Brief Exercise 23-1
Novak Corporation is preparing its 2017 statement of cash flows, using the indirect method.
Presented below is a list of items that may affect the statement. Using the code below, indicate how
each item will affect Novak’s 2017 statement of cash flows.
Code Letter
Effect
A
D
R-I
P-I
R-F
P-F
N
Added to net income in the operating section
Deducted from net income in the operating section
Cash receipt in investing section
Cash payment in investing section
Cash receipt in financing section
Cash payment in financing section
Noncash investing and financing activity
(a)
Purchase of land and building.
P-I
(b) Decrease in accounts receivable.
A
(c)
R-F
Issuance of stock.
(d) Depreciation expense.
A
(e) Sale of land at book value.
R-I
(f)
Sale of land at a gain.
R-I and D
(g)
Payment of dividends.
P-F
(h) Increase in accounts receivable.
D
(i)
Purchase of available-for-sale debt investment.
P-I
(j)
Increase in accounts payable.
A
(k) Decrease in accounts payable.
D
(l)
R-F
Loan from bank by signing note.
(m) Purchase of equipment using a note.
N
(n) Increase in inventory.
D
(o) Issuance of bonds.
R-F
(p) Redemption of bonds payable.
P-F
(q) Sale of equipment at a loss.
R-I and A
(r)
P-F
Purchase of treasury stock.
Brief Exercise 23-2
Martinez Corporation had the following activities in 2017.
1. Sale of land $174,000
2. Purchase of inventory $787,000
Purchase of treasury stock
3.
$65,000
4. Purchase of equipment $433,000
5. Issuance of common stock $311,000
Purchase of available-for-sale debt securities
6.
$63,000
Compute the amount Martinez should report as net cash provided (used) by investing activities in
its 2017 statement of cash flows. (Show amounts that decrease cash flow with either a - sign e.g. -
15,000 or in parenthesis e.g. (15,000).)
Net cash
used
by investing activities
$
-322,000
Cash flow from investing activities
Sale of land
$174,000
Purchase of equipment
(433,000)
Purchase of available-for-sale securities
(63,000)
Net cash used by investing activities
$(322,000)
Brief Exercise 23-3
Splish Corporation had the following activities in 2017.
1. Payment of accounts payable $823,000
2. Issuance of common stock $269,000
3. Payment of dividends $381,000
4. Collection of note receivable $94,000
5. Issuance of bonds payable $471,000
6. Purchase of treasury stock $43,000
Compute the amount Splish should report as net cash provided (used) by financing activities in its
2017 statement of cash flows. (Show amounts that decrease cash flow with either a - sign e.g. -
15,000 or in parenthesis e.g. (15,000).)
Net cash
provided
by financing activities
$
316,000
Cash flow from financing activities
Issuance of common stock
Issuance of bonds payable
Payment of dividends
Purchase of treasury stock
$269,000
471,000
(381,000)
(43,000)
Net cash provided by financing activities $316,000
Brief Exercise 23-4
Sunland Corporation had the following 2017 income statement.
Sales revenue
$198,000
Cost of goods sold
126,000
Gross profit
72,000
Operating expenses (includes depreciation of $22,000)
52,000
Net income
$20,000
The following accounts increased during 2017: Accounts Receivable $13,000, Inventory $10,000,
Accounts Payable $14,000. Prepare the cash flows from operating activities section of Sunland’s
2017 statement of cash flows using the direct method.
Sunland Corporation
Statement of Cash Flows-Direct Method (Partial)
For the Year Ended December 31, 2017
Cash Flow s from Operating Activities
$
Cash Received from Customers
Cash Payment to Suppliers
Cash Payment for Operating Expenses
185,000
$
122,000
30,000
152,000
Net Cash Provided by Operating Activities
Cash received from customers
Cash payment to suppliers
$
33,000
= ($198,000 – $13,000)
= $185,000
= ($126,000 + $10,000 – $14,000) = $122,000
Cash payment for operating expenses = ($52,000 – $22,000)
= $30,000
Brief Exercise 23-5
Riverbed Corporation had the following 2017 income statement.
Sales revenue
$197,000
Cost of goods sold
125,000
Gross profit
72,000
Operating expenses (includes depreciation of $19,000)
46,000
Net income
$26,000
The following accounts increased during 2017: Accounts Receivable $11,000, Inventory $11,000,
Accounts Payable $14,000. Prepare the cash flows from operating activities section of Riverbed’s
2017 statement of cash flows using the indirect method. (Show amounts that decrease cash flow
with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Riverbed Corporation
Statement of Cash Flows-Indirect Method (Partial)
For the Year Ended December 31, 2017
Cash Flow s from Operating Activities
$
Net Income
26,000
Adjustments to reconcile net income to
Net Cash Provided by Operating Activities
Depreciation expense
$
19,000
Increase in Accounts Payable
14,000
Increase in Accounts Receivable
-11,000
Increase in Inventory
-11,000
11,000
Net Cash Provided by Operating Activities
Brief Exercise 23-6
$
37,000
At January 1, 2017, Larkspur Inc. had accounts receivable of $77,000. At December 31, 2017,
accounts receivable is $53,000. Sales revenue for 2017 total $386,000.
Compute Larkspur’s 2017 cash receipts from customers.
Cash receipts from customers
$
410,000
Sales revenue
$386,000
Add: Decrease in accounts receivable ($77,000 – $53,000)
24,000
Cash receipts from customers
$410,000
Brief Exercise 23-7
Coronado Corporation had January 1 and December 31 balances as follows.
1/1/17
Inventory
Accounts payable
12/31/17
$89,000
$108,000
62,000
71,000
For 2017, cost of goods sold was $570,000.
Compute Coronado’s 2017 cash payments to suppliers.
Cash payments to suppliers
$
580,000
Cost of goods sold
Add: Increase in inventory ($108,000 – $89,000)
Purchases
Deduct: Increase in accounts payable ($71,000 – $62,000)
Cash payments to suppliers
$570,000
19,000
589,000
9,000
$580,000
Brief Exercise 23-8
In 2017, Martinez Corporation had net cash provided by operating activities of $505,000, net cash
used by investing activities of $987,000, and net cash provided by financing activities of $527,000.
At January 1, 2017, the cash balance was $325,000.
Compute December 31, 2017, cash.
Cash, December 31, 2017
$
370,000
Net cash provided by operating activities $505,000
Net cash used by investing activities
(987,000)
Net cash provided by financing activities 527,000
Net increase in cash
Cash, 1/1/17
45,000
325,000
Cash, 12/31/17
$370,000
Answer
CLOSE
Brief Exercise 23-9
Wildhorse Corporation had the following 2017 income statement.
Revenues
$107,000
Expenses
58,000
$49,000
In 2017, Wildhorse had the following activity in selected accounts.
Accounts Receivable
1/1/17
Revenues
12/31/17
21,000 Write-offs
107,000 Collections
900
99,000
28,100
Allowance for Doubtful Accounts
1/1/17
1,200
Write-offs
900 Bad debt expense
12/31/17
1,600
1,900
(a) Prepare Wildhorse’s cash flows from operating activities section of the statement of cash flows
using the direct method.
Wildhorse Corporation
Statement of Cash Flows-Direct Method (Partial)
For the Year Ended December 31, 2017
Cash Flow s from Operating Activities
$
Cash Received from Customers
99,000
Cash Payments for Expenses
56,400
$
Net Cash Provided by Operating Activities
42,600
(b) Prepare Wildhorse’s cash flows from operating activities section of the statement of cash flows
using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000
or in parenthesis e.g. (15,000).)
Wildhorse Corporation
Statement of Cash Flows-Indirect Method (Partial)
For the Year Ended December 31, 2017
Cash Flow s from Operating Activities
$
Net Income
49,000
Increase in Net Accounts Receivable
(6,400)
$
Net Cash Provided by Operating Activities
42,600
(a) Cash paid for expenses
= ($58,000 – $1,600) = $56,400
(b) Increase in net accounts receivable = ($26,200* – $19,800**) = ($6,400)
*
**
($28,100 – $1,900) = $26,200
($21,000 – $1,200) = $19,800
Answer
CLOSE
Brief Exercise 23-10
Bramble Corporation reported net income of $50,300 in 2017. Depreciation expense was
$15,600. The following working capital accounts changed.
$10,300 increase
Accounts receivable
Available-for-sale debt securities
Inventory
15,500 increase
6,900 increase
Nontrade note payable
15,800 decrease
Accounts payable
13,400 increase
Compute net cash provided by operating activities. (Show amounts that decrease cash flow with
either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Bramble Corporation
Statement of Cash Flows (Partial)
For the Year Ended December 31, 2017
Cash Flow s from Operating Activities
$
Net Income
50,300
Adjustments to reconcile net income to
Net Cash Provided by Operating Activities
Depreciation expense
15,600
Increase in Accounts Payable
13,400
Increase in Accounts Receivable
-10,300
Increase in Inventory
-6,900
11,800
$
Net Cash Provided by Operating Activities
62,100
Brief Exercise 23-11
In 2017, Pina Corporation reported a net loss of $71,000. Pina’s only net income adjustments
were depreciation expense $81,900, and increase in accounts receivable $7,700.
Compute Pina’s net cash provided (used) by operating activities. (Show amounts that decrease cash
flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Net cash
provided
by operating activities
$
3,200
Cash flows from operating activities:
Net loss
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
$(71,000)
Depreciation expense
Increase in accounts receivable
81,900
(7,700)
Net cash provided by operating activities
74,200
$3,200
Answer
CLOSE
Brief Exercise 23-12
In 2017, Bonita Inc. issued 700 shares of $10 par value common stock for land worth $41,200.
(a) Prepare Bonita’s journal entry to record the transaction. (Credit account titles are automatically
indented when amount is entered. Do not indent manually. If no entry is required, select "No
entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation
Land
Debit
Credit
41,200
Common Stock
7,000
Paid-in Capital in Excess of Par—Common Stock
34,200
(b) Indicate the effect the transaction has on cash.
No Effect
(c) Indicate how the transaction is reported on the statement of cash flows.
Bonita Inc.
Statement of Cash Flows (Partial)
For the Year Ended December 31, 2017
Noncash Investing and Financing Activities
$
Purchase of Land Through Issuance of Common Stock
41,200
Brief Exercise 23-13
Indicate in general journal form how the items below would be entered in a worksheet for the
preparation of the statement of cash flows. (Credit account titles are automatically indented when
amount is entered. Do not indent manually. If no entry is required, select "No entry" for the
account titles and enter 0 for the amounts.)
(a) Net income is $291,000.
(b) Cash dividends declared and paid totaled $119,000.
(c) Equipment was purchased for $122,000.
Equipment that originally cost $35,000 and had accumulated depreciation of $28,000 was sold
(d)
for $8,900.
No. Account Titles and Explanation
(a)
Operating—Net Income
Debit
291,000
Retained Earnings
(b)
Retained Earnings
291,000
119,000
Financing—Cash Dividends
(c)
Equipment
119,000
122,000
Investing—Purchase of Equipment
(d)
Credit
122,000
Investing—Sale of Equipment
8,900
Accumulated Depreciation—Equipment
28,000
Equipment
35,000
Operating—Gain on Sale of Equipment
1,900
(d) Operating—Gain on Sale of Equipment = $8,900 – ($35,000 – $28,000) = $1,900