Acct 592 – Spring 2005
The Statement of
Cash Flows
Purpose of a statement of cash flows:
To provide information about the cash inflows and outflows of an entity during a
period.
To summarize the operating, investing, and financing activities of the business.
The cash flow statement helps users to assess a company’s liquidity,
financial flexibility, operating capabilities, and risk.
The statement of cash flows is useful because it provides answers to the
following important questions:
Where did cash come from?
What was cash used for?
What was the change in the cash balance?
Specifically, the information in a statement of cash flows, if used with
information in the other financial statements, helps external users to
assess:
1.
A company’s ability to generate positive future net cash flows,
2.
A company’s ability to meet its obligations and pay dividends,
3.
A company’s need for external financing,
4.
The reasons for differences between a company’s net income
and associated cash receipts and payments, and
5.
Both the cash and noncash aspects of a company’s financing
and investing transactions.
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Acct 592 – Spring 2005
What can we learn from SCF that is not already available in
the other financial statements?
It provides answers to important questions like:
Where did cash come from?
What was cash used for?
What was the change in the cash balance?Couldn’t we just look the
balance sheet?
The change in cash could be determined, but the statement of cash
flows provides detailed information about a company’s cash receipts
and cash payments during the period.
Many things you want to know about a company is summarized in this one
statement
Operating, financing and investing cash flows
Net income does not always tell the whole story about operating
performance.
A statement of cash flows is an excellent forecasting tool.
Review of terms
Cash and cash equivalents
It is a short-term, highly liquid investment.
It must be readily convertible to cash and it must be so near to maturity that
there is insignificant risks of changes in value due to changes in interest rate.
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Noncash revenues and expenses
Net income includes items that were neither cash inflow nor cash outflows:
Depreciation expense
Accretion expense on asset retirement obligation
Amortization of intangibles
Impairment loss on goodwill and intangibles
Earnings of affiliated companies accounted for using the equity method
Impairment losses on other noncurrent assets
Compensation expense related to stock options
Net income also includes gains and losses from investing and financing activities
Gain ≠ cash received (unless carrying value was zero)
Even when there is a loss, cash might have been received
Net income must be adjusted for these items to get the cash provided by operations – part of the reconciling
schedule or “indirect method”
For other items, there are revenues/expenses as well as cash flows but the amounts are different:
Bond interest expense ≠ bond interest paid (if bonds were sold at premium or discount)
Sales were not all collected in cash (bad debts, other changes in Accounts Receivable)
Purchases were not necessarily paid for during period (change in Accounts Payable)
Income tax expense ≠ income taxes paid due to deferred tax assets/liabilities as well as income taxes
refunds receivable or unpaid taxes owed
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Acct 592 – Spring 2005
Company, Inc.
Statement of Cash Flows
For the year ended December 31, 199X
Cash Flows from Operating Activities
Cash received from customers
Cash received as interest income *
Cash received as dividend income
Cash paid for cost of goods sold *
Cash paid for selling expenses
Cash paid for general & administrative expenses
Cash paid for interest (including interest on capital leases)
Cash paid for income taxes
Cash that would have been paid for taxes except for “excess tax deduction” related to stock based
compensation
Net cash provided by (or used by) operating activities
Cash Flows from Investing Activities
Cash received from sale of property, plant, & equipment
Cash received from sale of investments
Cash received from repayment of note receivables
Cash paid to acquire property, plant, and equipment
Cash paid to acquire investments
Cash paid out as a loan
Net cash provided by (or used by) investing activities
Cash Flows from Financing Activities
Cash received as proceeds from issuance of debt
Cash received as proceeds from issuance of stock
Cash received as proceeds from reissuance of treasury stock
Cash paid to repay debt (principal payment)
Cash paid on principal related to capital leases
Cash paid to reacquire stock (purchase treasury stock)
Cash paid as dividends
Cash retained due to “excess tax deduction” related to stock options
Net cash provided by (or used by) financing activities
Net increase (decrease) in cash
Beginning cash and cash equivalents balance
=Ending cash and cash equivalents balance
Schedule of Noncash Investing and Financing Activities
Assets for Liabilities &/or Equity
Liabilities &/or Equity for Assets
Liabilities for Equity and Equity for Liabilities
Capital lease (acquisition of asset and obligation for lessee)
A reconciliation of net income to cash provided by operations
*Brackets indicate items that are normally combined
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Acct 592 – Spring 2005
Operating Activities
(Usually associated with working capital accounts like Accounts
receivable, inventory, salaries payable, etc.)
Inflows:
From sale of goods and services
From receiving dividends investments
From receiving interest from investments or loans
From sale of trading securities
From reduced income taxes due to “excess tax deduction” related to
stock options
Outflows:
To suppliers for inventory and other materials
To employees for services
To other entities for services (insurance, etc.)
To government for taxes
To lenders for interest
To purchase trading securities
Interest expense is an operating item! Investment earnings (dividends & interest) is an operating item!
Buying and selling trading securities are operating activities! These things may not make sense to you – so
“memorize.”
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Acct 592 – Spring 2005
Investing Activities
(Usually associated with long-term assets)
Inflows:
From sale of property, plant and equipment
From sale of debt or equity investments of other entities*
From collections of principal on loans to other entities
Outflows:
To purchase property, plant and equipment
To purchase debt or equity securities of other entities
To make loans to other entities
*except investments classified as trading securities which are included in operating activities
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Acct 592 – Spring 2005
Financing Activities
(Usually associated with long-term liability and equity items)
Inflows:
From issuance of debt (bonds and notes)
From issuance of equity securities
Common stock
Preferred stock
Re-issuance of treasury stock
Outflows:
To stockholders as dividends
To repay or retire long-term debt, including capital leases for
lessee (interest on leases is classified as operating)
To reacquire capital stock (treasury stock)
An “anomaly” on SCF
Dividends are paid to stockholders and interest is paid to bondholders.
Dividends paid are shown as outflows under financing activities
However, FASB defined interest expense to be an operating activity
Interest & dividend revenue are defined to be operating activities, too.
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Direct versus Indirect Presentations
FASB Statement No. 95 allows two ways to calculate and report a
company’s net cash flow from operating activities on its statement of
cash flows.
The Direct Method
Under the direct method, operating cash outflows are deducted from
operating cash inflows to determine the net cash flow from operating
activities.
If you choose the direct method, a reconciliation of cash provided by
operations to net income is a required disclosure.
This is the same schedule that appears in a statement prepared using the
indirect method
The required information items on a direct method statement of cash flow (per
FASB)
Operating Inflows
Cash collected from customers (including lessees, tenants, licensees,
and the like)
Interest and dividends received
Other operating cash receipts, if any
Operating outflows
Cash paid to employees and other suppliers of goods or services
(including insurance, advertising and the like)
Interest paid
Income taxes paid
Other operating cash payments, if any
The Indirect Method
Under the indirect method, net income is adjusted for noncash items
related to operations to compute the net cash flow from operating
activities.
If you choose to use the indirect method, you must also disclose interest paid
and income taxes paid during the year.
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Other disclosures
Under both methods (direct & indirect), you must disclose noncash
financing and investing activities
This can be on face of the statement or in the notes to the financial statements.
Examples:
Trade common stock for land
Convertible bonds converted to common stock
Noncash Items
Some financing and investing activities do not affect an entity’s cash
flow.
Examples:
Trade common stock for land
Issue bonds in exchange for a building
Convertible bonds converted to common stock
Significant transactions should be disclosed separately.
The disclosure of significant noncash financing and investing activities
are required under both methods (direct & indirect)
The disclosure can be on face of the statement or in the notes to the
financial statements.
Theoretical Considerations
The direct method has the advantage of reporting operating cash inflows separately from operating
cash outflows, which may be useful in estimating future cash flows.
The direct method is more meaningful to most financial statement users and the “tie in” to net
income is also provided in a separate schedule which is the same as the indirect method
presentation.
Under the indirect method, adjustments are made to net income to arrive at cash flow from
operating activities. Thus, cash from operating activities is “tied” to net income.
An advantage of the indirect method is that income flows are converted from an accrual basis to a
cash flow basis. In this manner, the indirect method shows the “quality of earnings” by providing
information about intervals of leads and lags between income flows and operating cash flows.
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Acct 592 – Spring 2005
Example 1 - Statement of Cash Flow – DIRECT METHOD
Year ending
12/31/06 Ref
15,000 X
Palouse Pottery
Cash
Accounts Receivable
Allowance for doubtful accounts
Merchandise Inventory
Prepaid Expenses
Plant, property & equipment
Accumulated Depreciation
Accounts Payable
Salaries Payable
Interest payable
Income Taxes Payable
Dividends Payable
Long term liabilities
Common stock, $1 par
Retained Earnings
Closing entry for
Sales
Gain/(loss) on sale of PP&E
Realized gain/(loss) - land
Cost of goods sold
Salaries & other operating
expenses
Bad debt expense
Depreciation & amortization
Interest expense
Income taxes expense
Net income (accrual basis)
Statement of Cash Flows
Operating Activities
Year ending
12/31/07
42,000
Target
27,000
40,000
(3,000)
25,000
3,000
37,500
(4,500)
43,000
6,000
(2,500)
(1,500)
18,000
3,000
215,000
(80,000)
215,000
(23,000)
(2,000)
(2,000)
(1,500)
0
(25,000)
(100,000)
(61,500)
(215,000)
1997
Rev/(Exp)
93,000
(4,000)
20,000
(35,000)
(37,000)
236,000
(82,000)
278,000
(31,000)
(9,000)
(1,500)
(5,500)
(8,000)
(15,000)
(145,000)
(63,000)
(278,000)
1997
Rec/(Disb)
21,000
(2,000)
Debit
Ref
27,000
Credit
(8,000)
(7,000)
500
(4,000)
(8,000)
10,000
(45,000)
(1,500)
0
(2,000)
(11,000)
(2,500)
(7,000)
14,500
(INFLOWS)
(OUTFLOWS)
Investing Activities
Financing Activities
Noncash Financing/Investing
CHANGE IN CASH
X
27,000
Totals
Additional information:
a. Wrote off $500 accounts receivable as uncollectible
b. Sold operational assets for $4,000 cash that had cost
$17,000 and had a book value of $8,000
c. Declared a cash dividend of $13,000
106747859 created by T. Gordon 2/16/2016
d.
e.
f.
g.
Sold land for $30,000 that had been acquired for $10,000
Paid a $10,000 long-term note installment
Purchase plant, property & equipment for $48,000 cash.
Issued common stock for $45,000 cash.
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Acct 592 – Spring 2005
Example 1 - Statement of Cash Flow – INDIRECT METHOD
Year ending
12/31/06 Ref
15,000 X
Palouse Pottery
Cash
Accounts Receivable
Allowance for doubtful accounts
Merchandise Inventory
Prepaid Expenses
Plant, property & equipment
Accumulated Depreciation
Accounts Payable
Salaries Payable
Interest payable
Income Taxes Payable
Dividends Payable
Long term liabilities
Common stock, $1 par
Retained Earnings
Year ending
12/31/07
42,000
Target
27,000
40,000
(3,000)
25,000
3,000
37,500
(4,500)
43,000
6,000
(2,500)
(1,500)
18,000
3,000
215,000
(80,000)
215,000
(23,000)
(2,000)
(2,000)
(1,500)
0
(25,000)
(100,000)
(61,500)
(215,000)
236,000
(82,000)
278,000
(31,000)
(9,000)
(1,500)
(5,500)
(8,000)
(15,000)
(145,000)
(63,000)
(278,000)
21,000
(2,000)
Debit
Ref
27,000
(INFLOWS)
Statement of Cash Flows
Operating Activities
Credit
(8,000)
(7,000)
500
(4,000)
(8,000)
10,000
(45,000)
(1,500)
0
(OUTFLOWS)
Investing Activities
Financing Activities
Noncash Financing/Investing
CHANGE IN CASH
X
27,000
Totals
Additional information:
a. Wrote off $500 accounts receivable as uncollectible
b. Sold operational assets for $4,000 cash that had cost
$17,000 and had a book value of $8,000
c. Declared a cash dividend of $13,000
106747859 created by T. Gordon 2/16/2016
d.
e.
f.
g.
Sold land for $30,000 that had been acquired for $10,000
Paid a $10,000 long-term note installment
Purchase plant, property & equipment for $48,000 cash.
Issued common stock for $45,000 cash.
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Acct 592 – Spring 2005
Example 2 - Statement of Cash Flow
Year ending
12/31/06 Ref
15,000
Moscow Moving & Storage
Cash
Accounts Receivable
Allowance for doubtful accounts
Merchandise Inventory
Prepaid Expenses
Plant, property & equipment
Accumulated Depreciation
Accounts Payable
Salaries Payable
Interest payable
Long term liabilities
Common stock, $1 par
Retained Earnings
Year ending
12/31/07
5,000
Target
(10,000)
30,000
(1,500)
10,000
4,500
28,500
(2,000)
17,000
500
(1,500)
(500)
7,000
(4,000)
220,100
(20,000)
258,100
(10,000)
(3,000)
0
(30,000)
289,100
(16,000)
322,100
(13,000)
(1,000)
(1,000)
(10,000)
69,000
4,000
Debit
Ref
Credit
(100,000)
(115,100)
(258,100)
1997
Rev/(Exp)
80,000
(2,000)
(35,000)
(26,000)
Closing entry for
Sales
Gain/(loss) on sale of PP&E
Cost of goods sold
Salaries & other operating
expenses
Bad debt expense
Depreciation & amortization
Interest expense
Income taxes expense
Net income (accrual basis)
Statement of Cash Flows
Operating Activities
(3,000)
2,000
(1,000)
20,000
(181,000)
(81,000)
(116,100)
(1,000)
(322,100)
0
1997
Receipt/(Disb)
(1,000)
(5,000)
(2,000)
(3,000)
6,000
(INFLOWS)
(OUTFLOWS)
Investing Activities
Financing Activities
Noncash Financing/Investing
CHANGE IN CASH
Totals
Additional Information
a. Wrote off $500 accounts receivable as uncollectible
b. Sold operational assets for $4,000 cash
(cost $15,000, acc'd depreciation $9,000)
c. Declared and paid a cash dividend, $5,000
106747859 created by T. Gordon 2/16/2016
d. Issued common stock for $36,000 cash
e. Paid a $20,000 long-term note installment
f. Purchased operational assets, $39,000 cash
g. Acquired land in exchange for 1,000 shares of
common stock worth $45 each
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Acct 592 – Spring 2005
Reconciliation of Net Income to Cash Provided by Operations
or – “the Indirect Method”
Example 2
Moscow Moving & Storage
Statement of Cash Flow Worksheet
Reconciliation Schedule (Indirect method)
Net income
Ref
Cash provided by operations
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Acct 592 – Spring 2005
Example 3
Avery Slings & Arrows, Inc.
Avery Slings & Arrows
Income Statement
For year ending
12/31/04
Sales
Earnings of affiliates (equity method)
Realized loss on sale of equipment
Realized gain on sale of investments
Interest and dividend revenue
Total revenues
Cost of goods sold
Salaries and wages
Other operating expenses
Bad debt expense
Depreciation expense
Amortization of intangibles
Accretion expense
Interest expense
Income tax expense
Net income
6,600,000
150,000
(65,000)
53,000
15,000
6,753,000
3,490,000
632,000
421,000
45,000
757,000
5,000
25,000
935,000
177,000
6,487,000
266,000
Prepare a statement of cash flows (direct method) including the required reconciling schedule and any other required
disclosures for Avery Slings & Arrows, Inc. Information from the balance sheet and income statement have been
entered into a worksheet for your convenience. In addition to completing the worksheet, you MUST prepare a formal
statement with headings, subtotals, etc. for full credit.
ADDITIONAL INFORMATION
a.
During the year, ASA paid $2,767,000 in cash for land, building, and equipment.
b.
On August 5, 2004, ASA issued 25,000 shares of common stock for $42 per share.
c.
ASA purchased $273,000 in marketable securities during the year.
d.
Equipment costing $500,000 was sold during the year for $59,000. The book value was $124,000.
e.
During the year, AAS declared cash dividends in the amount of $203,000.
f.
On April 1, 2004, the holders of $1,500,000 in convertible bonds elected to convert their bonds to common
stock. The conversion ratio was 25 shares of common stock for each share $1,000 face value bond.
g.
The noncurrent investment represents 30% of the outstanding securities of the investee. This investment is
accounted for on the equity method. During 2004, ASA received $29,000 in dividends from the investment.
h.
On May 1, 2004, ASA acquired equipment under a capital lease. At the inception of the lease, the present
value of the minimum lease payments was $648,000.
i.
ASA acquired a patent on a new process for $500,000 on October 15, 2004.
j.
During 2004, ASA sold marketable securities which it had acquired for $222,000 for $275,000.
k.
In February, ASA issued 150,000 shares of common stock in a 50% stock dividend.
l.
ASA issued $3,000,000 in bonds at face value on August 1, 2004.
m.
ASA sold 500 shares of treasury stock which it had acquired for $20 per share for $46 per share on January 18,
2004.
n.
In October, ASA acquired 1,000 shares of treasury stock at $38 per share.
o.
Bad debts in the amount of $33,000 were written off during the year.
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Acct 592 – Spring 2005
Avery Slings & Arrows
Balance Sheet
Current Assets
Cash
Securities Available for Sale (at market)
Accounts Receivable (net)
Merchandise Inventory
Prepaid Expenses
Noncurrent Assets
Investments in affiliated companies (equity method)
Land, building & equipment
Less Accumulated Depreciation
Intangible Assets
Total assets
Current Liabilities
Accounts Payable
Salaries Payable
Interest payable
Income Taxes Payable
Dividends Payable
Noncurrent Liabilities
Bonds Payable
Premium/Discount on Bonds Payable
Convertible Bonds Payable
Lease obligation
Asset retirement obligation
Deferred Income Taxes
Other long term liabilities
Stockholder's Equity
Common stock, $10 par
Additional paid in capital - common
Other paid in capital
Unrealized (gain)/loss AFS invest
Treasury stock (at cost)
Retained Earnings
Total liabilities and equity
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12/31/04
12/31/03
2,261,000
258,000
1,947,000
602,000
4,000
5,072,000
2,850,000
100,000
1,900,000
900,000
50,000
5,800,000
2,121,000
20,715,000
(2,181,000)
568,000
26,295,000
2,000,000
17,800,000
(1,800,000)
73,000
23,873,000
347,000
18,000
156,000
45,000
128,000
694,000
650,000
21,000
55,000
32,000
60,000
818,000
7,000,000
642,000
1,500,000
2,108,000
275,000
122,000
590,000
12,237,000
4,000,000
656,000
3,000,000
1,825,000
250,000
75,000
2,590,000
12,396,000
5,125,000
3,525,000
13,000
27,000
(38,000)
4,712,000
13,364,000
3,000,000
1,600,000
0
(80,000)
(10,000)
6,149,000
10,659,000
26,295,000
23,873,000
Page 15
Acct 592 – Spring 2005
Avery Slings & Arrows
Year ending
12/31/03
Ref Debit
Cash
2,850,000
x
Year ending
12/30/04
Target
Ref Credit
589,000
2,261,000
(589,000)
Securities Available for Sale
180,000
231,000
51,000
Allowance to adjust to market
(80,000)
27,000
107,000
1,900,000
1,947,000
47,000
900,000
602,000
(298,000)
50,000
4,000
(46,000)
2,000,000
2,121,000
121,000
Accounts receivable (net)
Merchandise Inventory
Prepaid Expenses
Investments in affiliated
companies (equity method)
Land, building & equipment
17,800,000
20,715,000 2,915,000
(1,800,000)
(2,181,000)
(381,000)
73,000
568,000
495,000
23,873,000
26,295,000
Accounts Payable
(650,000)
(347,000)
303,000
Salaries Payable
(21,000)
(18,000)
3,000
Interest payable
(55,000)
(156,000)
(101,000)
Income Taxes Payable
(32,000)
(45,000)
(13,000)
Dividends Payable
(60,000)
(128,000)
(68,000)
Accumulated Depreciation
Intangible Assets
Total assets
Bonds Payable
(Premium)/Discount on Bonds
Payable
(4,000,000)
(656,000)
(7,000,000) (3,000,000)
(642,000)
14,000
Convertible Bonds Payable
(3,000,000)
(1,500,000) 1,500,000
Lease obligation
(1,825,000)
(2,108,000)
(283,000)
(250,000)
(275,000)
(25,000)
(75,000)
(122,000)
(47,000)
(2,590,000)
(590,000)
2,000,000
Asset retirement obligation
Deferred Income Taxes
Other long term liabilities
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Acct 592 – Spring 2005
Avery Slings & Arrows
Year ending
12/31/03
Ref Debit
Ref Credit
Year ending
12/30/04
Target
Common stock, $10 par
(3,000,000)
(5,125,000) (2,125,000)
Additional paid in capital –
common
(1,600,000)
(3,525,000) (1,925,000)
Unrealized (gain)/loss AFS invest
80,000
(27,000)
(107,000)
Treasury stock (at cost)
10,000
38,000
28,000
0
(13,000)
(13,000)
(6,149,000)
(4,712,000)
1,437,000
(23,873,000)
(26,295,000)
Other paid in capital
Retained Earnings
Closing entry for
Sales
2004
Revenue/ Re
(Expense) f
6,600,000
Earnings of affiliated companies
150,000
Gain/(loss) on sale of equipment
(65,000)
Gain/(loss) sale of patent
0
Realized gain/(loss) sale of land
Realized gain/(loss) on
investments
0
53,000
Interest and dividend revenue
15,000
Cost of goods sold
(3,490,000)
Salaries and wages
(632,000)
Other operating expenses
(421,000)
Bad debt expense
Depreciation expense
Amortization of intangibles
Accretion expense
(45,000)
(757,000)
(5,000)
(25,000)
Interest expense
(935,000)
Income taxes expense
(177,000)
Net income (accrual basis)
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Ref
2004
Operating Cash
Inflows/(Outflows)
266,000
Page 17
Acct 592 – Spring 2005
Avery Slings & Arrows
INFLOWS
OUTFLOWS
Cash provided by operations:
Reconciling schedule:
Net income
266,000
Cash provided by operations
Investing Activities
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0
Page 18
Acct 592 – Spring 2005
Avery Slings & Arrows
INFLOWS
OUTFLOWS
Financing Activities
0
Noncash Financing/Investing
CHANGE IN CASH
589,000 x
Totals
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0
Page 19
Acct 592 – Spring 2005
Avery Slings & Arrows
Statement of Cash Flows
For year ended December 31, 2004
Inflows
Outflows
Net
Cash provided by operations
Cash collected from customers
Interest & dividends received
6,508,000
44,000
Cash paid for merchandise
(3,495,000)
Cash paid to employees
(635,000)
Other operating disbursements
(375,000)
Interest paid
(848,000)
Income taxes paid
(117,000)
6,552,000
(5,470,000)
1,082,000
Cash provided by investing activities
Proceeds from sale of equipment
59,000
Cash outlay to acquire equipment
(2,767,000)
Cash outlay to acquire patent
Proceeds from sale of securities
(500,000)
275,000
Cash outlay to buy securities
(273,000)
334,000
(3,540,000)
(3,206,000)
Cash provided by financing activities
Dividends paid
Sold treasury stock
(135,000)
23,000
Purchased treasury stock
(38,000)
Payments on long term debt
(2,000,000)
Payments on capital leases
(365,000)
Common stock issued
1,050,000
Proceeds from issuing nonconvertible bonds
3,000,000
4,073,000
(2,538,000)
1,535,000
Change in cash
(589,000)
Beginning balance - Cash
2,850,000
Ending balance - Cash
2,261,000
106747859 created by T. Gordon 2/16/2016
Page 20
Acct 592 – Spring 2005
Avery Slings & Arrows
Statement of Cash Flows
For year ended December 31, 2004
Non-cash financing and investing activities
Capital lease
Preferred bonds converted to common stock
648,000
1,500,000
Schedule to reconcile net income to cash provided by operations
Net Income
266,000
Depreciation
757,000
Amortization & impairment of intangibles
5,000
Accretion expense
Amortization of bond premium
25,000
(14,000)
Realized loss on sale of equipment
Realized gain on sale of investments
Equity method investments – earnings in excess of dividends
65,000
(53,000)
(121,000)
Increase in deferred income taxes
47,000
Change in working capital accounts:
Net accounts receivable
(47,000)
Merchandise Inventory
298,000
Prepaid Expenses
46,000
Accounts Payable
(303,000)
Salaries Payable
(3,000)
Interest Payable
101,000
Income Taxes Payable
Cash provided by operations:
106747859 created by T. Gordon 2/16/2016
13,000
1,082,000
Page 21
Acct 592 – Spring 2005
Acct. 301 - Statement of Cash Flows - Homework 4
Wenatchee Whirlpool World
Balance Sheet
Current Assets
Cash
Securities Available for Sale (at market)
Accounts Receivable
Allowance for doubtful accounts
Merchandise Inventory
Prepaid Operating Expenses
Noncurrent Assets
Investments (equity method)
Plant, property & equipment
Accumulated Depreciation
Intangible Assets
TOTAL ASSETS
Current Liabilities
Accounts Payable
Salaries Payable
Income Taxes Payable
Dividends Payable
Current portion long term debt
Noncurrent Liabilities
Bonds Payable
Discount on Bonds
Deferred Income Taxes
Other long term liabilities
Stockholder's Equity
Convertible preferred, $100 par
Common stock, $10 par
Additional paid in capital
Unrealized (gain)/loss investments
Retained Earnings
Total liabilities and equity
106747859 created by T. Gordon 2/16/2016
12/31/96
12/31/95
2,837,600
390,000
1,752,000
(120,500)
1,145,000
84,000
6,088,100
2,000,000
150,000
1,900,000
(110,000)
875,000
62,000
4,877,000
3,097,000
16,420,000
(829,000)
71,500
24,847,600
3,000,000
10,800,000
(600,000)
128,000
18,205,000
880,000
20,000
13,400
35,000
29,000
977,400
750,000
15,000
27,000
60,000
21,000
873,000
10,000,000
(247,000)
180,000
562,000
10,495,000
5,000,000
(270,000)
88,000
3,000,000
7,818,000
500,000
3,100,000
3,950,000
27,000
5,798,200
13,375,200
24,847,600
2,000,000
1,500,000
1,200,000
78,000
4,736,000
9,514,000
18,205,000
Page 22
Acct 592 – Spring 2005
Wenatchee Whirlpool World
Income Statement
For year ending 12/31/96
Sales
Earnings of affiliated company (equity method)
Gain/(loss) on sale of PP&E
Realized gain/(loss) on investments
Realized gain on sale of patent
Interest and dividend revenue
Total revenues
Cost of goods sold
Salaries and wages
Other operating expenses
Bad debt expense
Depreciation & amortization expense
Interest expense
Income taxes expense
6,200,000
115,000
(40,000)
108,000
950,000
13,000
7,346,000
3,600,000
590,000
345,000
38,500
250,500
669,400
740,400
Net income
6,233,800
1,112,200
Additional information:
a.
On February 25, WWW sold an internally developed patent for $1,000,000. The patent was carried on the
books at unamortized legal fees amounting to $50,000 at date of sale.
b.
On March 31, WWW issued $5,000,000 in bonds at face value. The semi-annual bonds have a coupon rate
of 10% per annum.
c.
During the year, WWW disposed of various items of equipment with a total book value of $65,000 and
original cost of $80,000. The amount received was $25,000 in cash.
d.
During the third quarter, shareholders holding 15,000 shares of the preferred stock converted them into
common stock. The conversion ratio was 6 shares of common for each share of preferred.
e.
On July 20, WWW sold 50,000 shares of its common stock for $41 per share.
f.
By the end of the year, WWW had written off as uncollectible a total of $28,000 in accounts receivable.
g.
An existing factory with equipment was acquired during the year. The acquisition cost was allocated as
follows: $772,000 to land, $3,450,000 to building and 678,000 to equipment.
h.
WWW acquired a parcel of land adjoining the new factory by giving the owner 20,000 shares of its
common stock. At the date of the transaction, the market value of the stock was $40 per share.
i.
During the year WWW purchased $875,000 in marketable securities and sold securities which had cost
$584,000. The market value of the portfolio at the end of the year was $390,000.
j.
WWW owns 30% of a company which manufactures parts that WWW uses in its production process.
WWW received $18,000 in dividends from this partially owned company during 1996.
k.
Dividends declared during the year totaled $50,000.
106747859 created by T. Gordon 2/16/2016
Page 23
Acct 592 – Spring 2005
Homework 4 - Acct 315
Worksheet
Wenatchee Whirlpool World
Cash
Year ending
12/31/95 Ref
Ref
Credit
Year ending
12/31/96
837,600
150,000
390,000
240,000
Accounts Receivable
1,900,000
1,752,000
(148,000)
Allowance for doubtful accounts
(110,000)
(120,500)
(10,500)
875,000
1,145,000
270,000
62,000
84,000
22,000
3,000,000
3,097,000
97,000
10,800,000
16,420,000
5,620,000
(600,000)
(829,000)
(229,000)
128,000
71,500
(56,500)
18,205,000
24,847,600
Accounts Payable
(750,000)
(880,000)
(130,000)
Salaries Payable
(15,000)
(20,000)
(5,000)
Income Taxes Payable
(27,000)
(13,400)
13,600
Dividends Payable
(60,000)
(35,000)
25,000
Current portion long term debt
(21,000)
(29,000)
(8,000)
Merchandise Inventory
Prepaid Operating Expenses
Investments in affiliated companies
(equity method)
Plant, property & equipment
Accumulated Depreciation
Intangible Assets
Bonds Payable
(5,000,000)
837,600
Target
2,837,600
Securities Available for Sale (at
market)
2,000,000
Debit
(10,000,000) (5,000,000)
Premium/Discount on Bonds Payable
270,000
247,000
(23,000)
Deferred Income Taxes
(88,000)
(180,000)
(92,000)
(3,000,000)
(562,000)
2,438,000
Other long term liabilities
106747859 created by T. Gordon 2/16/2016
Page 24
Acct 592 – Spring 2005
Wenatchee Whirlpool World
12/31/95 ref
Debit
ref
Credit
12/31/96
Convertible preferred, $100 par
(2,000,000)
Common stock, $10 par
(1,500,000)
(3,100,000) (1,600,000)
Additional paid in capital
(1,200,000)
(3,950,000) (2,750,000)
Unrealized (gain)/loss investments
Retained Earnings
Closing entry for
(78,000)
(24,847,600)
1996
1996
Gain/(loss) on sale of PP&E
(40,000)
Realized gain/(loss) on investments
108,000
Realized gain on sale of patent
950,000
Interest and dividend revenue
13,000
(3,600,000)
Salaries and wages
(590,000)
Other operating expenses
(345,000)
Bad debt expense
Depreciation expense
Amortization of intangible assets
(38,500)
(244,000)
(6,500)
Interest expense
(669,400)
Income taxes expense
(740,400)
106747859 created by T. Gordon 2/16/2016
Receipt/(Dis
b)
6,200,000
115,000
1,500,000
51,000
(5,798,200) (1,062,200)
0 (18,205,000)
Earnings of affiliated companies
(equity method)
Cost of goods sold
(27,000)
(4,736,000)
Rev/(Exp)
Sales
(500,000)
Target
Page 25
Acct 592 – Spring 2005
Net income (accrual basis)
106747859 created by T. Gordon 2/16/2016
1,112,200
Page 26
Acct 592 – Spring 2005
Wenatchee Whirlpool World
Statement of Cash Flows
INFLOWS
OUTFLOWS
Operating Activities
Investing Activities
Financing Activities
Noncash Financing/Investing
CHANGE IN CASH
837,600
Totals
106747859 created by T. Gordon 2/16/2016
Page 27
(Subtotals)
Acct 592 – Spring 2005
Statement of Cash Flow – Easy Practice Problems 5 & 6
5.
Ulliman Company
Prepare a statement of cash flow – direct method including the reconciliation schedule. Most
information is provided on the attached workpaper.
Additional information:
a.
Dividends declared and paid totaled $700.
b.
On January 1, 1999 the 10% convertible bonds that had originally been issued at face value
were converted into 500 shares of common stock. The book value method was used to
account for the conversion.
c.
Long-term nonmarketable investments that cost $1,600 were sold for $2,300.
d.
The long-term note payable was paid by issuing 250 shares of common stock at the
beginning of the year.
e.
Equipment with a cost of $2,000 and a book value of $300 was sold for $100.
f.
Equipment was purchased at a cost of $16,200.
g.
The 12% bonds payable were issued on September 1, 1999 at 97. They mature on
September 1, 2009. The company uses the straight-line method to amortize the discount.
h.
Taxable income was less than pretax accounting income, resulting in a $396 increase in
deferred taxes payable.
i.
Short-term marketable securities were purchased at a cost of $1,300. The portfolio was
increased by $300 to a $3,800 fair value at year end by adjusting the related allowance
account.
6.
Driskoll Company
Prepare a statement of cash flow – direct method including the reconciliation schedule. Most
information is provided on the attached workpaper.
Additional information:
a.
Dividends were declared in the amount of $2,100.
b.
Bonds payable with a face value, book value, and market value of $14,000 were retired on
June 30, 1999.
c.
Bonds payable with a face value of $8,000 were issued at 90.25 on July 31, 1999, They
mature on July 31, 2004. The company uses the straight-line method to amortize the bond
discount.
d.
Equipment with a cost of $4,000 and a book value of $1,400 was exchanged for an acre of
land valued at $2,700. No cash was exchanged. The transaction was properly considered to
be a dissimilar asset exchange.
e.
Long-term investments in bonds being held to maturity with a cost of $1,000 were sold for
$800.
f.
Sixty-five shares of common stock were exchanged for a patent. The common stock was
selling for $20 per share at the time of the exchange.
g.
A tornado completely destroyed a small building that had an original cost of $8,000 and a
book value of $4,800. Settlement with the insurance company resulted in after-tax proceeds
of $2,200 and an extraordinary loss (net of income taxes) of $2,600.
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Page 28
Acct 592 – Spring 2005
5.
Homework Assignment – Ulliman Company
Uliman Company
Cash
Accounts receivable (net)
Marketable securities (at cost)
Allowance for change in value
Merchandise Inventory
Prepaid Expenses
Investments (long-term)
Land
Buildings and equipment
Accumulated depreciation
Accounts Payable
Income Taxes Payable
Wages payable
Interest payable
12% bonds payable
Premium/Discount on Bonds
Payable
Notes payable (long term)
10% Convertible bonds
Deferred Income Taxes
Convertible preferred, $100 par
Common stock, $10 par
Additional paid in capital
Unrealized (gain)/loss
investments
Retained Earnings
Closing entry for
Sales
Other revenue
Gain/(loss) on sale of PP&E
Realized gain/(loss) on
investments
Interest and dividend revenue
Cost of goods sold
Salaries & other operating
expenses
Other operating expense
Depreciation & amortization
Interest expense
Income taxes expense
Net income (accrual basis)
106747859 created by T. Gordon 2/16/2016
Year ending
01/01/99 Ref
1,400
2,800
1,700
500
8,100
1,300
7,000
15,000
32,000
(16,000)
0
53,800
Debit
Worksheet
Ref Credit
Year ending
12/31/99 Target
2,400
1,000
2,690
(110)
3,000
1,300
800
300
7,910
(190)
1,710
410
5,400
(1,600)
15,000
0
46,200
14,200
(16,400)
(400)
0
0
68,710
(3,800)
(2,400)
(1,100)
0
0
0
(4,150)
(2,504)
(650)
(400)
(10,000)
290
(350)
(104)
450
(400)
(10,000)
290
(3,500)
(9,000)
(800)
0
(14,000)
(8,700)
(500)
0
0
(1,196)
0
(21,500)
(13,700)
(800)
3,500
9,000
(396)
0
(7,500)
(5,000)
(300)
(10,000)
(53,800)
1999
Rev/
(Exp)
39,930
0
(200)
700
(14,100)
(4,100)
(68,710)
1999
Receipt/(Disb)
820
(19,890)
(11,000)
(1,000)
(2,100)
(410)
(2,050)
4,800
(53,800)
Page 29
Acct 592 – Spring 2005
5.
Ulliman Company, continued
Statement of Cash Flows
Operating Activities
INFLOWS
OUTFLOWS
Subtotals
Reconciliation Schedule:
Investing Activities
Financing Activities
Noncash Financing/Investing
CHANGE IN CASH
Totals
106747859 created by T. Gordon 2/16/2016
Page 30
Acct 592 – Spring 2005
6.
Homework Problem – Driskoll Company
Driskoll Company
Cash
Accounts receivable (net)
Inventories
Prepaid Expenses
Investments (long-term)
Land
Buildings
Acc'd depreciation - Bldg
Equipment
Acc'd depreciation - Equip
Patents
Accounts Payable
Interest payable
Wages payable
Bonds payable
Discount on bonds
Common stock, $10 par
Additional paid in capital
Unrealized (gain)/loss
investments
Retained Earnings
Year ending
12/31/99 Ref
2,700
5,900
15,300
1,400
8,300
16,300
68,700
(35,000)
29,600
(14,200)
8,700
107,700
(8,900)
(630)
(2,500)
(23,000)
0
(22,000)
(15,320)
0
(35,350)
(107,700)
ok
1999
Closing entry for
Rev/(Exp)
Sales
49,550
Gain/(loss) on exchange of assets
1,300
Realized gain/(loss) on
(200)
investments
Interest and dividend revenue
790
Cost of goods sold
(23,800)
Salaries & other operating
(16,510)
expenses
Other operating expense
(1,100)
Depreciation - buildings
(2,700)
Depreciation - equipment
(3,100)
Patent amortization
(815)
Interest expense
(1,715)
Income taxes expense
(500)
Extraordinary loss (net of taxes)
(2,600)
Net income (accrual basis)
(1,400)
106747859 created by T. Gordon 2/16/2016
Debit
Worksheet
Ref Credit
Year ending
12/31/99 Target
3,520
820
6,215
315
15,530
230
1,000
(400)
7,300
(1,000)
19,000
2,700
60,700
(8,000)
(34,500)
500
25,600
(4,000)
(14,700)
(500)
9,185
485
98,850
(9,195)
(300)
(2,600)
(17,000)
715
(22,650)
(15,970)
0
(295)
330
(100)
6,000
715
(650)
(650)
0
(31,850)
3,500
(98,850)
ok
1999
Receipt/(Disb)
Page 31
Acct 592 – Spring 2005
6.
Driskoll Company, continued
Statement of Cash Flows
Operating Activities
INFLOWS
OUTFLOWS
Subtotals
Reconciliation Schedule:
Investing Activities
Financing Activities
Noncash Financing/Investing
CHANGE IN CASH
Totals
106747859 created by T. Gordon 2/16/2016
Page 32
Acct 592 – Spring 2005
7.
Statement of Cash Flow Problem
from final exam, Spring 1998
Albion Altimeters Inc.
Balance Sheet
Current Assets
Cash
Securities Available for Sale (at market)
Accounts Receivable
Allowance for doubtful accounts
Merchandise Inventory
Prepaid Operating Expenses
Noncurrent Assets
Plant, property & equipment
Accumulated Depreciation
TOTAL ASSETS
Current Liabilities
Accounts Payable
Salaries Payable
Income Taxes Payable
Dividends Payable
Noncurrent Liabilities
Bonds Payable
Premium/Discount on Bonds Payable
Deferred Income Taxes
Stockholder's Equity
Common stock, $10 par
Additional paid in capital
Acc'd other comprehensive income*
Retained Earnings
Total liabilities and equity
12/31/97
Albion Altimeters Inc.
Income Statement
For year ending
12/31/96
310,200
1,112,000
781,000
(33,200)
829,000
38,800
3,037,800
400,000
500,000
900,000
(27,000)
850,000
25,000
2,648,000
3,562,000
(355,000)
6,244,800
1,880,000
(350,000)
4,178,000
413,000
7,200
23,500
0
443,700
350,000
8,500
27,000
25,000
410,500
1,000,000
118,000
103,700
1,221,700
1,000,000
124,000
88,000
1,212,000
1,510,000
1,972,000
13,000
1,084,400
4,579,400
6,244,800
1,000,000
700,000
(14,000)
869,500
2,555,500
4,178,000
Sales
Gain/(loss) on sale of PP&E
Interest and dividend revenue
Total revenues
Cost of goods sold
Salaries and wages
Other operating expenses
Bad debt expense
Depreciation & amortization expense
Interest expense
Income taxes expense
Net income
3,600,000
(30,000)
15,000
3,585,000
2,100,000
650,000
230,000
17,200
30,000
87,700
180,200
3,295,100
289,900
Required:
Use the additional information (below) and the worksheet provided to
prepare the statement of cash flow using the direct method. For full credit,
use the pages provided to prepare the formal statement in addition to the
worksheet.
Additional information:
a.
AA declared dividends of $75,000 on June 30, 1997.
b.
On Sept. 3, AA sold equipment with a book value of $65,000 for
$35,000 in cash. The original cost of the item was $90,000.
c.
AA purchased for cash plant, property & equipment for $1,740,000.
d.
On May 15, AA issued 50,000 shares of common stock at $35 each.
e.
AA wrote off $11,000 of bad debts during 1997.
f.
AA purchased for cash $585,000 in marketable securities on Apr. 1.
g.
On Oct. 10, AA issued 1,000 shares of stock in exchange for a
parcel of land. At that date, the market price of the stock was $32.
* Other comprehensive income is composed of the holding gains/losses
related to available for sale securities.
106747859 created by T. Gordon 2/16/2016
12/31/97
Page 33
Acct 592 – Spring 2005
7. Statement of Cash Flow Problem
Worksheet
Albion Altimeters Inc.
Year ending
12/31/96 Ref
Cash
Securities Available for Sale (at market)
400,000
500,000
Accounts Receivable
Debit
Ref
Year ending
12/31/97
Credit
310,200
1,112,000
(89,800)
612,000
900,000
781,000
(119,000)
Allowance for doubtful accounts
(27,000)
(33,200)
(6,200)
Merchandise Inventory
850,000
829,000
(21,000)
Prepaid Operating Expenses
25,000
38,800
13,800
Plant, property & equipment
1,880,000
3,562,000
1,682,000
Accumulated Depreciation
(350,000)
(355,000)
(5,000)
Accounts Payable
4,178,000
(350,000)
6,244,800
(413,000)
(63,000)
(8,500)
(7,200)
1,300
Income Taxes Payable
(27,000)
(23,500)
3,500
Dividends Payable
(25,000)
0
25,000
(1,000,000)
(1,000,000)
0
(124,000)
(118,000)
6,000
(88,000)
(103,700)
(15,700)
(1,000,000)
(1,510,000)
(510,000)
(700,000)
(1,972,000)
(1,272,000)
14,000
(13,000)
(27,000)
(869,500)
(1,084,400)
(214,900)
(4,178,000)
(6,244,800)
(2,066,800)
Salaries Payable
Bonds Payable
Premium/Discount on Bonds Payable
Deferred Income Taxes
Common stock, $10 par
Additional paid in capital
Acc'd other comprehensive income
Retained Earnings
0
Closing entry for 1997
Sales
Gain/(loss) on sale of PP&E
Interest and dividend revenue
Rev/(Exp)
Ref
Credit
Receipt/(Disb)
15,000
Salaries and wages
(650,000)
Other operating expenses
(230,000)
Bad debt expense
(17,200)
Depreciation expense
(30,000)
Interest expense
(87,700)
106747859 created by T. Gordon 2/16/2016
Debit
(30,000)
(2,100,000)
Net income (accrual basis)
Ref
3,600,000
Cost of goods sold
Income taxes expense
89,800
Target
(180,200)
289,900
Page 34
Acct 592 – Spring 2005
7. Albion Altimeters
Statement of Cash Flows
INFLOWS
OUTFLOWS
(Subtotals)
Operating Activities
Investing Activities
Financing Activities
Noncash Financing/Investing
CHANGE IN CASH
89,800
Totals
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Page 35
Acct 592 – Spring 2005
Albion Altimeters
Statement of Cash Flow
For year ended 12-31-97
Cash provided by operations
Cash provided by investing activities
Cash provided by financing activities
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Page 36
Acct 592 – Spring 2005
Albion Altimeters
Statement of Cash Flow
For year ended 12-31-97
Reconciling schedule
Notes:
106747859 created by T. Gordon 2/16/2016
Page 37
Acct 592 – Spring 2005
Acct 315 - Statement of Cash Flow
Homework Problem # 8
Instructions:
Prepare the statement of cash flow for Endicott Engines Inc. (attached) using the direct method.
Show all your work on clearly labeled and well-organized worksheet (provided) or equivalent
printout. Label your work and answers clearly. You must submit a worksheet if you want me to
be able to follow your thought process (in case your answer is wrong). If the problem doesn’t
“balance”, you may “plug” something (clearly labeled as a plug) and still obtain most of the
available points. If you are using spreadsheet software, please explain your computations since I
cannot tell what formulas you incorporated into the cells from looking at the printout. The Excel
worksheet is available on the course web page: http://www.academic.uidaho.edu/Acct301.
NOTE: For full credit, you must prepare the statement of cash flow in good form (direct
method) with all necessary disclosures including a reconciling schedule and disclosures about
noncash financing and investing activities.
Endicott Engines Inc.
Income Statement
For year ending 12/31/02
Sales
Earnings of affiliated companies (equity method)
Gain/(loss) on sale of PP&E
Realized gain/(loss) on investments
Realized gain on sale of patent
Interest and dividend revenue
Total revenues
Cost of goods sold
Salaries and wages
Other operating expenses
Bad debt expense
Depreciation & amortization expense
Income taxes expense
6,500,000
125,000
(30,000)
192,000
450,000
15,000
7,252,000
3,800,000
610,000
354,000
47,200
261,000
692,100
572,700
6,337,000
Net income
915,000
106747859 created by T. Gordon 2/16/2016
Page 38
Acct 592 – Spring 2005
Endicott Engines Inc.
Additional information:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
On February 19, EEI sold an internally developed patent for $500,000.
On April 3, EEI issued $6,000,000 in bonds at face value. The semi-annual bonds have a
coupon rate of 10% per annum.
During the year, EEI disposed of various items of equipment with a total book value of
$60,000 and original cost of $80,000. The amount received was $30,000 in cash.
During the third quarter, shareholders holding 10,000 shares of the preferred stock
converted them into common stock. The conversion ratio was 8 shares of common for
each share of preferred.
On July 20, EEI sold 25,000 shares of its common stock for $43 per share.
By the end of the year, EEI had written off as uncollectible a total of $35,000 in accounts
receivable.
An existing factory with equipment was acquired during the year. The acquisition cost
was allocated as follows: $750,000 to land, $4,000,000 to building and 600,000 to
equipment.
EEI acquired a parcel of land adjoining the new factory by giving the owner 10,000
shares of its common stock. At the date of the transaction, the market value of the stock
was $45 per share.
New equipment for the factory was obtained under a capital lease. The present value of
the minimum lease payments was $722,000.
During the year EEI purchased $900,000 in marketable securities and sold securities
which had cost $600,000. The market value of the portfolio at the end of the year was
$536,000.
EEI owns 40% of a company that manufactures parts that EEI uses in its production
process. EEI received $20,000 in dividends from this partially owned company during
2002.
Dividends declared during the year totaled $100,000.
106747859 created by T. Gordon 2/16/2016
Page 39
Acct 592 – Spring 2005
Endicott Engines Inc.
Balance Sheet
Current Assets
Cash
Securities Available for Sale
Accounts Receivable
Allowance for doubtful accounts
Merchandise Inventory
Prepaid Operating Expenses
Noncurrent Assets
Investments (partially owned companies)
Plant, property & equipment
Accumulated Depreciation
Intangible Assets
TOTAL ASSETS
Current Liabilities
Accounts Payable
Salaries Payable
Income Taxes Payable
Dividends Payable
12/31/02
12/31/01
1,308,200
536,000
2,145,000
(122,200)
1,165,000
63,000
5,095,000
1,500,000
300,000
2,000,000
(110,000)
975,000
50,000
4,715,000
2,605,000
17,142,000
(934,000)
93,000
24,001,000
2,500,000
10,700,000
(700,000)
150,000
17,365,000
1,050,000
43,000
24,000
85,000
1,202,000
800,000
18,000
35,000
60,000
913,000
11,000,000
(277,000)
142,000
749,000
570,000
12,184,000
5,000,000
(300,000)
90,000
323,000
3,000,000
8,113,000
1,000,000
2,150,000
2,575,000
27,000
4,863,000
10,615,000
24,001,000
2,000,000
1,000,000
1,200,000
91,000
4,048,000
8,339,000
17,365,000
Noncurrent Liabilities
Bonds Payable
Discount on Bonds
Deferred Income Taxes
Lease obligations
Other long term liabilities
Stockholder's Equity
Convertible preferred, $100 par
Common stock, $10 par
Additional paid in capital
Unrealized (gain)/loss investments
Retained Earnings
Total liabilities and equity
106747859 created by T. Gordon 2/16/2016
Page 40
Acct 592 – Spring 2005
Worksheet
Endicott Engines Inc.
Cash
Endicott Engines Inc.
Year ending
12/31/01 Ref
Ref
Credit
12/31/02
(191,800)
300,000
536,000
236,000
Accounts Receivable
2,000,000
2,145,000
145,000
Allowance for doubtful accounts
(110,000)
(122,200)
(12,200)
975,000
1,165,000
190,000
Prepaid Operating Expenses
50,000
63,000
13,000
Investments (equity method)
2,500,000
2,605,000
105,000
Plant, property & equipment
10,700,000
17,142,000
6,442,000
(700,000)
(934,000)
(234,000)
150,000
93,000
(57,000)
17,365,000
24,001,000
(800,000)
(1,050,000)
(250,000)
Salaries Payable
(18,000)
(43,000)
(25,000)
Income Taxes Payable
(35,000)
(24,000)
11,000
Dividends Payable
(60,000)
(85,000)
(25,000)
(5,000,000)
(11,000,000)
(6,000,000)
Premium/Discount on Bonds Payable
300,000
277,000
(23,000)
Deferred Income Taxes
(90,000)
(142,000)
(52,000)
(323,000)
(749,000)
(426,000)
Merchandise Inventory
Accumulated Depreciation
Intangible Assets
Accounts Payable
Bonds Payable
Lease obligations
106747859 Created by T. Gordon 2/16/2016
191,800
Target
1,308,200
Securities Available for Sale
1,500,000
Debit
Year
ending
Page 41
Acct 592 – Spring 2005
Endicott Engines Inc.
12/31/01 Ref
Debit
Ref
Credit
12/31/02
Target
Other long term liabilities
(3,000,000)
(570,000)
2,430,000
Convertible preferred, $100 par
(2,000,000)
(1,000,000)
1,000,000
Common stock, $10 par
(1,000,000)
(2,150,000) (1,150,000)
Additional paid in capital
(1,200,000)
(2,575,000) (1,375,000)
Unrealized (gain)/loss investments
Retained Earnings
0
Closing entry for 2002:
Sales
(91,000)
(27,000)
64,000
(4,048,000)
(4,863,000)
(815,000)
(17,365,000)
(24,001,000)
Rev/(Exp)
Earnings of affiliated company (equity
method)
125,000
Gain/(loss) on sale of PP&E
(30,000)
Realized gain/(loss) on investments
192,000
Realized gain on sale of patent
450,000
Interest and dividend revenue
15,000
Cost of goods sold
(3,800,000)
Salaries and wages
(610,000)
Other operating expenses
(354,000)
Bad debt expense
Depreciation expense
Amortization of intangible assets
(47,200)
(254,000)
(7,000)
Interest expense
(692,100)
Income taxes expense
(572,700)
Net income (accrual basis)
Receipt/(Disb)
6,500,000
915,000
Endicott Engines Inc.
Statement of Cash Flows
106747859 Created by T. Gordon 2/16/2016
INFLOWS
OUTFLOW
S
Page 42
Acct 592 – Spring 2005
Operating Activities
Investing Activities
106747859 Created by T. Gordon 2/16/2016
Page 43
Acct 592 – Spring 2005
Endicott Engines Inc.
Financing Activities
Noncash Financing/Investing
CHANGE IN CASH
Totals
106747859 Created by T. Gordon 2/16/2016
191,800
Page 44
Acct 592 – Spring 2005
Statement of Cash Flow Examples - Solutions
Example 1 - completed worksheet
Palouse Pottery
Cash
Year ending
12/31/96
Year ending
Ref
15,000
x
Debit
Ref
40,000
Allowance for doubtful accounts
(3,000)
Merchandise Inventory
Prepaid Expenses
12/31/97
27,000
i
Accounts Receivable
Credit
Target
42,000
27,000
2,000
a
500
37,500
(2,500)
j
2,000
(4,500)
(1,500)
18,000
43,000
18,000
3,000
6,000
3,000
a
500
25,000
k
3,000
L
d
10,000
Plant, property & equipment
215,000
f
48,000
b
17,000
236,000
21,000
Accumulated Depreciation
(80,000)
b
9,000
m
11,000
(82,000)
(2,000)
215,000
278,000
Accounts Payable
(23,000)
n
8,000
(31,000)
(8,000)
Salaries Payable
(2,000)
o
7,000
(9,000)
(7,000)
Interest payable
(2,000)
(1,500)
500
Income Taxes Payable
(1,500)
q
4,000
(5,500)
(4,000)
c
13,000
(8,000)
(8,000)
(15,000)
10,000
g
45,000
(145,000)
(45,000)
x
14,500
(63,000)
(1,500)
(278,000)
0
Dividends Payable
Long term liabilities
Common stock, $1 par
Retained Earnings
p
500
0
h
5,000
(25,000)
e
10,000
(100,000)
(61,500)
c
13,000
(215,000)
Closing entry for
x
1997
Rev/(Exp)
1997
Receipt/(Disb)
Sales
93,000
i
2,000
Gain/(loss) on sale of PP&E
(4,000)
b
4,000
Realized gain/(loss) - land
20,000
95,000
0
d
20,000
0
Cost of goods sold
(35,000)
n
8,000
k
18,000
(45,000)
Salaries & other operating expenses
(37,000)
o
7,000
L
3,000
(33,000)
Bad debt expense
Depreciation & amortization
(2,000)
j
2,000
(11,000)
m
11,000
Interest expense
(2,500)
Income taxes expense
(7,000)
q
4,000
Net income (accrual basis)
14,500
X
14,500
Statement of Cash Flows
Operating Activities
0
0
p
500
X
11,000
(3,000)
(INFLOWS)
X
11,000
Sold operational asset
b
4,000
Sold land
d
30,000
11,000 Operating
Cash
(OUTFLOWS)
11,000
Investing Activities
(14,000)
Purchased Plant, Property &
Equipment
f
48,000
e
10,000
h
5,000
Financing Activities
30,000
Paid long-term debt
Issued common stock
(3,000)
g
45,000
Paid cash dividend
Noncash Financing/Investing
CHANGE IN CASH
Totals
106747859 Created by T. Gordon 2/16/2016
X
276,500
27,000
27,000
276,500
Page 45
Acct 592 – Spring 2005
Solutions for Example Problems
Example 1 for Acct 301
Solution:
Palouse Pottery
Statement of Cash Flows
For year ended
31-Dec-97
Inflows
Cash provided by operations
Cash collected from customers
Interest & dividends received
Cash paid for merchandise
Cash paid to employees
Other operating disbursements
Interest paid
Income taxes paid
Outflows
Net
95,000
0
Subtotals
95,000
Subtotals
4,000
30,000
34,000
Cash provided by investing activities
Purchase plant, property & equipment
Sale of plant, property & equipment
Sale of land
(45,000)
(20,000)
(13,000)
(3,000)
(3,000)
(84,000)
11,000
(48,000)
Cash provided by financing activities
Dividends paid
Long-term debt retired
Common stock issued
(48,000)
(14,000)
(5,000)
(10,000)
Subtotals
45,000
45,000
Change in cash
Beginning balance - Cash
Ending balance - Cash
(15,000)
30,000
27,000
15,000
42,000
Schedule to reconcile net income to cash provided by operations
Net Income
14,500
Depreciation & amortization
11,000
Realized gains/losses PP&E
4,000
Realized gain/loss - land sale
(20,000)
Change in working capital accounts:
Net accounts receivable
4,000
Merchandise Inventory
(18,000)
Prepaid Expenses
(3,000)
Accounts Payable
8,000
Salaries Payable
7,000
Income Taxes Payable
4,000
Interest Payable
(500)
Cash provided by operations:
11,000
Non-cash financing and investing activities
None
106747859 Created by T. Gordon 2/16/2016
Page 46
Acct 592 – Spring 2005
Example 1 for Acct 301 – INDIRECT METHOD SOLUTION
Statement of Cash Flow Worksheet
Year ending
Palouse Pottery
12/31/96
Ref
Cash
15,000 x
Accounts Receivable
40,000
Allowance for doubtful accounts
(3,000)
Merchandise Inventory
25,000
Prepaid Expenses
3,000
Plant, property & equipment
215,000 f
Accumulated Depreciation
(80,000) b
215,000
Accounts Payable
(23,000)
Salaries Payable
(2,000)
Interest payable
(2,000)
Income Taxes Payable
(1,500)
Dividends Payable
0c
Long term liabilities
(25,000) e
Common stock, $1 par
(100,000)
Retained Earnings
(61,500) c
(215,000)
Statement of Cash Flows
Operating Activities
Net income
Add back loss on sale of equipment
Minus gain on sale of land
depreciation
Financing Activities
Dividends paid
Payment on LT debt
Issued common stock
Noncash Financing/Investing
18,000
3,000
48,000 b,d
9,000
27,000
11,000
8,000
7,000
500
5,000 c
10,000
g
13,000 h
4,000
13,000
45,000
14,500
Year ending
12/31/97
42,000
37,500
(4,500)
43,000
6,000
236,000
(82,000)
278,000
(31,000)
(9,000)
(1,500)
(5,500)
(8,000)
(15,000)
(145,000)
(63,000)
(278,000)
(OUTFLOWS
)
11,000
h
b
14,500
4,000
d
20,000
11,000
4,000
18,000
3,000
8,000
7,000
500
4,000
b
d
g
4,000
30,000
f
48,000
c
e
5,000
10,000
X
27,000
45,000
CHANGE IN CASH
Totals
265,000
106747859 Created by T. Gordon 2/16/2016
Credit
2,500
1,500
(INFLOWS)
Change in working capital accounts:
A/R (net)
Inventory
Prepaid expenses
A/P
Salaries payable
Interest payable
Income taxes payable
Investing Activities
Sold equipment
Sold land
Purchase PP&E
Debit
Ref
27,000
265,000
Page 47
Target
27,000
(2,500)
(1,500)
18,000
3,000
21,000
(2,000)
(8,000)
(7,000)
500
(4,000)
(8,000)
10,000
(45,000)
(1,500)
0
Acct 592 – Spring 2005
Example 2 for Acct 301 - S97
Statement of Cash Flow Worksheet
Moscow Moving & Storage
Year ending
12/31/96
Ref
Ref
Debit
Year ending
12/31/97
Credit
(10,000)
1,000
500
1,000
28,500
(2,000)
(1,500)
(500)
L
4,000
17,000
500
7,000
(4,000)
b
i
15,000
5,000
289,100
(16,000)
322,100
69,000
4,000
m
3,000
(13,000)
(1,000)
(3,000)
2,000
o
1,000
(1,000)
(10,000)
(1,000)
20,000
g
d
x
45,000
36,000
6,000
(181,000)
(116,100)
(322,100)
(81,000)
(1,000)
0
15,000
x
10,000
Accounts Receivable
Allowance for doubtful accounts
30,000
(1,500)
j
a
h
Merchandise Inventory
Prepaid Expenses
10,000
4,500
500
k
7,000
g
f
b
45,000
39,000
9,000
(10,000)
(3,000)
n
2,000
0
(30,000)
e
20,000
Plant, property & equipment
Accumulated Depreciation
220,100
(20,000)
258,100
Accounts Payable
Salaries Payable
Interest payable
Long term liabilities
(100,000)
(115,100)
(258,100)
Common stock, $1 par
Retained Earnings
a
c
5,000
1997
1997
Closing entry for
Sales
Rev/(Exp)
80,000
Gain/(loss) on sale of PP&E
Cost of goods sold
Salaries & other operating expenses
Bad debt expense
Depreciation & amortization
Interest expense
Income taxes expense
Net income (accrual basis)
j
1,000
(2,000)
(35,000)
(26,000)
(1,000)
(5,000)
(2,000)
b
m
L
h
i
o
2,000
3,000
4,000
1,000
5,000
1,000
(3,000)
6,000
x
6,000
Statement of Cash Flows
Receipt/(Disb)
81,000
k
n
7,000
2,000
x
14,000
x
14,000
Investing Activities
Sold operational assets
b
4,000
0
(39,000)
(24,000)
0
0
(1,000)
(3,000)
14,000 Operating Cash
(OUTFLOWS)
(INFLOWS)
Operating Activities
14,000
(35,000)
Purchased operational assets
f
39,000
Financing Activities
Paid cash dividend
Issued common stock
c
5,000
e
20,000
g
x
45,000
11,000
d
36,000
Paid long term debt
Noncash Financing/Investing
Acquired land in exchange for stock
CHANGE IN CASH
Totals
Target
5,000
Cash
g
x
45,000
10,000
259,500
0
(10,000)
259,500
0
Additional Information
a. Wrote off $500 accounts receivable as uncollectible
0
0
d. Issued common stock for $36,000 cash
b. Sold operational assets for $4,000 cash
e. Paid a $20,000 long-term note installment
(cost $15,000, acc'd depreciation $9,000)
c. Declared and paid a cash dividend, $5,000
f. Purchased operational assets, $39,000 cash
g. Acquired land in exchange for 1000 shares worth $45 each
106747859 Created by T. Gordon 2/16/2016
Page 48
Acct 592 – Spring 2005
Example 2 for Acct 301 - Solution:
Moscow Moving & Storage
Statement of Cash Flows
For year ended
31-Dec-97
Inflows
Cash provided by operations
Cash collected from customers
Interest & dividends received
Cash paid for merchandise
Cash paid to employees
Other operating disbursements
Interest paid
Income taxes paid
Outflows
81,000
0
Subtotals
Cash provided by investing activities
Purchase plant, property & equipment
Sale of plant, property & equipment
Sale of land
81,000
(39,000)
(14,000)
(10,000)
(1,000)
(3,000)
(67,000)
14,000
(39,000)
4,000
Subtotals
Cash provided by financing activities
Dividends paid
Long-term debt retired
Common stock issued
4,000
(39,000)
(35,000)
(5,000)
(20,000)
Subtotals
36,000
36,000
(25,000)
Change in cash
Beginning balance – Cash
Ending balance – Cash
11,000
(10,000)
15,000
5,000
Schedule to reconcile net income to cash provided by operations
Net Income
6,000
Depreciation & amortization
5,000
Realized gains/losses PP&E
2,000
Change in working capital accounts:
Net accounts receivable
2,000
Merchandise Inventory
(7,000)
Prepaid Expenses
4,000
Accounts Payable
3,000
Salaries Payable
(2,000)
Interest Payable
1,000
Cash provided by operations:
14,000
Non-cash financing and investing activities
Acquired land in exchange for common stock
106747859 Created by T. Gordon 2/16/2016
Net
Page 49
Acct 592 – Spring 2005
Example 3 – workpaper solution
Avery Slings & Arrows
Year ending
0 12/31/03
Cash
2,850,000
Securities Available for Sale
180,000
Allowance to adjust to market
(80,000)
Accounts Receivable
2,000,000
Allowance for doubtful accounts
(100,000)
Merchandise Inventory
900,000
Prepaid Expenses
50,000
Investments in affiliated companies
2,000,000
(equity method)
Land, building & equipment
17,800,000
Ref
x
c
r
s
o
Debit
Ref
33,000
45,000
298,000
46,000
29,000
Year ending
12/30/04
2,261,000
231,000
27,000
2,059,000
(112,000)
602,000
4,000
2,121,000
Target
(589,000)
51,000
107,000
59,000
(12,000)
(298,000)
(46,000)
121,000
Credit
589,000
222,000
g
273,000 J
107,000
92,000 o
33,000 o
s
s
150,000 g
a
2,767,000 d
500,000
20,715,000
2,915,000
Accumulated Depreciation
Intangible Assets
g
(1,800,000) d
73,000 I
648,000
376,000 p
500,000 p
757,000
5,000
(2,181,000)
568,000
(381,000)
495,000
Total assets
23,873,000
Accounts Payable
Salaries Payable
Interest payable
Income Taxes Payable
Dividends Payable
Bonds Payable
Premium/Discount on Bonds Payable
Convertible Bonds Payable
Lease obligation
Asset retirement obligation
Deferred Income Taxes
Other long term liabilities
Convertible preferred, $100 par
Common stock, $10 par
(650,000)
(21,000)
(55,000)
(32,000)
(60,000)
(4,000,000)
(656,000)
(3,000,000)
(1,825,000)
(250,000)
(75,000)
(2,590,000)
0
(3,000,000)
Additional paid in capital - common
(1,600,000)
Unrealized (gain)/loss AFS invest
Treasury stock (at cost)
Other paid in capital
80,000
10,000 n
0
k
(6,149,000) e
Retained Earnings
(23,873,000)
106747859 Created by T. Gordon 2/16/2016
26,295,000
t
t
e
u
f
v
y
303,000
3,000
(347,000)
(18,000)
(156,000)
(45,000)
(128,000)
(7,000,000)
(642,000)
(1,500,000)
(2,108,000)
(275,000)
(122,000)
(590,000)
0
(5,125,000)
303,000
3,000
(101,000)
(13,000)
(68,000)
(3,000,000)
14,000
1,500,000
(283,000)
(25,000)
(47,000)
2,000,000
0
(2,125,000)
t
t
135,000 e
L
14,000
1,500,000
365,000 g
q
w
2,000,000
101,000
13,000
203,000
3,000,000
b
f
k
250,000
375,000
1,500,000
b
f
800,000
1,125,000
(3,525,000)
(1,925,000)
r
38,000 m
m
1,500,000
203,000 X
107,000
10,000
13,000
(27,000)
38,000
(13,000)
(107,000)
28,000
(13,000)
(4,712,000)
1,437,000
648,000
25,000
47,000
266,000
(26,295,000)
Page 50
Acct 592 – Spring 2005
Avery Slings & Arrows
Closing entry for
Sales
Earnings of affiliates (equity method)
Gain/(loss) on sale of PP&E
Realized gain/(loss) on investments
Interest and dividend revenue
Cost of goods sold
Salaries and wages
Other operating expenses
Bad debt expense
Depreciation expense
Amortization of intangibles
Accretion expense
Interest expense
Income taxes expense
Net income (accrual basis)
2004
Rev/(Exp)
6,600,000
150,000
(65,000)
53,000
15,000
(3,490,000)
(632,000)
(421,000)
(45,000)
(757,000)
(5,000)
(25,000)
(935,000)
Ref
d
g
s
Debits
Cash provided by operations
off by
106747859 Created by T. Gordon 2/16/2016
1,082,000
1,082,000
92,000
150,000
J
53,000
s
o
p
p
q
t
w
(177,000) t
266,000 X
266,000 X
X
14,000
2004
Receipt/
(Disb)
6,508,000
0
0
0
44,000
(3,495,000)
(635,000)
(375,000)
0
0
0
0
(848,000)
s
g
29,000
298,000 t
t
46,000
45,000
757,000
5,000
25,000
101,000 u
47,000
13,000
Cash provided by operations:
Credits
65,000
INFLOWS
Reconciling schedule:
Net income
Depreciation
Amortization & impairment of
intangibles
Accretion expense
Bond premiums/discounts
Realized gains/losses PP&E
Realized gain/loss investments
Equity method investments
Deferred income taxes
Change in working capital:
Net accounts receivable
Merchandise Inventory
Prepaid Expenses
Accounts Payable
Salaries Payable
Interest payable
Income Taxes Payable
Ref
1,082,000
303,000
3,000
(117,000)
OUTFLOWS
1,082,000
266,000
757,000
5,000
25,000
(14,000)
65,000
(53,000)
(121,000)
47,000
(47,000)
298,000
46,000
(303,000)
(3,000)
101,000
13,000
1,082,000
0
Page 51
Acct 592 – Spring 2005
Avery Slings & Arrows
Investing Activities
Purchased PP&E
Purchased marketable securities
Sold equipment
Purchased patent
Sold investments
Financing Activities
Issued common stock
Paid dividends
Issued bonds
Sold treasury stock
Purchased treasury stock
Payments on capital leases
Payments on long-term debt
Noncash Financing/Investing
Bonds converted into stock
Capital lease
Stock dividend
Ref
Inflows
Outflows
(3,206,000)
d
a
c
2,767,000
273,000
I
500,000
59,000
J
275,000
1,535,000
b
1,050,000
L
m
3,000,000
23,000
f
h
K
CHANGE IN CASH
Totals
ok
106747859 Created by T. Gordon 2/16/2016
Ref
e
135,000
n
v
y
38,000
365,000
2,000,000
1,500,000 f
648,000
1,500,000
648,000
589,000 x
20,930,000
20,930,000
0
(589,000) Change in
Cash
0 half
0 double
0 divide by 9
Page 52
Acct 592 – Spring 2005
Solution
Example 4- Acct 315
Worksheet
Year ending
Wenatchee Whirlpool World
Year ending
12/31/95 Ref
Cash
2,000,000
Securities Available for Sale (at market)
150,000
X
I
Debit
Ref
Credit
12/31/96
837,600
875,000
Target
2,837,600
837,600
390,000
240,000
o
51,000
I
584,000
p
120,000
f
28,000
1,752,000
(148,000)
m
38,500
(120,500)
(10,500)
Accounts Receivable
1,900,000
Allowance for doubtful accounts
(110,000)
f
28,000
875,000
p
270,000
1,145,000
270,000
Prepaid Operating Expenses
62,000
p
22,000
84,000
22,000
Investments (equity method)
3,000,000
l
115,000
h
800,000
10,800,000
g
(600,000)
c
Merchandise Inventory
Plant, property & equipment
Accumulated Depreciation
Intangible Assets
j
18,000
3,097,000
97,000
4,900,000
c
80,000
16,420,000
5,620,000
15,000
n
244,000
(829,000)
(229,000)
n
6,500
a
50,000
71,500
(56,500)
128,000
18,205,000
Accounts Payable
24,847,600
(750,000)
Salaries Payable
(15,000)
Income Taxes Payable
(27,000)
q
13,600
Dividends Payable
(60,000)
k
75,000
Current portion long term debt
p
130,000
(880,000)
(130,000)
p
5,000
(20,000)
(5,000)
(13,400)
13,600
k
50,000
(35,000)
25,000
(21,000)
s
8,000
(29,000)
(8,000)
(5,000,000)
b
5,000,000
(10,000,000)
(5,000,000)
Premium/Discount on Bonds Payable
270,000
r
23,000
247,000
(23,000)
Deferred Income Taxes
(88,000)
q
92,000
(180,000)
(92,000)
(562,000)
2,438,000
Bonds Payable
Other long term liabilities
(3,000,000)
s
2,430,000
s
8,000
12/31/95 ref
Convertible preferred, $100 par
(2,000,000)
Common stock, $10 par
(1,200,000)
Unrealized (gain)/loss investments
Retained Earnings
0
ref
Credit
12/31/96
1,500,000
(1,500,000)
Additional paid in capital
106747859 Created by T. Gordon 2/16/2016
d
Debit
(78,000)
o
51,000
(4,736,000)
k
50,000
h
200,000
e
500,000
d
900,000
h
600,000
e
1,550,000
d
600,000
X
1,112,200
(18,205,000)
(500,000)
1,500,000
(3,100,000)
(1,600,000)
(3,950,000)
(2,750,000)
(27,000)
51,000
(5,798,200)
(1,062,200)
(24,847,600)
Page 53
Target
Acct 592 – Spring 2005
Wenatchee Whirlpool World
Closing entry for
1996
1996
Rev/(Exp)
Sales
6,200,000
Receipt/(Disb)
p
120,000
Earnings of affiliated company (equity
method)
Gain/(loss) on sale of PP&E
(40,000)
Realized gain/(loss) on investments
108,000
I
108,000
0
Realized gain on sale of patent
950,000
a
950,000
0
Interest and dividend revenue
13,000
j
18,000
Cost of goods sold
(3,600,000)
p
130,000
Salaries and wages
(590,000)
p
5,000
Other operating expenses
(345,000)
Bad debt expense
115,000
6,320,000
l
c
115,000
0
40,000
0
31,000
p
270,000
(3,740,000)
(585,000)
p
22,000
(367,000)
(38,500)
m
38,500
0
(244,000)
n
244,000
0
(6,500)
n
6,500
0
Interest expense
(669,400)
r
23,000
(646,400)
Income taxes expense
(740,400)
q
92,000
q
13,600
(662,000)
Net income (accrual basis)
1,112,200
X
1,112,200
X
350,600
350,600
Depreciation expense
Amortization of intangible assets
Statement of Cash Flows
INFLOWS
X
Operating Activities
OUTFLOWS
(Subtotals)
350,600
Reconciling schedule:
Net Income
Depreciation & amortization
1,112,200
250,500
Bond premiums/discounts
23,000
Realized gains/losses PP&E
40,000
Realized gain/loss investments
(108,000)
Gain on sale of patent
(950,000)
Undistributed Earnings of Investees
Deferred income taxes
(97,000)
92,000
Change in working capital accounts:
Net accounts receivable
158,500
Merchandise Inventory
(270,000)
Prepaid Operating Expenses
(22,000)
Accounts Payable
130,000
Salaries Payable
5,000
Income Taxes Payable
(13,600)
Cash provided by operations:
350,600
106747859 Created by T. Gordon 2/16/2016
Page 54
Acct 592 – Spring 2005
Investing Activities
Sale of patent
a
1,000,000
Sale of equipment
c
25,000
Purchase factory
g
4,900,000
Purchase investment securities
I
875,000
Dividends paid
k
75,000
Long-term debt repaid
s
2,430,000
Sold investment securities
I
692,000
Issued bonds
b
5,000,000
Issued common stock
e
2,050,000
Financing Activities
Noncash Financing/Investing
Preferred converted to common stock
d
1,500,000
d
1,500,000
Swap common stock for land
h
800,000
h
800,000
X
837,600
CHANGE IN CASH
Totals
106747859 Created by T. Gordon 2/16/2016
25,237,000
25,237,000
Page 55
Acct 592 – Spring 2005
Solution
Working through the additional items of information:
a.
On February 25, WWW sold an internally developed patent for $1,000,000. The patent was carried on the
books at unamortized legal fees amounting to $50,000 at date of sale.
Cash [Investing - inflow]
Intangible Assets
Realized gain on sale of patent
b.
80,000
1,500,000
900,000
600,000
2,050,000
500,000
1,550,000
By the end of the year, WWW had written off as uncollectible a total of $28,000 in accounts receivable.
Allowance for doubtful accounts
Accounts receivable
g.
25,000
15,000
40,000
On July 20, WWW sold 50,000 shares of its common stock for $41 per share. The proceeds would be
$2,050,000 (41 * 50,000) and the par value portion would be $500,000 with the rest as additional paid in
capital.
Cash [Financing - inflow]
Common stock, $10 par
Additional paid in capital
f.
5,000,000
During the third quarter, shareholders holding 15,000 shares of the preferred stock converted them into
common stock. The conversion ratio was 6 shares of common for each share of preferred. Therefore 90,000
shares of common stock would be issues (6 * 15,000) with a par value of $900,000 ($10 par each). The book
value of the preferred was 1,500,000. Therefore, additional paid in capital to balance the journal entry
would be 600,000.
Convertible Preferred Stock, $100 par
Common stock, $10 par
Additional paid-in capital
e.
5,000,000
During the year, WWW disposed of various items of equipment with a total book value of $65,000 and
original cost of $80,000. The amount received was $25,000 in cash. Accumulated depreciation would be
$15,000 (80,000 - 65,000)
Cash [Investing - inflow]
Accumulated depreciation
Loss on sale of plant, property & equipment
Plant, property and equipment
d.
50,000
950,000
On March 31, WWW issued $5,000,000 in bonds at face value. The semi-annual bonds have a coupon rate
of 10% per annum.
Cash [Financing - inflow]
Bonds payable
c.
1,000,000
28,000
28,000
An existing factory with equipment was acquired during the year. The acquisition cost was allocated as
follows: $772,000 to land, $3,450,000 to building and 678,000 to equipment. This totals to $4,900,000.
Plant, property and equipment
Cash [Investing outflow]
106747859 Created by T. Gordon 2/16/2016
4,900,000
4,900,000
Page 56
Acct 592 – Spring 2005
h.
WWW acquired a parcel of land adjoining the new factory by giving the owner 20,000 shares of its common
stock. At the date of the transaction, the market value of the stock was $40 per share. The value of the land
is $800,000 (20,000 * 40).
Plant, property and equipment
Common stock, $10 par
Additional paid in capital
i.
875,000
875,000
692,000
584,000
108,000
WWW owns 30% of a company which manufactures parts that WWW uses in its production process.
WWW received $18,000 in dividends from this partially owned company during 1996. Dividends received
from equity-method investments reduce the investment account and do NOT appear on the income statement.
Cash [Operating - dividends received]
Investments (partially-owned companies)
k.
200,000
600,000
During the year WWW purchased $875,000 in marketable securities and sold securities which had cost
$584,000. The market value of the portfolio at the end of the year was $390,000. From the income
statement, the gain on sale was 108,000. Therefore, the cash received from the sale of securities was
584+108 = $692,000
Investments - Securities available for sale
Cash [Investing outflow]
Cash [Investing inflow]
Investments - Securities available for sale
Gain on sale of investments
j.
800,000
18,000
18,000
Dividends declared during the year totaled $50,000. Dividends declared reduce retained earnings and
increase dividends payable. The balancing number in dividends payable (if this account exists) will be the
dividends paid. If there is no dividends payable account, then the dividends declared = the dividends paid.
Retained earnings
Dividends payable
Dividends payable
Cash [Financing - outflow]
50,000
50,000
75,000
75,000
Starting through the income statement, looking for noncash items:
l.
No deposit was made for share of earnings of partially owned companies. Therefore, this
account needs to be zeroed out by re-constructing the entry that recorded the share of
earnings.
Investments in partially owned company
Earnings of partially-owned company
115,000
115,000
m. No check was written for bad debt expense. Therefore, this account needs to be zeroed out by
re-constructing the entry that recorded bad debt expense for the year (the credit is always to
allowance for doubtful accounts.
Bad debt expense
Allowance for doubtful accounts
106747859 Created by T. Gordon 2/16/2016
38,500
38,500
Page 57
Acct 592 – Spring 2005
n.
No checks are written to record depreciation expense and amortization of intangibles.
Therefore, these accounts need to be zeroed out by reconstructing the entry that recorded the
expenses.
Depreciation expense
Amortization of intangible assets
Accumulated depreciation
Intangible assets
244,000
6,500
244,000
6,500
Starting through the balance sheet to investigate accounts not yet balanced:
o.
Securities available for sale (at market) doesn’t balance by $51,000. However, this amount
appears in the owners’ equity section as the change in Unrealized (gain)/loss on investments.
Therefore, this amount must have been the adjusting entry for the “allowance for change in
value” account.
Unrealized gain/loss on investments
Investments in AFS securities (allowance)
p.
120,000
120,000
270,000
270,000
22,000
22,000
130,000
130,000
5,000
5,000
Income tax expense is affected by two accounts on the balance sheet - income taxes payable
and deferred income taxes.
Income taxes payable
Income tax expense
Deferred income taxes
Income tax expense
r.
51,000
The remaining difference in accounts receivable ($120,000) is the adjustment to sales to get
from accrual basis to cash basis. The difference in Merchandise Inventory is an adjustment to
cost of goods sold. The difference in prepaid operating expenses is an adjustment to other
operating expenses. The change in accounts payable would mostly be related to cost of goods
sold. The change in salaries payable affects salaries and wages expense.
Sales
Accounts receivable
Merchandise inventory
Cost of goods sold
Prepaid operating expenses
Other operating expenses
Accounts payable
Cost of goods sold
Salaries payable
Salaries and wages
q.
51,000
13,600
13,600
92,000
92,000
Amortization of premiums and discounts on bonds payable impacts interest expense.
106747859 Created by T. Gordon 2/16/2016
Page 58
Acct 592 – Spring 2005
Interest expense
Discount on bonds payable
s.
23,000
23,000
Long-term debt is presented in two numbers on balance sheet - current and noncurrent. These
accounts need to be combined to find out how much was borrowed or repaid during the year.
Take the change in one account to the other. The remaining “amount to balance” will be the
cash inflow or outflow.
Other long-term debt
Current portion of long-term debt
8,000
8,000
After this entry, the number necessary to balance other long-term debt is $2,430,000 which must
be the amount of long-term debt repaid during the year.
Other long-term debt
Cash [Financing - outflow]
106747859 Created by T. Gordon 2/16/2016
2,430,000
2,430,000
Page 59
Acct 592 – Spring 2005
Example 4 - Acct 301
Solution
Wenatchee Whirlpool World
Statement of Cash Flows
For year ended 12/31/96
Inflows
Cash provided by operations
Cash collected from customers
Interest & dividends received
Cash paid for merchandise
Cash paid to employees
Other operating disbursements
Interest paid
Income taxes paid
Outflows
Net
6,320,000
31,000
Subtotals
Cash provided by investing activities
Purchase plant, property & equipment
Sale of plant, property & equipment
Sale of patent
Marketable securities purchased
Marketable securities sold
Subtotals
Cash provided by financing activities
Dividends paid
Long-term debt retired
Bonds issued
Common stock issued
Subtotals
(3,740,000)
(585,000)
(367,000)
(646,400)
(662,000)
6,351,000 (6,000,400)
350,600
(4,900,000)
25,000
1,000,000
(875,000)
692,000
1,717,000 (5,775,000) (4,058,000)
(75,000)
(2,430,000)
5,000,000
2,050,000
7,050,000 (2,505,000)
Change in cash
Beginning balance - Cash
Ending balance - Cash
4,545,000
837,600
2,000,000
2,837,600
Non-cash financing and investing activities
Preferred stock converted to common
1,500,000
Land obtained by issue of common stock
800,000
106747859 Created by T. Gordon 2/16/2016
Page 60
Acct 592 – Spring 2005
Example 3 - Acct 301
Wenatchee Whirlpool World
For year ended
Solution
12/31/96
Schedule to reconcile net income to cash provided by operations
Net Income
1,112,200
Depreciation & amortization
250,500
Bond premiums/discounts
23,000
Realized gains/losses PP&E
40,000
Realized gain/loss investments
(108,000)
Gain on sale of patent
(950,000)
Undistributed Earnings of Affiliates
(97,000) *
Deferred income taxes
92,000
Change in working capital accounts:
Net accounts receivable
158,500 **
Merchandise Inventory
(270,000)
Prepaid Operating Expenses
(22,000)
Accounts Payable
130,000
Salaries Payable
5,000
Income Taxes Payable
(13,600)
Cash provided by operations:
350,600
The following notes are explanations and
not part of a formal statement of cash flow
* Earnings of affiliates (equity method)
Dividends received (equity method affiliates)
(115,000)
18,000
(97,000)
** This is the easiest way to handle bad debts: just enter change in NET A/R:
Change in Accounts Receivable
148,000
Change in Allowance for Doubtful Accounts
10,500
158,500
This is the more difficult alternate:
Adjustment to sales (to get cash collected from
120,000
customers)
Bad debt expense
38,500
158,500
What does not work is to include bad debt expense +
change in Accounts Receivable and change in Allowance!
106747859 Created by T. Gordon 2/16/2016
Page 61
Acct 592 – Spring 2005
Solution
1. Homework Assignment
Ulliman Company
Year ending
0
01/01/99 Ref
Cash
1,400 x
Accounts receivable (net)
2,800
Marketable securities (at cost)
1,700 j
Allowance for change in value
500 j
Merchandise Inventory
8,100
Prepaid Expenses
1,300 N
Investments (long-term)
7,000
Land
15,000
Buildings and equipment
32,000 g
Accumulated depreciation
(16,000) f
Total assets
53,800
Accounts Payable
Income Taxes Payable
Wages payable
Interest payable
12% bonds payable
Premium/Discount on Bonds Payable
Notes payable (long term)
10% Convertible bonds
Deferred Income Taxes
Convertible preferred, $100 par
Common stock, $10 par
Additional paid in capital
Unrealized (gain)/loss investments
Retained Earnings
Total liab & equity
Closing entry for
Sales
Other revenue
Gain/(loss) on sale of PP&E
Realized gain/(loss) on investments
Interest and dividend revenue
Cost of goods sold
Salaries & other operating expenses
Other operating expense
Depreciation & amortization
Interest expense
Income taxes expense
Net income (accrual basis)
106747859 Created by T. Gordon 2/16/2016
(3,800)
(2,400)
(1,100)
0
0
0
(3,500)
(9,000)
(800)
0
(14,000)
(8,700)
(500)
(10,000)
(53,800)
q
h
e
c
b
Worksheet
Year ending
Ref
Credit
12/31/99 Target
1,000
2,400
1,000
L
110
2,690
(110)
1,300
3,000
1,300
300
800
300
M
190
7,910
(190)
410
1,710
410
d
1,600
5,400
(1,600)
15,000
0
16,200 f
2,000
46,200
14,200
1,700 k
2,100
(16,400)
(400)
68,710
Debit
O
p
350
104
r
h
300 s
3,500
9,000
i
400
10,000
10
(4,150)
(2,504)
(650)
(400)
(10,000)
290
0
0
(1,196)
0
(21,500)
(13,700)
(800)
(14,100)
(68,710)
450
c&e
c&e
j
700 XX
396
7,500
5,000
300
4,800
ok
ok
1999
Rev/(Exp)
39,930
0
(200)
700
820
(19,890)
(11,000)
(1,000)
(2,100)
(410)
(2,050)
4,800
1999
Receipt/(Disb)
40,040
0
0
0
820
(19,350)
(11,450)
(1,410)
0
0
(1,550)
7,100
L
110
f
200
m&o
k
r&s
i&p
XX
d
700
q
N
450
410
2,100
410
500
4,800 xx
7,100
540
(350)
(104)
450
(400)
(10,000)
290
3,500
9,000
(396)
0
(7,500)
(5,000)
(300)
(4,100)
Page 62
Acct 592 – Spring 2005
Ulliman Company
Statement of Cash Flows
Operating Activities
Reconciliation Schedule:
Net Income
Loss on sale of equipment
Gain on sale of investments
Depreciation expense
Bond discount amortization
Deferred income taxes
Change in WC accounts:
Accounts receivable (net)
Merchandise Inventory
Prepaid Expenses
Accounts Payable
Income Taxes Payable
Wages payable
Interest payable
Investing Activities
Investments sold
sold equipment
Purchased equipment
Purchase mkt securities
xx
4,800
200
(700)
2,100
10
396
110
190
(410)
350
104
(450)
400
7,100
(15,100)
d
f
h
Noncash Financing/Investing
LT debt retired by issue of common stock
conversion of bonds to stock
e
c
106747859 Created by T. Gordon 2/16/2016
7,100
f
d
k
s
i
Financing Activities
Dividends paid
Issued bonds at a discount
CHANGE IN CASH
Totals
OUTFLOWS Subtotals
INFLOWS
7,100
2,300
100
g
j
16,200
1,300
b
700
x
1,000
62,720
9,000
9,700
62,720
1,000
Page 63
Acct 592 – Spring 2005
Ulliman Company
Statement of Cash Flows
For year ended December 31, 1999
Cash flows from operating activities
Collections from customers
Payments to suppliers
Payments to employees
Other operating payments
Income taxes paid
Dividends collected
Cash provided by operations
40,040
(19,350)
(11,450)
(1,410)
(1,550)
820
7,100
Cash flows from investing activities
Purchase of marketable securities
Proceeds from sale of long-term investments
Disbursements to acquire equipment
Proceeds from sale of equipment
Cash used by investing activities
(1,300)
2,300
(16,200)
100
(15,100)
Cash flows from financing activities
Proceeds from issuance of bonds
Payment of dividends
Cash provided by financing activities
9,700
(700)
9,000
Net increase in cash
Beginning balance in cash
Cash balance at 12-31-97
1,000
1,400
2,400
Noncash investing and financing activities
LT debt retired by issue of common stock
conversion of bonds to stock
3,500
9,000
Reconcilation of net income to cash provided by operations
Net income
Loss on sale of equipment
Gain on sale of investments
Depreciation expense
Bond discount amortization
Deferred income taxes
Change in WC accounts:
Accounts receivable (net)
Merchandise Inventory
Prepaid Expenses
Accounts Payable
Income Taxes Payable
Wages payable
Interest payable
106747859 Created by T. Gordon 2/16/2016
4,800
200
(700)
2,100
10
396
110
190
(410)
350
104
(450)
400
7,100
Page 64
Acct 592 – Spring 2005
2. Homework Assignment
Driskoll Company
Cash
Accounts receivable (net)
Inventories
Prepaid Expenses
Investments (long-term)
Land
Buildings
Acc'd depreciation - Bldg
Equipment
Acc'd depreciation - Equip
Patents
Accounts Payable
Interest payable
Wages payable
Bonds payable
Discount on bonds
Common stock, $10 par
Additional paid in capital
Unrealized (gain)/loss investments
Retained Earnings
Closing entry for
Sales
Gain/(loss) on exchange of assets
Realized gain/(loss) on investments
Interest and dividend revenue
Cost of goods sold
Salaries & other operating expenses
Other operating expense
Depreciation - buildings
Depreciation - equipment
Patent amortization
Interest expense
Income taxes expense
Extraordinary loss (net of taxes)
Net income (accrual basis)
106747859 Created by T. Gordon 2/16/2016
Solution
Year ending
12/31/99 Ref
2,700 x
5,900 i
15,300 j
1,400
8,300
16,300 d
68,700
(35,000) c
29,600
(14,200) d
8,700 f
107,700
(8,900)
(630)
(2,500)
(23,000)
0
(22,000)
(15,320)
0
(35,350)
(107,700)
ok
1999
Rev/(Exp)
49,550
1,300
(200)
790
(23,800)
(16,510)
(1,100)
(2,700)
(3,100)
(815)
(1,715)
(500)
(2,600)
(1,400)
m
a
b
p
Debit
Worksheet
Year ending
Ref
Credit
12/31/99 Target
820
3,520
820
315
6,215
315
230
15,530
230
k
400
1,000
(400)
e
1,000
7,300
(1,000)
2,700
19,000
2,700
c
8,000
60,700
(8,000)
3,200 g
2,700
(34,500)
500
d
4,000
25,600
(4,000)
2,600 g
3,100
(14,700)
(500)
1,300 h
815
9,185
485
98,850
L
295
n
14,000 b
780 o
f
f
100
8,000
65
650
650
(9,195)
(300)
(2,600)
(17,000)
715
(22,650)
(15,970)
0
(31,850)
(98,850)
330
2,100 xx
(1,400)
ok
i
d
315
1,300
e
200
L
n
k
g
g
h
o
295 j
100
400
2,700
3,100
815
65 m
230
c
xx
2,600
(1,400) xx
330
6,700
1999
Receipt/(Disb)
49,235
0
0
790
(23,735)
(16,410)
(700)
0
0
0
(1,980)
(500)
0
6,700
Page 65
(295)
330
(100)
6,000
715
(650)
(650)
0
3,500
Acct 592 – Spring 2005
Driskoll Company
Statement of Cash Flows
Operating Activities
Reconciliation Schedule:
Net income
Depreciation
amortization
Extraordinary loss (net of taxes)
Gain/(loss) on exchange of assets
Realized gain/(loss) on investments
Amort of Bond Discount
change in WC accounts:
Accounts receivable (net)
Inventories
Prepaid Expenses
Accounts Payable
Interest payable
Wages payable
Investing Activities
Proceeds from insurance company
Sale of long-term investment
Financing Activities
Retired bonds payable
Proceeds of bond issue
dividends paid
Noncash Financing/Investing
Exchanged equipment for land
Exchanged stock for patent
CHANGE IN CASH
Totals
106747859 Created by T. Gordon 2/16/2016
xx
OUTFLOWS Subtotals
INFLOWS
6,700
6,700
(1,400)
5,800 g
815 h
2,600
(1,300)
200
65 o
(315)
(230)
400
295
(330)
100
6,700
i
j
k
L
m
n
3,000
c
e
2,200
800
(8,880)
b
a
14,000
p
2,100
x
820
54,170
7,220
d
f
54,170
820
Page 66
Acct 592 – Spring 2005
Driskoll Company
Statement of Cash Flows
For year ended December 31, 1998
Cash flows from operating activities
Collections from customers
Payments to suppliers
Payments to employees
Other operating payments
Income taxes paid
Interest paid
Dividends collected
Cash provided by operations
49,235
(23,735)
(16,410)
(700)
(500)
(1,980)
790
6,700
Cash flows from investing activities
Proceeds from insurance company
Proceeds from sale of long-term investments
Cash provided by investing activities
2,200
800
3,000
Cash flows from financing activities
Proceeds from issuance of bonds
Retire bonds payable
Payment of dividends
Cash used by financing activities
7,220
(14,000)
(2,100)
(8,880)
Net increase in cash
Beginning balance in cash
Cash balance at 12-31-97
820
2,700
3,520
Noncash investing and financing activities
Exchanged stock for patent
Exchanged equipment for land
Reconcilation of net income to cash provided by operations
Net income
Depreciation
amortization
Extraordinary loss (net of taxes)
Gain/(loss) on exchange of assets
Realized gain/(loss) on investments
Amort of Bond Discount
Change in working capital accounts:
Accounts receivable (net)
Inventories
Prepaid Expenses
Accounts Payable
Interest payable
Wages payable
106747859 Created by T. Gordon 2/16/2016
(1,400)
5,800
815
2,600
(1,300)
200
65
(315)
(230)
400
295
(330)
100
6,700
Page 67
Acct 592 – Spring 2005
Albion Altimeters Inc.
Statement of Cash Flows
For year ended
Cash provided by operations
Cash collected from customers
Interest & dividends received
Cash paid for merchandise
Cash paid to employees
Other operating disbursements
Interest paid
Income taxes paid
12/31/97
Inflows
Outflows
Net
3,708,000
15,000
Subtotals
3,723,000
Cash provided by investing activities
Purchase plant, property & equipment
Sale of plant, property & equipment
Marketable securities purchased
Marketable securities sold
Subtotals
Cash provided by financing activities
Dividends paid
Common stock issued
Subtotals
(2,016,000)
(651,300)
(243,800)
(93,700)
(168,000)
(3,172,800)
550,200
(1,740,000)
35,000
(585,000)
35,000
(2,325,000)
(2,290,000)
(100,000)
1,750,000
1,750,000
(100,000)
1,650,000
Change in cash
Beginning balance - Cash
Ending balance - Cash
Land obtained by issue of
common stock
106747859 Created by T. Gordon 2/16/2016
(89,800)
400,000
310,200
32,000
Page 68
Acct 592 – Spring 2005
Albion Altimeters Inc.
For year ended 12/31/97
Schedule to reconcile net income to cash provided by operations
Net Income
Depreciation & amortization
Bond premiums/discounts
Realized gains/losses PP&E
Deferred income taxes
Change in working capital accounts:
Net accounts receivable
Merchandise Inventory
Prepaid Operating Expenses
Accounts Payable
Salaries Payable
Income Taxes Payable
Cash provided by operations:
**
Change in Accounts Receivable
Change in Allowance for Doubtful Accounts
This is the more difficult alternate:
Adjustment to sales (to get cash collected from customers)
Bad debt expense
106747859 Created by T. Gordon 2/16/2016
289,900
30,000
(6,000)
30,000
15,700
125,200 **
21,000
(13,800)
63,000
(1,300)
(3,500)
550,200
119,000
6,200
125,200
108,000
17,200
125,200
Page 69
Acct 592 – Spring 2005
Year ending
Worksheet
Year ending
Albion Altimeters Inc.
12/31/96 Ref
Cash
400,000
Securities Available for Sale (at market)
500,000
Accounts Receivable
900,000
Allowance for doubtful accounts
(27,000)
Merchandise Inventory
850,000
Prepaid Operating Expenses
25,000
Debit
Ref
Credit
89,800
r,
f
e
Plant, property & equipment
1,880,000
m
g,
c
Accumulated Depreciation
(350,000)
b
27,000
585,000
11,000
1,112,000
11,000
108,000
781,000
i
17,200
(33,200)
k
21,000
829,000
13,800
32,000
1,740,000 b
90,000
3,562,000
25,000 h
30,000
(355,000)
38,800
6,244,800
(350,000)
Salaries Payable
(8,500)
l
n
63,000
1,300
(27,000)
o
3,500
Dividends Payable
(25,000)
A
100,000 a
(23,500)
75,000
(1,000,000)
Premium/Discount on Bonds Payable
(124,000)
Deferred Income Taxes
(413,000)
(7,200)
Income Taxes Payable
Bonds Payable
310,200
J
e
4,178,000
Accounts Payable
12/31/97
0
(1,000,000)
p
(88,000)
6,000
(118,000)
Common stock, $10 par
(1,000,000)
Additional paid in capital
(700,000)
q
G
d
G
d
14,000
r
27,000
(13,000)
75,000 x
289,900
(1,084,400)
(6,244,800)
Acc'd other comprehensive income
Retained Earnings
0
106747859 Created by T. Gordon 2/16/2016
(869,500)
(4,178,000)
a
15,700
10,000
500,000
22,000
1,250,000
(1,510,000)
Page 70
(103,700)
(1,972,000)
Acct 592 – Spring 2005
Albion Altimeters
1997
Closing entry for 1997
Sales
Gain/(loss) on sale of PP&E
Interest and dividend revenue
Cost of goods sold
Salaries and wages
Other operating expenses
Bad debt expense
Depreciation expense
Interest expense
Income taxes expense
Net income (accrual basis)
Statement of Cash Flows
Operating Activities
Net income
Add depreciation expense
Add loss on sale of equipment
Amortization of discount on B/P
Deferred Income Taxes
Change in working capital accounts:
Accounts Receivable
Allowance for doubtful accounts
Merchandise Inventory
Prepaid Operating Expenses
Accounts Payable
Salaries Payable
Income Taxes Payable
Investing Activities
Proceeds from sale of equipment
Purchase building & equipment
Purchase marketable securities
Financing Activities
Dividends paid
Proceeds from issuance of common stock
Noncash Financing/Investing
Exchange common stock for land valued at
$32,000
CHANGE IN CASH
Totals
Rev/(Exp) Ref
3,600,000 j
(30,000) b
15,000
k
(2,100,000) l
(650,000)
(230,000)
(17,200) I
(30,000) H
(87,700)
(180,200) Q
289,900 X
289,900
30,000
30,000
(6,000)
15,700
X
X
H
B
P
Q
Debit
Ref
108,000
30,000
Credit
1997
Receipt/(Dis
b)
3,708,000
0
15,000
21,000
63,000
n
m
1,300
13,800
17,200
30,000
p
15,700 o
289,900 X
INFLOWS
550,200
6,000
3,500
550,200
OUTFLOW
S
(Subtotals)
550,200
119,000
6,200
21,000
(13,800)
63,000
(1,300)
(3,500)
550,200
(2,290,000)
b
35,000
c
f
1,740,000
585,000
A
100,000
1,650,000
d
1,750,000
89,800
5,619,400
5,619,400
0
106747859 Created by T. Gordon 2/16/2016
(2,016,000)
(651,300)
(243,800)
0
0
(93,700)
(168,000)
550,200
Page 71
(89,800)
Acct 592 – Spring 2005
Check figures for cash provided by operations:
Endicott Engines
Camperdown Company
106747859 Created by T. Gordon 2/16/2016
$ 462,000
$2,647,000
Page 72
Acct 592 – Spring 2005
Final Exam Question – Spring 2002
Required:
Use the financial statements, the additional information (next page) and the
worksheet provided to prepare the statement of cash flow using the direct method.
For full credit, use the pages provided to prepare the formal statement in addition
to the worksheet.
Camperdown Company
Balance Sheet
Current Assets
Cash
Securities Available for Sale (at cost)
Allowance to adjust to market value
Net accounts receivable
Merchandise Inventory
Noncurrent Assets
Plant, property & equipment
Accumulated Depreciation
Investment in Edible Oils Inc.
Intangible Assets
TOTAL ASSETS
106747859 Created by T. Gordon 2/16/2016
12/31/02
12/31/01
183,000
727,000
13,000
917,000
480,000
2,320,000
100,000
367,000
(14,000)
1,238,000
540,000
2,231,000
17,208,000
(2,527,000)
2,023,000
480,000
19,504,000
14,500,000
(1,500,000)
2,000,000
500,000
17,731,000
Balance Sheet
Current Liabilities
Accounts Payable
Salaries Payable
Income Taxes Payable
Dividends Payable
Noncurrent Liabilities
Bonds Payable
Discount on Bonds Payable
Deferred Income Taxes
Obligation under capital leases
Stockholder's Equity
Convertible preferred stock
Common stock, $10 par
Additional paid in capital
Acc'd other comprehensive
income
Treasury stock (at cost)
Retained Earnings
Total liabilities and equity
Page 73
12/31/02
12/31/01
930,000
2,000
9,000
27,000
968,000
750,000
5,000
20,000
18,000
793,000
7,000,000
(605,000)
64,000
403,000
6,862,000
7,000,000
(640,000)
39,000
380,000
6,779,000
4,500,000
2,000,000
2,106,000
5,000,000
1,600,000
1,400,000
13,000
(26,000)
3,081,000
11,674,000
19,504,000
(14,000)
(52,000)
2,225,000
10,159,000
17,731,000
Acct 592 – Spring 2005
Camperdown Company
Income Statement
For year ending 12/31/02
Sales
Investment income
Gain/(loss) on sale of PP&E
Realized gain/(loss) on
investments
Total revenues
Cost of goods sold
Salaries and wages
Other operating expenses
Bad debt expense
Depreciation & amortization
expense
Interest expense
Income taxes expense
Net income
106747859 Created by T. Gordon 2/16/2016
10,000,000
50,000
(45,000)
10,000
10,015,000
6,000,000
600,000
250,000
21,000
1,077,000
565,000
551,000
9,064,000
951,000
Additional information:
a.
During the year, Camperdown Corporation paid quarterly dividends in
the total amount of $86,000.
b.
The preferred stock is convertible into 6 shares of common stock at the
discretion of the stockholder. During the year, 5,000 shares of
preferred stock were converted into common stock.
c.
Camperdown Corporation received $27,000 in dividends from Edible
Oils Inc (equity method investment). The securities held in the
available for sale portfolio paid no cash dividends during the year.
d.
During the year, Camperdown Corporation sold a piece of equipment
for $25,000. The historical cost of the asset was $100,000 and the
book value was $70,000 at the date of sale.
e.
On April 30, Camperdown Corporation issued 10,000 shares of
common stock for $60 per share.
f.
Camperdown Corporation acquired a new processing plant for a total
cost of $2,450,000. $2,000,000 was attributed to the building and the
remainder was attributed to the cost of the land.
g.
Camperdown Corporation wrote off $5,000 in bad debts during the
year.
h.
Camperdown Corporation sold marketable securities that had cost
$90,000 for $100,000.
i.
Camperdown Corporation entered into a new capital lease
arrangement to obtain manufacturing equipment needed for the new
facility. The present value of the minimum lease payments was
$358,000 at the inception of the lease.
j.
Half of the 1,000 shares of treasury stock were sold for $64 per share.
Camperdown Corporation uses the cost method. The treasury stock on
hand at the beginning of the year was carried at $52 per share.
Page 74
Acct 592 – Spring 2005
Statement of Cash Flow Problem
Worksheet
Year ending
Camperdown Company
12/31/01Ref
Cash
100,000
Securities Available for Sale (at cost)
Allowance to adjust to market value
Year ending
Debit
Ref
Credit
12/31/02
183,000
83,000
367,000
727,000
360,000
(14,000)
13,000
27,000
Net accounts receivable
1,238,000
917,000
(321,000)
Merchandise Inventory
540,000
480,000
(60,000)
Plant, property & equipment
14,500,000
17,208,000
2,708,000
Accumulated Depreciation
(1,500,000)
(2,527,000) (1,027,000)
Investment in Edible Oils Inc.
83,000
Target
2,000,000
2,023,000
23,000
500,000
480,000
(20,000)
17,731,000
19,504,000
(750,000)
(930,000)
(180,000)
(5,000)
(2,000)
3,000
Income Taxes Payable
(20,000)
(9,000)
11,000
Dividends Payable
(18,000)
(27,000)
(9,000)
(7,000,000)
(7,000,000)
0
Premium/Discount on Bonds Payable
640,000
605,000
(35,000)
Deferred Income Taxes
(39,000)
(64,000)
(25,000)
(380,000)
(403,000)
(23,000)
Intangible Assets
Total assets
Accounts Payable
Salaries Payable
Bonds Payable
Obligation under capital leases
106747859 Created by T. Gordon 2/16/2016
Page 75
Acct 592 – Spring 2005
Statement of Cash Flow Problem
Worksheet
Camperdown Company
Year ending
Year ending
12/31/01Ref
Debit
Ref
Credit
12/31/02
Target
Convertible preferred, $100 par
(5,000,000)
(4,500,000)
500,000
Common stock, $10 par
(1,600,000)
(2,000,000)
(400,000)
Additional paid in capital
(1,400,000)
(2,106,000)
(706,000)
Acc'd other comprehensive income
14,000
(13,000)
(27,000)
Treasury stock (at cost)
52,000
26,000
(26,000)
Retained Earnings
Total Liab & owners equity
Closing entry for
(2,225,000)
(17,731,000)
2002
Rev/(Exp)
Sales
Earnings of investees (equity method)
Gain/(loss) on sale of PP&E
Realized gain/(loss) on investments
Credit
10,000
(600,000)
Other operating expenses
(250,000)
(21,000)
(1,077,000)
Interest expense
(565,000)
Income taxes expense
(551,000)
106747859 Created by T. Gordon 2/16/2016
Ref
(45,000)
Salaries and wages
Net income (accrual basis)
Debit
50,000
(6,000,000)
Depreciation & amortization expense
Ref
2002
Inflow/
(Outflow)
10,000,000
Cost of goods sold
Bad debt expense
(3,081,000)
(856,000)
(19,504,000) (1,773,000)
951,000
Page 76
Acct 592 – Spring 2005
Camperdown Company
Statement of Cash Flows
INFLOWS
OUTFLOWS
(Subtotals)
Operating Activities
Net income
951,000
Investing Activities
Financing Activities
106747859 Created by T. Gordon 2/16/2016
Page 77
Acct 592 – Spring 2005
Camperdown Company
INFLOWS
OUTFLOWS
(Subtotals)
Noncash Financing/Investing
CHANGE IN CASH
83,000
Totals
106747859 Created by T. Gordon 2/16/2016
Page 78
Acct 592 – Spring 2005
Camperdown Corporation
Statement of Cash Flow
For year ended 12-31-02
Cash provided by operations
Cash provided by investing activities
Cash provided by financing activities
106747859 Created by T. Gordon 2/16/2016
Page 79
Acct 592 – Spring 2005
Camperdown Corporation
Statement of Cash Flow
For year ended 12-31-02
Reconciling schedule
Notes
106747859 Created by T. Gordon 2/16/2016
Page 80