Chapter 5: The Statement of Cash Flow
Assignment 5-7
RANGLER PAPER COMPANY
Statement of Cash Flow
Year Ended 31 December 20x5
(in ‘000’s)
Net cash inflows (outflows) from operating activities:
Net earnings .........................................................................................
Adjustments
Depreciation ..................................................................................
Net increase in working capital ...................................................
Net cash inflow (outflow) from operating activities ...........................
Cash inflows (outflows) from investing activities:
Cash invested in restricted construction fund ............................
Disposal of operational asset for cash (at book value) .............
Net cash inflow (outflow) from investing activities ............................
Cash inflows (outflows) from financing activities:
Paid cash dividend .......................................................................
Borrowed on long-term note ........................................................
Payment of bonds payable...........................................................
Net cash inflow (outflow) from financing activities ............................
Net increase (decrease) in cash .........................................................
Beginning cash balance, 1 January 20x5 ..........................................
Ending cash balance, 31 December 20x5 .........................................
$103
20
( 3)*
$120
(60)
12
(48)
(10)
25
(97)
*Changes in current items:
Assets
Increase in Inventory ...... $-14
$+5
Increase in Prepaids .......
-3
Decrease in Receivables
+7
Decrease in Rent receivable +2
Net........................................... $-8
Overall (-8 + (+5)) ................
$-3
Liabilities
Increase in Accounts payable
(82)
(10)
62
$52
Assignment 5-8
Note: The assignment asks only for the total cash flow from each category, so a
formal statement and/or appropriate presentation of operating activities is not
required.
DENTON CORPORATION
Statement of Cash Flow
For the year ended 31 December 20x5
Operations:
Net earnings ............................................................................ $690,000
Less: Increase in inventory................................................... (80,000)
Gain on sale of long-term investment ....................... ( 35,000)
Plus: Depreciation expense*............................................... 250,000
Amortization of patent ................................................
10,000
Increase in accounts payable .................................... 105,000
Net cash from operations .......................................................
$940,000
Financing activities:
Bank loan................................................................................. 325,000
Proceeds on issuance of shares ............................................ 220,000
Dividends ................................................................................. ( 240,000)
Net cash from financing ...............................................................
305,000
Investing activities:
Proceeds on sale of long-term investment............................ 135,000
Proceeds on sale of equipment ............................................. 150,000
Purchase of plant assets** ...................................................(1,100,000)
Net cash for investing ...................................................................
(
Change in cash..............................................................................
Opening cash ($100 + $0) ...........................................................
Closing cash ($230 + $300) ........................................................
$
815,000)
430,000
100,000
530,000
Assumed: short-term bank debt is not an overdraft and thus is not included in the
cash definition.
* Accumulated Depreciation 20x5 ........................................... $450,000
Accumulated depreciation on equipment sold ..................... + 250,000
Less: Accunulated depreciation 20x4 ................................... - 450,000
Depreciation expense ............................................................. $ 250,000
** Equipment 20x5 ..................................................................... $1,700,000
Cost of equipment sold...........................................................
400,000
Less: equipment 20x4 ............................................................ - 1,000,000
Purchase of equipment............................................................ $1,100,000
Assignment 5-18
Requirement 1
BXX Products Limitied
Statement of Cash Flow
Year ended 31 December 20x1
Cash flows from operating activities:
Net earnings .........................................................................................$128,000
Adjustments for non-cash items:
Depreciation expense ...................................................................... 24,000
Loss on sale of capital assets ......................................................... 2,000
154,000
Changes in net working capital:
Increase in accounts receivable ..................................................... (15,000)
Decrease in inventories................................................................... 7,000
Increase in accounts payable ......................................................... 14,000
Increase in wages payable .............................................................. 8,000
Decrease in tax payable .................................................................. (5,000)
Net cash flows from operating ............................................................
$163,000
Cash flows used for investing activities:
Sale of capital assets ...................................................................... 15,000
Purchase of capital assets ..............................................................(125,000)
Purchase of land .............................................................................. (45,000)
Net cash flows used for investing .......................................................
(155,000)
Cash flows used for financing activities:
Borrowing on long-term mortgage .................................................. 30,000
Cash from issuance of common shares ........................................ 50,000
Payments on long-term debt ........................................................... (54,000)
Dividends paid ................................................................................. (36,000)
Net cash flows used for financing.......................................................
(10,000)
Net decrease in cash ...........................................................................
(2,000)
Cash balance 1 January .....................................................................
43,000
Cash balance 31 December (to balance) ..........................................
$41,000
Requirement 2
BXX Products Limitied
Statement of Cash Flow
Year ended 31 December 20x1
Cash flows from operating activities:
Net earnings .........................................................................................$128,000
Adjustments:
Depreciation expense ...................................................................... 24,000
Loss on sale of capital assets ......................................................... 2,000
Income tax expense ......................................................................... 17,000
Interest expense .............................................................................. 4,000
175,000
Changes in net working capital:
Increase in accounts receivable ..................................................... (15,000)
Decrease in inventories................................................................... 7,000
Increase in accounts payable ......................................................... 14,000
Increase in wages payable .............................................................. 8,000
Cash paid for income tax ($17,000 + $5,000) ................................. (22,000)
Net cash flows from operating ............................................................
$167,000
Cash flows used for investing activities:
Sale of capital assets ...................................................................... 15,000
Purchase of capital assets ..............................................................(125,000)
Purchase of land .............................................................................. (45,000)
Net cash flows used for investing .......................................................
(155,000)
Cash flows used for financing activities:
Borrowing on long-term mortgage .................................................. 30,000
Cash from issuance of common shares ........................................ 50,000
Payments on long-term debt ........................................................... (54,000)
Dividends paid ................................................................................. (36,000)
Interest paid ..................................................................................... (4,000)
Net cash flows used for financing.......................................................
(14,000)
Net decrease in cash ...........................................................................
(2,000)
Cash balance 1 January .....................................................................
43,000
Cash balance 31 December (to balance) ..........................................
$41,000
Assignment 5-29
BOOLE, INC
Statement of Cash Flow
Year ended 31 December 20x5
Operating activities
Net earnings ........................................................................ $790,000
Plus (less): non-cash charges
Depreciation .................................................................. 250,000a
Gain on sale of investment .......................................... ( 35,000)
1,005,000
Changes in working capital:
Inventory increase.........................................................
(80,000)
Accounts payable and accrued liabilities decrease ... ( 5,000)
$920,000
Investing activities
Sale of building ................................................................... 350,000
Purchase of plant assets .................................................... (1,190,000)b
Sale of long-term investments ........................................... 135,000
(705,000)
Financing activities
Dividends paid..................................................................... (340,000)c
Issuance of common shares .............................................. 220,000
Net increase in cash and cash equivalents ............................
(120,000)
$95,000d
Computations:
a Depreciation expense = $250,000 because accumulated depreciation did not
change during the year and the building disposal caused accumulated
depreciation to decrease $250,000.
b
Plant asset increase = $700,000 = plant asset purchases in 20x5 + $110,000
acquisition through debt - $600,000 cost of building sold
Plant asset purchases in 20x5 = $1,190,000
c
Retained earnings increase = $290,000 = $790,000 earnings - Dividends
declared
Dividends declared = $500,000
Dividends payable increase = $160,000
Dividends paid = $340,000 ($500,000 - $160,000)
d
Change in cash ................................................................. $120,000 dr
Change in short-term investments ................................... 300,000 dr
Change in bank overdraft.................................................. (325,000) cr
$95,000 dr