U.C. Berkeley
Haas School of Business
Chapter 4
April 28, 2001
Spring 2001
BA 230-B
Solutions to S&W
4.27
(Preparing and interpreting a statement of cash flows using T-accounts)
a.
HALE COMPANY
Statement of Cash Flows
For the Year
Operations:
Net Income ............................................................
Additions:
Depreciation Expense .......................................
Increase in Accounts Payable...........................
Subtractions:
Increase in Accounts Receivable ......................
Increase in Inventory .......................................
Decrease in Interest Payable ...........................
Cash Flow from Operations .....................................
Investing:
Sale of Equipment ................................................
Acquisition of Equipment .....................................
Cash Flow from Investing ........................................
Financing:
Dividends ..............................................................
Retirement of Portion of Mortgage Payable ........
Cash Flow from Financing .......................................
Net Change in Cash..................................................
Cash, January 1 ........................................................
Cash, December 31 ...................................................
$ 44,000
54,000
5,000
(13,000)
(11,000)
(2,000)
$ 77,000
$
5,000
(55,000)
(50,000)
$ (10,000)
(11,000)
(21,000)
$ 6,000
52,000
$ 58,000
The amounts in the T-account work sheet below are in thousands.
√
Cash
52
Operations
Net Income
Depreciation
Increase in Accounts
Payable
(1)
(3)
44
54
13
(8)
5
11
2
Prepared by Gavin Cassar
(5) Increase in Accounts Receivable
(6) Increase in
Inventory
(9) Decrease in
Interest Payable
Page 1
U.C. Berkeley
Haas School of Business
Chapter 4
April 28, 2001
Spring 2001
BA 230-B
Investing
Sale of Equipment
(4)
5
55
(7) Acquisition of
Equipment
Financing
10 (2) Dividends
11 (10) Payment of
Mortgage
Payable
√
Accounts Receivable
√
93
(5)
13
√
106
√
(6)
√
58
Inventory
151
11
162
Buildings and
Accumulated
Equipment (Cost)
Depreciation
√
790
460 √
(7)
55
15 (4) (4)
10
54 (3)
√
830
504 √
Interest Payable
Mortgage Payable
10 √
120
√
(9)
2
(10)
11
8 √
109
√
√
Land
30
√
30
Accounts Payable
136 √
5 (8)
141 √
Common Stock
250
√
250
√
Retained Earnings
140 √
(2)
10
44 (1)
174 √
b.
Sales Revenue ...................................................................
Less Increase in Accounts Receivable ($106,000 –
$93,000) .........................................................................
Cash Collected from Customers during the Year ............
Prepared by Gavin Cassar
$ 1,200,000
(13,000)
$ 1,187,000
Page 2
U.C. Berkeley
Haas School of Business
c.
d.
e.
4.30
Chapter 4
April 28, 2001
Spring 2001
BA 230-B
Cost of Goods Sold .............................................................
Less Increase in Inventories ($162,000 – $151,000)........
Plus Increase in Accounts Payable for Inventory
($141,000 – $136,000) ...................................................
Cash Paid to Suppliers of Inventory during the Year .....
$ (788,000)
(11,000)
Interest Expense ...............................................................
Less Decrease in Interest Payable ($8,000 – $10,000) ....
Cash Paid for Interest during the Year ...........................
$
5,000
$ (794,000)
$
(12,000)
(2,000)
(14,000)
Cash flow from operations was sufficient to finance acquisitions of
equipment during the year. The firm used the excess cash flow to pay
dividends and retire long-term debt.
(Clark Corporation; preparing and interpreting a statement of cash flows
using a T-account work sheet.)
a.
CLARK CORPORATION
Statement of Cash Flows
For the Current Year
Operations:
Net Income ............................................................
Additions:
Depreciation Expense ...........................................
Increase in Accounts Payable...............................
Increase in Income Taxes Payable .......................
Subtractions:
Increase in Accounts Receivable ..........................
Increase in Merchandise Inventories...................
Cash Flow from Operations .....................................
Investing:
Sale of Property, Plant, and Equipment ..............
Acquisition of Property, Plant, and Equipment ..
Cash Flow from Investing ........................................
Financing:
Issue of Bonds .......................................................
Dividends Paid ......................................................
Cash Flow from Financing .......................................
Net Change in Cash..................................................
Cash, January 1 ........................................................
Cash, December 31 ...................................................
Prepared by Gavin Cassar
$ 60,000
22,000
17,000
5,000
(20,000)
(16,000)
$ 68,000
$ 8,000
(80,000)
(72,000)
$ 10,000
(10,000)
0
$ (4,000)
42,000
$ 38,000
Page 3
U.C. Berkeley
Haas School of Business
Chapter 4
April 28, 2001
Spring 2001
BA 230-B
The amounts in the T-account work sheet below are in thousands.
Cash
42
√
Operations
Net Income
Depreciation
Increase in Accounts
Payable
Increase in Income
Taxes Payable
(1)
(6)
60
22
20
(9)
17
16
(10)
5
(7) Increase in Accounts Receivable
(8) Increase in Merchandise Inventories
Investing
Sale of Property, Plant,
and Equipment
(5)
80
(3) Property, Plant,
and Equipment
Acquired for
Cash
10
(2) Dividends
8
Financing
Issue of Long-Term
Debt for Cash
(11)
10
√
38
Accounts Receivable
√
146
(7)
20
√
(8)
√
√
(5)
166
Accumulated
Depreciation
62 √
6
22 (6)
78 √
Prepared by Gavin Cassar
Merchandise
Inventories
162
16
178
Accounts Payable
182 √
17 (9)
199 √
Property, Plant,
and Equipment
√
180
(3)
80
(4)
20
14 (5)
√
266
Income Taxes
Payable
20 √
5(10)
25 √
Page 4
U.C. Berkeley
Haas School of Business
Bonds Payable
20 √
20 (4)
10 (11)
50 √
b.
Chapter 4
April 28, 2001
Spring 2001
BA 230-B
Common Stock
50
√
50
√
Retained Earnings
196 √
(2)
10
60 (1)
246
√
Clark Company generated cash flow from operations slightly in excess of
net income.
It used the operating cash flow to finance capital
expenditures.
Prepared by Gavin Cassar
Page 5