Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 11, Problem 62.1C
To determine
Concept introduction:
Cash flow statement also known as statement of cash flows shows inflow and outflow of cash and it is divided into three categories- operating, investing and financing activities.
To prepare:
Cash Flow Statement for 2019 using direct method.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Company ABC is preparing its 2021 financial statements. At the end of 2021, the company purchased a building for $500,000 making a down payment of $200,000 cash and signing a $300,000 mortgage note. The president of Company ABC, Jackie Brown understand that debt transactions are considered a financing activity from a business perspective and also, that purchases of long-term assets are investing activities. Consequently, Jackie is pondering how to report this transaction on the statement of cash flows and has asked you as her accountant to look into the issue.
Using the related GAAP, prepare a memo to the president that summarizes how to report this transaction on the State of Cash Flows
Construct the statement of cash flow:
Hyrule Motors, a motorcycle repairs and maintenance services provider, had the following transaction during 2020, its first month of operations:
January 1. The owner, Link, invested P1,000,000 cash to start the business.
January 1. Hyrule Motors bought computer equipment totaling P240,000 using cash.
January 1. Bought furniture and fixtures using cash, P400,000.
January 1. Bought machineries totaling P500,000 on account.
January 3. Bought office supplies amounting 50,000 cash.
January 7. Rendered services amounting to P800,000, on account.
January 8. Rendered services amounting to P200,000 cash.
January 13. Paid 300,000 for the machineries bought on January 1.
January 27. Received P400,000 cash as payment for the services rendered on January 31.
January 31. Paid P100,000 for the month’s utilities.
Company ABC is preparing its 2021 financial statements. At the end of 2021, the company purchased a building for $500,000 making a down payment of $200,000 cash and signing a $300,000 mortgage note. The president of Company ABC, Jackie Brown understand that debt transactions are considered a financing activity from a business perspective and also, that purchases of long-term assets are investing activities.
Summarize how this transaction is to be reported on the State of Cash Flows using the related GAAP.
Required:
- What are the issues of the given case? List them.
- Show how the transaction is to be recorded on the statement of cash flows (Journal entries).
- Give an example of the disclousure required for the particular items .
- Give your reasoning/support based on guidance from the codification.
Chapter 11 Solutions
Cornerstones of Financial Accounting
Ch. 11 - Prob. 1DQCh. 11 - Prob. 2DQCh. 11 - How is a statement of cash flows different from an...Ch. 11 - Prob. 4DQCh. 11 - What are the three categories into which inflows...Ch. 11 - Prob. 6DQCh. 11 - Why are direct exchanges of long-term debt for...Ch. 11 - Describe the relationship between changes in cash...Ch. 11 - What are two ways to report a companys net cash...Ch. 11 - Why are depreciation, depletion, and amortization...
Ch. 11 - Prob. 11DQCh. 11 - Prob. 12DQCh. 11 - What does an increase in inventory imply? How...Ch. 11 - Prob. 14DQCh. 11 - Prob. 15DQCh. 11 - Prob. 16DQCh. 11 - Prob. 17DQCh. 11 - What balance sheet account changes might you...Ch. 11 - Prob. 19DQCh. 11 - Prob. 20DQCh. 11 - Prob. 21DQCh. 11 - Prob. 22DQCh. 11 - Prob. 23DQCh. 11 - Prob. 24DQCh. 11 - Which of the following is not a use of the...Ch. 11 - Which of the following would be classified as a...Ch. 11 - Prob. 3MCQCh. 11 - Which of the following is an example of a cash...Ch. 11 - Prob. 5MCQCh. 11 - Which of the following statements is true? a. Net...Ch. 11 - Mullinix Inc. reported the following information:...Ch. 11 - Which item is added to net income when computing...Ch. 11 - Refer to the information for Cornett Company...Ch. 11 - Prob. 10MCQCh. 11 - Chasse Building Supply Inc. reported net cash...Ch. 11 - Smoltz Company reported the following information...Ch. 11 - Prob. 13MCQCh. 11 - Classification of Cash Flows Stanfield Inc....Ch. 11 - Classification of Cash Flows Patel Company...Ch. 11 - Prob. 16CECh. 11 - Analyzing Changes in Balance Sheet Accounts Refer...Ch. 11 - Prob. 18CECh. 11 - Prob. 19CECh. 11 - Determining Net Cash Flow from Investing...Ch. 11 - Prob. 21CECh. 11 - Prob. 22CECh. 11 - Cash Receipts from Customers Singleton Inc. had...Ch. 11 - Prob. 24CECh. 11 - Prob. 25CECh. 11 - Prob. 26BECh. 11 - Prob. 27BECh. 11 - Analyzing Balance Sheet Accounts A review of the...Ch. 11 - Prob. 29BECh. 11 - Prob. 30BECh. 11 - Prob. 31BECh. 11 - Prob. 32BECh. 11 - Prob. 33BECh. 11 - Classification of Cash Flows A review of the...Ch. 11 - Classification of Cash Flows The following are...Ch. 11 - Analyzing Changes in Balance Sheet Accounts A...Ch. 11 - Analyzing the Accounts Casey Company uses a...Ch. 11 - Analyzing the Accounts The controller for Summit...Ch. 11 - Reporting Net Cash Flow from Operating Activities...Ch. 11 - Prob. 40ECh. 11 - Determining Cash Flows from Investing Activities...Ch. 11 - Determining Cash Flows 1from Investing Activities...Ch. 11 - Determining Cash Flows from Financing Activities...Ch. 11 - Prob. 44ECh. 11 - Partial Statement of Cash Flows Service Company...Ch. 11 - Prob. 46ECh. 11 - Prob. 47ECh. 11 - Preparing Net Cash Flows from Operating...Ch. 11 - Preparing a Statement of Cash Flows-Direct Method...Ch. 11 - Preparing a Statement of Cash Flows-Direct Method...Ch. 11 - Prob. 51ECh. 11 - Prob. 52PSACh. 11 - Prob. 53PSACh. 11 - Classification of Cash Flows Rolling Meadows...Ch. 11 - Prob. 55PSACh. 11 - Preparing a Statement of Cash Flows Monon Cable...Ch. 11 - Prob. 57PSACh. 11 - Preparing Net Cash Flows from Operating...Ch. 11 - Using a Spreadsheet to Prepare a Statement of Cash...Ch. 11 - Prob. 52PSBCh. 11 - Prob. 53PSBCh. 11 - Prob. 54PSBCh. 11 - Preparing a Statement of Cash Flows Volusia...Ch. 11 - Prob. 56PSBCh. 11 - Prob. 57PSBCh. 11 - Prob. 58PSBCh. 11 - Using a Spreadsheet to Prepare a Statement of Cash...Ch. 11 - Prob. 60.1CCh. 11 - Prob. 60.2CCh. 11 - Prob. 60.3CCh. 11 - Prob. 61.1CCh. 11 - Profitability Declines and the Statement of Cash...Ch. 11 - Prob. 61.3CCh. 11 - Prob. 61.4CCh. 11 - Prob. 62.1CCh. 11 - Prob. 62.2CCh. 11 - Prob. 62.3CCh. 11 - Income, Cash Flow, and Future Losses On January L...Ch. 11 - Income, Cash Flow, and Future Losses On January L...Ch. 11 - Income, Cash Flow, and Future Losses On January L...Ch. 11 - Prob. 63.4CCh. 11 - Researching Accounting Standards: Dissenting Views...Ch. 11 - Prob. 64.2CCh. 11 - Prob. 65.1CCh. 11 - Prob. 65.2CCh. 11 - Prob. 65.3CCh. 11 - Prob. 65.4CCh. 11 - Prob. 65.5CCh. 11 - Prob. 65.6CCh. 11 - Prob. 65.7CCh. 11 - Prob. 65.8CCh. 11 - Prob. 66.1CCh. 11 - Prob. 66.2CCh. 11 - Prob. 66.3CCh. 11 - Prob. 66.4CCh. 11 - Comparative Analysis: Under Armour, Inc., versus...Ch. 11 - Prob. 67.1CCh. 11 - CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT The...
Knowledge Booster
Similar questions
- Prepare the financial statement for the year ended 31 December 2022 that provides details about the cash inflows and cash outflows of Megazone Limited MEGAZONE LIMITEDMegazone Limited is well known for its focus on innovation and this is highlighted in the company’s website. The website also tells a story of growth and success in the marketplace. This, combined with the excellent quality products offered, has made Megazone Limited a leader in the marketplace. At the end of 2021 the plant and equipment (at carrying value) totalled R5 000 000, a long-term investment was valued at R400 000, inventories amounted to R2 050 000, R1 750 000 was owed by trade debtors, cash in the bank amounted to R350 000, the ordinary share capital balance was R3 100 000, the accumulated undistributed profits amounted to R2 500 000, an amount of R3 350 000 was owed to Vap Bank in respect of a long-term loan, R270 000 was owed to the trade creditors, R250 000 was owed to shareholders for the final dividend and…arrow_forwardPlease submit financial statements for 2021 for Company Co Landscaping, including a balance sheet, income statement, and statements of cash flows (operating, investing, financing) Trial Balance For the Years Ending December 31 2020 2021 ash operating 16,914 $79,275 Cash saving 26,300 $74,314 Cash - Loan Account- - 249,019 Account Receivable 73,325 15,092 Prepaid insurance 20,719 6,561 Account Payable (33,839) (448) Prepaid expense (69,8220 (21,762) Loan Payable (256,658) (617,275) Equity 335,016 337,429 Sales (410,000) (418,841) Land lease Income (3,000) (3000) Electric 4,500 5000 Water 5,000 5000 Water Reim Exp 500 500 Office expense 4,047 4,047 Legal 12,500 12,500 Accounting 500 500 Professional Fees 35,000 35,000 Bad Debt 500 500 Cost of Good Sold 80,000 80,000 Beautification/Dumpster 10,000 10,000 Fertilizing /Grass 5,000 5,000 Road Sign 1,000 1,500 Insect Mitigation 1,000 1,000 Tree/bush trimming 2,500 2,500…arrow_forwardPlease answer all of the following questions and kindly type it out if possible so I can easily understand. I have attached two pictures with the information to complete the questions. Thank You :) As part of your analysis, you are required to investigate WITCO’s cash flows. (a)Using the financial statements and additional notes provided, calculate the following for 2020: i. Operating Cash Flow ii. Net Capital Spending iii. Change in Net Working Capital iv. Cash Flow from assets v. Cash Flow to creditors vi. Cash Flow to stockholders (b) Prepare WITCO’s Statement of Cash Flow for the year ended December 31, 2020. (c)What is the purpose and importanceof the Cash Flow Statement?arrow_forward
- On 1 March 2021, Tom set up J Hair Salon by investing $50,000 cash and $30,000 of equipment in J Hair Salon. On that day, he paid rent of $15,000 for three months. During March 2021, he completed the following additional transactions: Purchased $3,000 of supplies on account. Provided haircuts and treatments and received $20,000 cash. Determined that the cost of supplies on hand in end-March was $500.Analyse the above and record the necessary entries for March 2021. For this question, dates and narrations are not requiredarrow_forwardCreate a statement of cash flow from the following transactions from the books of Arts and Styles. The owner wants to see the result of its operation after a month of existence December, 2020. December 1 Chon Loo invested 1,500,000 and equipment worth 500,000. 3 Paid Permits and licenses to operate 12,000. 5 Bought tables, chairs, on account from SM Malls, 250,000. 8 Rendered services for cash worth 50,000. 9 Rendered services on account with a promissory note from Aces worth 30,000. 10 Bought canvas and paints worth 20,000. 15 Paid salaries of artist for 6 months, worth 300,000. 20 The owner withdraw 10,000 for personal use. 25 Borrowed money from Metro Bank 1,000,000 giving a promissory payable in a year with Interest of 8% per annum. 27 Collected from Aces…arrow_forwardCreate a statement of cash flow from the following transactions from the books of Arts and Styles. The owner wants to see the result of its operation after a month of existence December, 2020. December 1 Chon Loo invested 1,500,000 and equipment worth 500,000. 3 Paid Permits and licenses to operate 12,000. 5 Bought tables, chairs, on account from SM Malls, 250,000. 8 Rendered services for cash worth 50,000. 9 Rendered services on account with a promissory note from Aces worth 30,000. 10 Bought canvas and paints worth 20,000. 15 Paid salaries of artist for 6 months, worth 300,000. 20 The owner withdraw 10,000 for personal use. 25 Borrowed money from Metro Bank 1,000,000 giving a promissory payable in a year with Interest of 8% per annum. 27 Collected from Aces…arrow_forward
- Sohni Dharti International is a renowned seed company and they want to expand their business. They hire you as a financial expert and provide you following financial records for the years of 2019 and 2020. Company has Cash $53,000 in 2019 and $31,000 in 2020, Marketable securities $87,000 in 2019 and $0 in 2020, Account Receivable $346,000 in 2019 and $528,000 in 2020, Account payable in 2019 is $13,000 and in 2020 is $27,000, Bank borrowing in 2019 is $10,000 and in 2020 is $35,000, common stock is $100,000 in both 2019 and 2020,purchase and sales is $0 in both 2019 and 2020. Being a financial expert prepare cash flow statement by using direct method and then give your opinion whether company has sufficient funds to take advantage of investment opportunities or not?arrow_forwardSuppose you work in the loan department of Third National Bank.Byron Blakely, the owner of Byron’s Beauty Solutions, has come to you seeking a loan for$500,000 to expand operations. He proposes to use accounts receivable as collateral for the loanand has provided you with the following information from the company’s most recent financialstatements: Requirement1. Analyze the trends of sales, days’ sales outstanding, and cash collections from customersfor 2019 and 2018. Would you make the loan to Blakely? Support your decision with factsand figures. Assume there are no write-offs in 2018 and 2019.arrow_forwardYou work as a freelance accounting professional and have been recently engaged by the auditors of Life-Positive Inc. for an assignment. In examining the company’s records, you have extracted the following information: 4. Calculate the cash flow from assets, cash flow to creditors, and cash flow to stockholders for 2022. 5. Calculate the Dividends per Share and Earnings per Share for each year for Brown Company. 6. Briefly comment on the company’s cash flows for 2022 in light of an expansion plan which will be financed by both debt and equity.arrow_forward
- Apple Inc Please use Apple Inc’s complete annual report, including the notes to its financial statements for 2019 and 2018 to answer this case study. Information are available at the company's website. Apple's financial statements contain the following selected accounts, stated in millions of dollars. Accounts PayableAccounts ReceivableProperty, Plant, and Equipment Instructions Cash and Cash Equivalents Research and Development Expense Inventories a. Answer the following questions.1. What is the increase and decrease side for each account? 2. What is the normal balance for each account? b. Identify the probable other account in the transaction and the effect on that account when: 1. Accounts Receivable is decreased. 2. Accounts Payable is decreased.3. Inventories are increased. c. Identify the other account(s) that ordinarily would be involved when: 1. Research and Development Expense is increased.2. Property, Plant, and Equipment is increased.arrow_forwardA summary of cash flows for Adventure Travel Service for the year ended April 30, 2019, follows: Cash Flows Cash receipts: Cash receipts from customers $2,080,000 Cash receipt from owner as investment 60,000 Cash payments: Cash payments for operating expenses 1,706,000 Cash payment for purchase of land 400,000 Cash withdrawals by owner 40,000 The cash balance as of May 1, 2018, was $203,000. Prepare a statement of cash flows for Adventure Travel Service for the year ended April 30, 2019. Refer to the cash receipts and cash payments information given in the instructions and to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) and the word “Deduct” will automatically appear if they are required. Enter amounts that represent cash outflows as negative numbers using a minus sign.arrow_forwardMelody Lane Music Company was started by John Ross early in 2021. Initial capital was acquired by issuing shares of common stock to various investors and by obtaining a bank loan. The company operates a retail store that sells records, tapes, and compact discs. Business was so good during the first year of operations that John is considering opening a second store. The funds necessary for expansion will come from a new bank loan. In order to approve the loan, the bank requires financial statements. A. Cash receipts consisted of the following: from customers $360,000, from issue of common stock $100,000, from bank loan $100,000 B. Cash disbursements were as follows: purchase odf inventory $300,000, rent $15,000, Salaries $30,000, Utilities $5,000, Insurance $3,000, Purchase of equipment $40,0000 C. The bank loan was made on March 31,2021. A note was signed requiring payment of interest and principle on March 31,2022. The interest rate is 12% D. The equipment was purchased on…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningExcel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Excel Applications for Accounting Principles
Accounting
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Cengage Learning