Mastery Problem: Statement of Cash Flows Championship Boxing, Inc. Championship Boxing, Inc. is a small manufacturer of cardboard boxes of all sizes. You have reported for your first day of work, and the company is in an uproar. Yearly financial statements are being prepared, but a computer malfunction of the company’s new BOX-9000 computer has inadvertently erased parts of the company’s balance sheet, along with almost all related data except the company’s statement of cash flows. The IT department is working to retrieve earlier backups, but estimates that the reconstruction of the data will take about 24 hours. Unfortunately, financial statements are to be presented at a stockholders’ meeting in one hour. The company uses the indirect method to prepare its statement of cash flows (rather than the direct method), so your new supervisor believes the missing data for the balance sheet can be prepared using the statement of cash flows. You are assigned this task, since you were top student in your business school class. Meanwhile, the supervisor will go to the stockholders’ meeting and give some introductory remarks. In addition to the statement of cash flows, the following data survived the computer mishap: The investments were sold for $280,000 cash. Equipment was acquired for $152,000 cash. Land was acquired for $326,000 cash. There were no disposals of equipment during the year. 12,500 shares of common stock were sold for cash during the year. There was a $96,000 debit to Retained Earnings for cash dividends declared. Statement of Cash Flows Your supervisor has provided you with the following statement of cash flows, prepared using the indirect method. Recall that the statement of cash flows consists of three sections: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Review the statement, and then proceed to the next panel. Championship Boxing, Inc. Statement of Cash Flows For the Year Ended December 31, 20Y8 Cash flows from (used for) operating activities: Net income $186,540 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation 18,400 Gain on sale of investments (50,000) Changes in current operating assets and liabilities: Increase in accounts receivable (25,390) Increase in inventories (33,450) Increase in accounts payable 41,070 Decrease in accrued expenses payable (12,480) Net cash flow from operating activities $124,690 Cash flows from (used for) investing activities: Cash received from sale of investments $280,000 Cash paid for purchase of land (326,000) Cash paid for purchase of equipment (152,000) Net cash flow used for investing activities (198,000) Cash flows from (used for) financing activities: Cash received from sale of common stock $187,500 Cash paid for dividends (91,200) Net cash flow from financing activities 96,300 Net increase in cash $22,990 Cash balance, January 1, 20Y8 585,920 Cash balance, December 31, 20Y8 $608,910 Balance Sheet Using the information on above, complete the following comparative balance sheet. Championship Boxing, Inc. Comparative Balance Sheet December 31, 20Y8 and 20Y7 20Y8 20Y7 Assets Cash $fill in the blank 1 $585,920 Accounts receivable (net) 230,950 fill in the blank 2 Inventories fill in the blank 3 618,420 Investments 0 fill in the blank 4 Land fill in the blank 5 0 Equipment 705,120 fill in the blank 6 Accumulated depreciation-equipment (166,400) fill in the blank 7 Total assets $fill in the blank 8 $fill in the blank 9 Liabilities Accounts payable (merchandise creditors) $fill in the blank 10 $391,830 Accrued expenses payable (operating expenses) 41,150 fill in the blank 11 Dividends payable fill in the blank 12 19,200 Total liabilities $498,050 $fill in the blank 13 Stockholders' Equity Common stock, $4 par $fill in the blank 14 $100,000 Paid-in capital in excess of par fill in the blank 15 280,000 Retained earnings fill in the blank 16 fill in the blank 17 Total stockholders' equity $1,858,400 $fill in the blank 18 Total liabilities and stockholders' equity $fill in the blank 19 $fill in the blank 20

Mastery Problem: Statement of Cash Flows Championship Boxing, Inc. Championship Boxing, Inc. is a small manufacturer of cardboard boxes of all sizes. You have reported for your first day of work, and the company is in an uproar. Yearly financial statements are being prepared, but a computer malfunction of the company’s new BOX-9000 computer has inadvertently erased parts of the company’s balance sheet, along with almost all related data except the company’s statement of cash flows. The IT department is working to retrieve earlier backups, but estimates that the reconstruction of the data will take about 24 hours. Unfortunately, financial statements are to be presented at a stockholders’ meeting in one hour. The company uses the indirect method to prepare its statement of cash flows (rather than the direct method), so your new supervisor believes the missing data for the balance sheet can be prepared using the statement of cash flows. You are assigned this task, since you were top student in your business school class. Meanwhile, the supervisor will go to the stockholders’ meeting and give some introductory remarks. In addition to the statement of cash flows, the following data survived the computer mishap: The investments were sold for $280,000 cash. Equipment was acquired for $152,000 cash. Land was acquired for $326,000 cash. There were no disposals of equipment during the year. 12,500 shares of common stock were sold for cash during the year. There was a $96,000 debit to Retained Earnings for cash dividends declared. Statement of Cash Flows Your supervisor has provided you with the following statement of cash flows, prepared using the indirect method. Recall that the statement of cash flows consists of three sections: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Review the statement, and then proceed to the next panel. Championship Boxing, Inc. Statement of Cash Flows For the Year Ended December 31, 20Y8 Cash flows from (used for) operating activities: Net income $186,540 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation 18,400 Gain on sale of investments (50,000) Changes in current operating assets and liabilities: Increase in accounts receivable (25,390) Increase in inventories (33,450) Increase in accounts payable 41,070 Decrease in accrued expenses payable (12,480) Net cash flow from operating activities $124,690 Cash flows from (used for) investing activities: Cash received from sale of investments $280,000 Cash paid for purchase of land (326,000) Cash paid for purchase of equipment (152,000) Net cash flow used for investing activities (198,000) Cash flows from (used for) financing activities: Cash received from sale of common stock $187,500 Cash paid for dividends (91,200) Net cash flow from financing activities 96,300 Net increase in cash $22,990 Cash balance, January 1, 20Y8 585,920 Cash balance, December 31, 20Y8 $608,910 Balance Sheet Using the information on above, complete the following comparative balance sheet. Championship Boxing, Inc. Comparative Balance Sheet December 31, 20Y8 and 20Y7 20Y8 20Y7 Assets Cash $fill in the blank 1 $585,920 Accounts receivable (net) 230,950 fill in the blank 2 Inventories fill in the blank 3 618,420 Investments 0 fill in the blank 4 Land fill in the blank 5 0 Equipment 705,120 fill in the blank 6 Accumulated depreciation-equipment (166,400) fill in the blank 7 Total assets $fill in the blank 8 $fill in the blank 9 Liabilities Accounts payable (merchandise creditors) $fill in the blank 10 $391,830 Accrued expenses payable (operating expenses) 41,150 fill in the blank 11 Dividends payable fill in the blank 12 19,200 Total liabilities $498,050 $fill in the blank 13 Stockholders' Equity Common stock, $4 par $fill in the blank 14 $100,000 Paid-in capital in excess of par fill in the blank 15 280,000 Retained earnings fill in the blank 16 fill in the blank 17 Total stockholders' equity $1,858,400 $fill in the blank 18 Total liabilities and stockholders' equity $fill in the blank 19 $fill in the blank 20

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter3: Income Flows Versus Cash Flows: Understanding The Statement Of Cash Flow

Section: Chapter Questions

Problem 27PC: Preparing a Statement of Cash Flows from Balance Sheets and Income Statements. BTB Electronics Inc....

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Mastery Problem: Statement of Cash Flows

Championship Boxing, Inc.

Championship Boxing, Inc. is a small manufacturer of cardboard boxes of all sizes. You have reported for your first day of work, and the company is in an uproar. Yearly financial statements are being prepared, but a computer malfunction of the company’s new BOX-9000 computer has inadvertently erased parts of the company’s balance sheet, along with almost all related data except the company’s statement of cash flows. The IT department is working to retrieve earlier backups, but estimates that the reconstruction of the data will take about 24 hours.

Unfortunately, financial statements are to be presented at a stockholders’ meeting in one hour. The company uses the indirect method to prepare its statement of cash flows (rather than the direct method), so your new supervisor believes the missing data for the balance sheet can be prepared using the statement of cash flows. You are assigned this task, since you were top student in your business school class. Meanwhile, the supervisor will go to the stockholders’ meeting and give some introductory remarks.

In addition to the statement of cash flows, the following data survived the computer mishap:

The investments were sold for $280,000 cash.
Equipment was acquired for $152,000 cash.
Land was acquired for $326,000 cash.
There were no disposals of equipment during the year.
12,500 shares of common stock were sold for cash during the year.
There was a $96,000 debit to Retained Earnings for cash dividends declared.

Statement of Cash Flows

Your supervisor has provided you with the following statement of cash flows, prepared using the indirect method. Recall that the statement of cash flows consists of three sections: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Review the statement, and then proceed to the next panel.

Championship Boxing, Inc. Statement of Cash Flows For the Year Ended December 31, 20Y8
Cash flows from (used for) operating activities:
Net income	$186,540
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	18,400
Gain on sale of investments	(50,000)
Changes in current operating assets and liabilities:
Increase in accounts receivable	(25,390)
Increase in inventories	(33,450)
Increase in accounts payable	41,070
Decrease in accrued expenses payable	(12,480)
Net cash flow from operating activities		$124,690
Cash flows from (used for) investing activities:
Cash received from sale of investments	$280,000
Cash paid for purchase of land	(326,000)
Cash paid for purchase of equipment	(152,000)
Net cash flow used for investing activities		(198,000)
Cash flows from (used for) financing activities:
Cash received from sale of common stock	$187,500
Cash paid for dividends	(91,200)
Net cash flow from financing activities		96,300
Net increase in cash		$22,990
Cash balance, January 1, 20Y8		585,920
Cash balance, December 31, 20Y8		$608,910

Balance Sheet

Using the information on above, complete the following comparative balance sheet.

Championship Boxing, Inc. Comparative Balance Sheet December 31, 20Y8 and 20Y7
	20Y8	20Y7
Assets
Cash		$fill in the blank 1	$585,920
Accounts receivable (net)		230,950	fill in the blank 2
Inventories		fill in the blank 3	618,420
Investments		0	fill in the blank 4
Land		fill in the blank 5	0
Equipment		705,120	fill in the blank 6
Accumulated depreciation-equipment		(166,400)	fill in the blank 7
Total assets		$fill in the blank 8	$fill in the blank 9

Liabilities
Accounts payable (merchandise creditors)		$fill in the blank 10	$391,830
Accrued expenses payable (operating expenses)		41,150	fill in the blank 11
Dividends payable		fill in the blank 12	19,200
Total liabilities		$498,050	$fill in the blank 13

Stockholders' Equity
Common stock, $4 par		$fill in the blank 14	$100,000
Paid-in capital in excess of par		fill in the blank 15	280,000
Retained earnings		fill in the blank 16	fill in the blank 17
Total stockholders' equity		$1,858,400	$fill in the blank 18
Total liabilities and stockholders' equity		$fill in the blank 19	$fill in the blank 20

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