Week 2 – Assignment #3– Cash Flow
1. Danford Corporation's balance sheet and income statement appear below:
Comparative Balance Sheet
Ending
Balance
Beginning
Balance
Assets:
Cash and cash equivalents .........................
Accounts receivable ..................................
Inventory ...................................................
Plant and equipment ..................................
Accumulated depreciation .........................
Total assets ................................................
$ 27
43
40
467
( 264)
$313
$ 25
48
49
410
( 221)
$311
Liabilities and stockholders’ equity:
Accounts payable ......................................
Wages payable...........................................
Taxes payable ............................................
Bonds payable ...........................................
Deferred taxes ...........................................
Common stock...........................................
Retained earnings ......................................
Total liabilities and stockholders’ equity ..
$ 49
14
25
100
16
74
35
$313
$ 61
16
22
120
19
70
3
$311
Income Statement
Sales ..........................................................
Cost of goods sold .....................................
Gross margin .............................................
Selling and administrative expense ...........
Net operating income ................................
Gain on sale of plant and equipment .........
Income before taxes ..................................
Income taxes ..............................................
$546
363
183
134
49
8
57
17
Net income ................................................
$ 40
Cash dividends were $8. The company sold equipment for $12 that was originally purchased f$9
and that had accumulated depreciation of $5. Deferred Taxes is Current Liability.
Required:
Determine the net cash provided by (used by) operating activities for the
year using the indirect method.
Operating Activities
Net Income
$40
Depreciation
48
Decrease in Accounts Receivable
5
Decrease in Inventory
9
Decrease in Accounts Payable
(12)
Decrease in Wages Payable
(2)
Increase in Taxes Payable
3
Gain on Sale of PPE
(8)
Decrease in Deferred Taxes
(3)
Cash Flow from Operating Activities
$80
2. Dano Company's comparative balance sheet and income statement for last year appear below:
Statement of Financial Position
Cash ...........................................................
Accounts receivable ..................................
Inventory ...................................................
Ending
Balance
$ 41,000
43,000
66,000
Beginning
Balance
$ 20,000
57,000
53,000
Prepaid expenses .......................................
Long-term investments ..............................
Plant and equipment ..................................
Accumulated depreciation .........................
Total assets ................................................
14,000
310,000
580,000
( 369,000)
$685,000
11,000
240,000
580,000
( 340,000)
$621,000
Accounts payable ......................................
Accrued liabilities .....................................
Taxes payable ............................................
Bonds payable ...........................................
Deferred taxes ...........................................
Common stock...........................................
Retained earnings ......................................
Total liabilities and owners’ equity ...........
$ 45,000
14,000
32,000
70,000
29,000
90,000
405,000
$685,000
$ 27,000
19,000
15,000
110,000
25,000
70,000
355,000
$621,000
Income Statement
Sales ..........................................................
Cost of goods sold .....................................
Gross margin .............................................
Selling and administrative expense ...........
Net operating income ................................
$540,000
220,000
320,000
200,000
120,000
Income taxes ..............................................
Net income ................................................
36,000
$ 84,000
The company declared and paid $34,000 in cash dividends during the year.
Deferred Tax is Current Liability.
Required:
a. Construct in good form the operating activities section of the company's statement of
cash flows for the year.
b. Construct in good form the investing activities section of the company's statement of
cash flows for the year.
c. Construct in good form the financing activities section of the company's statement of
cash flows for the year.
Operating Activities
Net Income
Depreciation
Decrease in Accounts Receivable
Increase in Inventory
Increase in Prepaid Expense
Increase in Accounts Payable
Decrease in Accrued Liabilities
Increase in Taxes Payable
Increase in Deferred Taxes
Cash Flow from Operating Activities
$84,000
29,000
14,000
(13,000)
(3,000)
18,000
(5,000)
17,000
4,000
$145,000
Investing Activities
Increase in Long Term Investment
Cash Flow from Investing Activities
(70,000)
($70,000)
Financing Activities
Decrease in Bonds Payable
Increase in Common Stock
Cash Dividend
Cash Flow from Financing Activities
($40,000)
20,000
(34,000)
($54,000)
Statement of Cash Flows
Cash Flow from Operating Activities
145,000
Cash Flow from Investing Activities
-70,000
Cash Flow from Financing Activities
-54,000
Cash Flow
$ 21,000
Cash Flow –
Cash Beginning –
Cash Ending–
$ 21,000
$ 20,000
$ 41,000
3. Sary Corporation's balance sheet and income statement appear below:
Comparative Balance Sheet
Ending Beginning
Balance Balance
Assets:
Cash and cash equivalents .........................
Accounts receivable ..................................
Inventory ...................................................
Plant and equipment ..................................
Accumulated depreciation .........................
Total assets ................................................
$ 27
57
62
685
( 404)
$427
$ 26
53
55
580
( 355)
$359
Liabilities and stockholders’ equity:
Accounts payable ......................................
Wages payable ...........................................
Taxes payable ............................................
Bonds payable ...........................................
Deferred taxes ...........................................
Common stock...........................................
Retained earnings ......................................
Total liabilities and stockholders’ equity ..
$ 37
21
15
171
18
32
133
$427
$ 46
25
18
170
22
30
48
$359
Income Statement
Sales ..........................................................
Cost of goods sold .....................................
Gross margin .............................................
Selling and administrative expense ...........
Net operating income ................................
Income taxes ..............................................
Net income ................................................
Cash dividends were $28.
Required:
$895
557
338
177
161
48
$113
Prepare a statement of cash flows in good form using the indirect method
Operating Activities
Net Income
Depreciation
Increase in Accounts Receivable
Increase in Inventory
Decrease in Accounts Payable
Decrease in Wages Payable
Decrease in Taxes Payable
Decrease in Deferred Taxes
$113
49
(4)
(7)
(9)
(4)
(3)
(4)
Cash Flow from Operating Activities
$131
Investing Activities
Increase in PPE
Cash Flow from Investing Activities
(105)
($105)
Financing Activities
Increase in Bonds Payable
Increase in Common Stock
Cash Dividend
Cash Flow from Financing Activities
$1
2
(28)
($25)
Statement of Cash Flows
Cash Flow from Operating Activities
131
Cash Flow from Investing Activities
-105
Cash Flow from Financing Activities
-25
Cash Flow
$1
Cash Flow –
Cash Beginning –
Cash Ending–
$1
$ 26
$ 27