PROBLEMS
P23-1 (L02,4) (SCF—Indirect Method) The following are Sullivan Corp.’s comparative balance sheet accounts at December 31, 2017 and 2016, with a column showing the increase (decrease) from 2016 to 2017…
Instructions
Prepare a statement of cash flows for Sullivan Corp. for the year ended December 31, 2017, using the indirect method.
(AICPA adapted)
P23-2 (L02,4) EXCEL GROUPWORK (SCF—Indirect Method) The comparative balance sheets for Hinckley Corporation show the following information...
Instructions
Prepare a statement of cash flows using the indirect method. Flood damage is unusual and infrequent in that part of the country.
P23-3 (L02) EXCEL (SCF—Direct Method) Mortonson Company has not yet prepared a formal statement of cash flows for the 2017 fiscal year. Comparative balance sheets as of December 31, 2016 and 2017, and a statement of income and retained earnings for the year ended December 31, 2017, are presented as follows...
Instructions
Prepare a statement of cash flows using the direct method. Changes in accounts receivable and accounts payable relate to sales and cost of goods sold. Do not prepare a reconciliation schedule.
(CMA adapted)
P23-4 (L02,4) (SCF—Direct Method) Michaels Company had available at the end of 2017 the following information...
Instructions
Prepare a statement of cash flows for Michaels Company using the direct method accompanied by a reconciliation schedule.
Assume the short-term investments are debt securities, classified as available-for-sale.
P23-5 (L02,4) (SCF—Indirect Method) You have completed the field work in connection with your audit of Alexander Corporation for the year ended December 31, 2017. The balance sheet accounts at the beginning and end of the year are shown below...
Instructions
From the information given, prepare a statement of cash flows using the indirect method. A worksheet is not necessary, but the principal computations should be supported by schedules or general ledger accounts. The company uses straight-line amortization for bond interest.
P23-6 (L02,3,4) (SCF—Indirect Method, and Net Cash Flow from Operating Activities, Direct Method) Comparative balance sheet accounts of Marcus Inc. are presented below…
Instructions
(a) Compute net cash flow from operating activities using the direct method.
(b) Prepare a statement of cash flows using the indirect method.
P23-7 (L02,3,4) GROUPWORK (SCF—Direct and Indirect Methods from Comparative Financial Statements) Chapman Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The comparative balance sheet and income statement for Chapman as of May 31, 2017, are as follows. The company is preparing its statement of cash flows...
The following is additional information concerning Chapman’s transactions during the year ended May 31, 2017.
1. All sales during the year were made on account.
2. All merchandise was purchased on account, comprising the total accounts payable account.
3. Plant assets costing $98,000 were purchased by paying $28,000 in cash and issuing 7,000 shares of stock.
4. The “other expenses” are related to prepaid items.
5. All income taxes incurred during the year were paid during the year.
6. In order to supplement its cash, Chapman issued 2,000 shares of common stock at par value.
7. Cash dividends of $105,000 were declared and paid at the end of the fiscal year.
Instructions
(a) Compare and contrast the direct method and the indirect method for reporting cash flows from operating activities.
(b) Prepare a statement of cash flows for Chapman Company for the year ended May 31, 2017, using the direct method. Be sure to support the statement with appropriate calculations. (A reconciliation of net income to net cash provided is not required.)
(c) Using the indirect method, calculate only the net cash flow from operating activities for Chapman Company for the year ended May 31, 2017.
P23-8 (L02,4) (SCF—Direct and Indirect Methods) Comparative balance sheet accounts of Sharpe Company are presented below...
Additional data:
1. Equipment that cost $10,000 and was 60% depreciated was sold in 2017.
2. Cash dividends were declared and paid during the year.
3. Common stock was issued in exchange for land.
4. Debt investments that cost $35,000 were sold during the year.
5. There were no write-offs of uncollectible accounts during the year.
Sharpe’s 2017 income statement is as follows.
Sales revenue $950,000
Less: Cost of goods sold 600,000
Gross profit 350,000
Less: Operating expenses (includes depreciation expense and bad debt expense) 250,000
Income from operations 100,000
Other revenues and expenses
Gain on sale of investments $15,000
Loss on sale of equipment (3,000) 12,000
Income before taxes 112,000
Income taxes 45,000
Net income $ 67,000
Instructions
(a) Compute net cash provided by operating activities under the direct method.
(b) Prepare a statement of cash flows using the indirect method.
P23-9 (L02,4) (Indirect SCF) Dingel Corporation has contracted with you to prepare a statement of cash flows. The controller has provided the following information...
Instructions
(a) Use the indirect method to analyze the above information and prepare a statement of cash flows for Dingel.
(b) What would you expect to observe in the operating, investing, and financing sections of a statement of cash flows of:
(1) A severely financially troubled firm?
(2) A recently formed firm that is experiencing rapid growth?
