operations for 2016…
Instructions
(a) Prepare a statement of cash flows for 2017 using the indirect method.
(b) Prepare the condensed balance sheet for Jobim Inc. as it would appear at December 31, 2017.
E23-18 (L02,4) (Partial SCF—Indirect Method) The accounts below appear in the ledger of Anita Baker Company.
Retained Earnings Dr. Cr. Bal...
Instructions
From the postings in the accounts above, indicate how the information is reported on a statement of cash flows by preparing a partial statement of cash flows using the indirect method. The loss on sale of equipment (November 15) was $5,800.
E23-19 (L05) (Worksheet Analysis of Selected Accounts) Data for Anita Baker Company are presented in E23-18.
Instructions
Prepare entries in journal form for all adjustments that should be made on a worksheet for a statement of cash flows.
E23-20 (L05) (Worksheet Analysis of Selected Transactions) The transactions below took place during the year 2017...
Instructions
Show by journal entries the adjustments that would be made on a worksheet for a statement of cash flows.
E23-21 (L05) (Worksheet Preparation) Below is the comparative balance sheet for Stevie Wonder Corporation…
Instructions
From this information, prepare a worksheet for a statement of cash flows. Make reasonable assumptions as appropriate.
The short-term investments are considered available-for-sale and no unrealized gains or losses have occurred on these securities.
