Ex. 5-117—Statement of cash flows.
For each event listed below, select the appropriate category which describes the effect of the event on a statement of cash flows:
a. Cash provided/used by operating activities.
b. Cash provided/used by investing activities.
c. Cash provided/used by financing activities.
d. Not a cash flow.
1. Payment on long-term debt
2. Issuance of bonds at a premium
3. Collection of accounts receivable
4. Cash dividends declared
5. Issuance of stock to acquire land
6. Sale of available-for-sale securities (long-term)
7. Payment of employees' wages
8. Issuance of common stock for cash
9. Payment of income taxes payable
10. Purchase of equipment
11. Purchase of treasury stock (common)
12. Sale of real estate held as a long-term investment
Ex. 5-118—Statement of cash flows.
(L.O. 5) The information shown below is taken from the accounts of Waverly Corporation for the year ended December 31, 2017
Net income $314,000
Amortization of patent 12,000
Proceeds from issuance of common stock 103,000
Decrease in inventory 27,000
Sale of building at a $15,000 gain 85,000
Decrease in accounts payable 15,000
Purchase of equipment 185,000
Payment of cash dividends 24,000
Depreciation expense 55,000
Decrease in accounts receivable 23,000
Payment of mortgage 75,000
Increase in short-term notes payable 8,000
Sale of land at a $5,000 loss 40,000
Purchase of delivery van 33,000
Cash at beginning of year 205,000
Instructions
Prepare a statement of cash flows for Robinson Corporation for the year ended December 31, 2017.
Ex. 5-119—Statement of cash flows.
A comparative balance sheet for Talkington Corporation is presented below.
December 31
Assets 2017 2016
Cash
Accounts receivable $ 68,100 $ 21,600
Inventory 82,800 33,000
Land 170,200 83,800
Equipment 71,400 74,000
Accumulated depreciation–equipment 280,500 212,400
Total (74,000) (42,000)
$597,000 $545,000
Liabilities and Stockholders’ Equity
Accounts payable $ 34,000 $ 47,000
Bonds payable 150,000 200,000
Common stock ($1 par) 164,000 164,000
Retained earnings 249,000 134,000
Total $597,000 $545,000
Additional information:
1. Net income for 2017 was $155,000; there were no gains or losses.
2. Cash dividends of $400,000 were declared and paid.
3. Bonds payable of $50,000 were retired.
Instructions:
Compute each of the following:
1. Net cash provided by operating activities
2. Net cash provided (used) by investing activities
3. Net cash provided (used) by financing activities
Ex. 5-120—Statement of cash flows ratios.
Financial statements for Hilton Company are presented below:
Hilton Company
Balance Sheet
December 31, 2017
Assets Liabilities & Stockholders’ Equity
Cash $ 40,000 Accounts payable $ 20,000
Accounts receivable 35,000 Bonds payable 50,000
Buildings and equipment 150,000 Common stock 65,000
Accumulated depreciation— Retained earnings 60,000
buildings and equipment (50,000) $195,000
Patents 20,000
$195,000
Hilton Company
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income $50,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in accounts receivable $(16,000)
Increase in accounts payable 8,000
Depreciation—buildings and equipment 15,000
Gain on sale of equipment (6,000)
Amortization of patents 2,000 3,000
Net cash provided by operating activities 53,000
Cash flows from investing activities
Sale of equipment 12,000
Purchase of land (25,000)
Purchase of buildings and equipment (48,000)
Net cash used by investing activities (61,000)
Cash flows from financing activities
Payment of cash dividend (15,000)
Sale of bonds 30,000
Net cash provided by financing activities 15,000
Net increase in cash 7,000
Cash, January 1, 2017 33,000
Cash, December 31, 2017 $40,000
At the beginning of 2017, Accounts Payable amounted to $12,000 and Bonds Payable was $20,000.
Instructions
Calculate the following for Hilton Company:
a. Current cash debt coverage
b. Cash debt coverage
c. Free cash flow
d. Explain the purpose of free cash flow analysis.
PROBLEMS
Pr. 5-121—Balance sheet format.
The following balance sheet has been submitted to you by an inexperienced bookkeeper. List your suggestions for improvements in the format of the balance sheet. Consider both terminology deficiencies as well as classification inaccuracies.
Jasper Industries, Inc.
Balance Sheet
For the Period Ended 12/31/17
Assets
Fixed Assets—Tangible
Equipment $110,000
Less: reserve for depreciation (40,000) $ 70,000
Factory supplies 22,000
Land and buildings 400,000
Less: reserve for depreciation (150,000) 250,000
Plant site held for future use 90,000 $ 432,000
Current Assets
Accounts receivable 175,000
Cash 80,000
Inventory 220,000
Treasury stock (at cost) 20,000 495,000
Fixed Assets--Intangible
Goodwill 80,000
Notes receivable 40,000
Patents 26,000 146,000
Deferred Charges
Advances to salespersons 60,000
Prepaid rent 27,000
Returnable containers 75,000 162,000
TOTAL ASSETS $1,235,000
Liabilities
Current Liabilities
Accounts payable $140,000
Allowance for doubtful accounts 8,000
Common stock dividend distributable 35,000
Income tax payable 42,000
Sales tax payable 17,000 $ 242,000
Long-term Liabilities, 5% debenture bonds, due 2020 500,000
Reserve for contingencies 150,000 650,000
TOTAL LIABILITIES 892,000
Equity
Capital stock, $10 par value, issued 12,000 shares with
60 shares held as treasury stock $150,000
Capital surplus 90,000
Dividends paid (20,000)
Earned surplus 123,000
TOTAL EQUITY 343,000
TOTAL LIABILITIES AND EQUITY $1,235,000
Note 1. The reserve for contingencies has been created by charges to earned surplus and has been established to provide a cushion for future uncertainties.
Note 2. The inventory account includes only items physically present at the main plant and warehouse. Items located at the company's branch sales office amounting to $40,000 are excluded since the company has consistently followed this procedure for many years.
Pr. 5-122—Balance sheet presentation.
The following balance sheet was prepared by the bookkeeper for Kraus Company as of December 31, 2017.
Kraus Company
Balance Sheet
as of December 31, 2017
Cash $ 80,000 Accounts payable $ 75,000
Accounts receivable (net) 52,200 Bonds payable 100,000
Inventory 57,000 Stockholders' equity 218,500
Investments 76,300
Equipment (net) 96,000
Patents 32,000
$393,500 $393,500
The following additional information is provided:
1. Cash includes the cash surrender value of a life insurance policy $9,400, and a bank overdraft of $2,500 has been deducted.
2. The net accounts receivable balance includes:
(a) accounts receivable—debit balances $60,000;
(b) accounts receivable—credit balances $4,000;
(c) allowance for doubtful accounts $3,800.
3. Inventory does not include goods costing $3,000 shipped out on consignment. Receivables of $3,000 were recorded on these goods.
4. Investments include investments in common stock, trading $19,000 and available-for-sale $48,300, and franchises $9,000.
5. Equipment costing $5,000 with accumulated depreciation $4,000 is no longer used and is held for sale. Accumulated depreciation on the other equipment is $40,000.
Instructions
Prepare a balance sheet in good form (stockholders' equity details can be omitted.)
Pr. 5-123—Balance sheet presentation.
Given the following account information for Leong Corporation, prepare a balance sheet in report form for the company as of December 31, 2017. All accounts have normal balances.
Equipment 70,000
Interest Expense 2,400
Interest Payable 600
Retained Earnings ?
Dividends 50,400
Land 137,320
Accounts Receivable 102,000
Bonds Payable 78,000
Notes Payable (due in 6 months) 34,400
Common Stock 70,000
Accumulated Depreciation - Equip. 10,000
Prepaid Advertising 5,000
Service Revenue 351,400
Buildings 80,400
Supplies 1,860
Income Taxes Payable 3,000
Utilities Expense 1,320
Advertising Expense 1,560
Salaries and Wages Expense 53,040
Salaries and Wages Payable 900
Accumulated Depr. - Bld. 15,000
Cash 50,000
Depreciation Expense 8,000
Pr. 5-124—Statement of cash flows preparation.
Selected financial statement information and additional data for Stanislaus Co. is presented below. Prepare a statement of cash flows for the year ending December 31, 2017.
December 31
2016 2017
Cash $42,000 $60,000
Accounts receivable (net) 84,000 144,200
Inventory 168,000 206,600
Land 58,800 26,000
Equipment 504,000 789,600
TOTAL $856,800 $1,226,400
Accumulated depreciation $84,000 $110,600
Accounts payable 50,400 91,000
Notes payable - short-term 67,200 29,400
Notes payable - long-term 168,000 302,400
Common stock 420,000 487,200
Retained earnings 67,200 205,800
TOTAL $856,800 $1,226,400
Additional data for 2017:
1. Net income was $230,200.
2. Depreciation was $31,600.
3. Land was sold at its original cost.
4. Dividends of $91,600 were paid.
5. Equipment was purchased for $84,000 cash.
6. A long-term note for $201,600 was used to pay for an equipment purchase.
7. Common stock was issued to pay a $67,200 long-term note payable.
Pr. 5-125—Statement of cash flows preparation.
Selected financial statement information and additional data for Johnston Enterprises is presented below. Prepare a statement of cash flows for the year ending December 31, 2017.
Johnston Enterprises
Balance Sheet and Income Statement Data
December 31, December 31,
2017 2016___
Current Assets:
Cash $153,000 $119,000
Accounts Receivable 238,000 306,000
Inventory 391,000 340,000
Total Current Assets 782,000 765,000
Property, Plant, and Equipment 1,241,000 1,122,000
Less: Accumulated Depreciation (476,000) (442,000)
Total Assets $1,547,000 $1,445,000
Current Liabilities:
Accounts Payable $187,000 $102,000
Notes Payable 51,000 68,000
Income Taxes Payable 85,000 76,500
Total Current Liabilities 323,000 246,500
Bonds Payable 340,000 391,000
Total Liabilities 663,000 637,500
Stockholders' Equity:
Common Stock 510,000 467,500
Retained Earnings 374,000 340,000
Total Stockholders' Equity 884,000 807,500
Total Liabilities & Stockholders' Equity $1,547,000 $1,445,000
Sales Revenue 1,615,000 $1,513,000
Less Cost of Goods Sold 751,000 731,000
Gross Profit 864,000 782,000
Expenses:
Depreciation Expense 153,000 136,000
Salaries and Wages Expense 391,000 357,000
Interest Expense 34,000 34,000
Loss on Sale of Equipment 12,000 0
Income Before Taxes 274,000 255,000
Less Income Tax Expense 110,000 102,000
Net Income $164,000 $153,000
Additional Information:
During the year, Johnston sold equipment with an original cost of $153,000 and accumulated depreciation of $119,000 and purchased new equipment for $272,000.
IFRS QUESTIONS
True/False:
1. Although the presentation formats for the balance sheet and statement of cash flows are similar under IFRS and U.S. GAAP, IFRS requires far more extensive disclosure.
2. One significant difference between a balance sheet prepared using IFRS rather than U.S. GAAP is that long-term tangible assets may be reported at fair value rather than historical cost.
3. Both IFRS and U.S. GAAP require that specific items be reported on the balance sheet.
4. Both IFRS and U.S. GAAP require current assets to be listed first on the balance sheet.
Multiple Choice Questions:
5. Which of the following statements about IFRS and U.S. GAAP accounting and reporting requirements for the balance sheet is not correct?
a. The presentation formats required by IFRS and U.S. GAAP for the balance sheet are similar.
b. One difference between the reporting requirements under IFRS and those of
U.S. GAAP balance sheet is that an IFRS balance sheet may list long-term assets first.
c. Both IFRS and U.S. GAAP require that property, plant and equipment be reported at historical cost on the balance sheet.
d. Both IFRS and U.S. GAAP require that comparative information be reported.
