Concept explainers
1.
Complete the T-account worksheet that is used to prepare the statement of cash flows for the current year.
1.
Explanation of Solution
T-account:
T-account is the form of the ledger account, where the
Following are the changes in cash accounts:
Cash (A) | |||
Operating activities: | |||
(1) Net income | 20,200 | (3) Inventory | 7,000 |
(2) | 3,000 | (4) Accounts payable | 3,000 |
(3) Income taxes payable | 1,500 | (5) Wages payable | 1,500 |
Net cash flow provided by operating activities | 13,700 | ||
Investing activities: | |||
(7) Sale of equipment | 6,000 | (8) Purchased investments | 15,000 |
Net cash flow provided by investing activities | 9,000 | ||
Financing activities: | |||
(9) Proceeds from stock issuance | 6,000 | (10) Payment of dividends | 12,000 |
Net cash flow used by financing activities | 6,000 | ||
Net decrease in cash and cash equivalents | 1,300 |
Following are the changes in non-cash accounts:
Beginning balance 22,000 | |||||
Ending balance 22,000 | |||||
Merchandise Inventory (A) | |||||
Beginning balance 68,000 | |||||
(3) Increase 7,000 | |||||
Ending balance 75,000 |
Accounts payable (L) | ||
Beginning balance | ||
(4) Decrease 7,000 | 17,000 | |
Ending balance | 14,000 |
Wages payable (L) | ||
Beginning balance | 2,500 | |
(5) Decrease 1,000 | ||
Ending balance | 1,500 |
Income taxes payable (L) | ||
Beginning balance | 3,000 | |
(6) Increase | 1,500 | |
Ending balance | 4,500 |
Equipment (A) | ||
Beginning balance 114,500 | ||
Purchases 0 | (7)Disposals | 21,000 |
Ending balance 93,500 |
Accumulated Depreciation (XA) | ||
Beginning balance | 32,000 | |
(7) Disposals | (2)Depreciation | 3,000 |
Ending balance | 20,000 |
Investments (A) | ||
Beginning balance 0 | ||
(8) Purchases 15,000 | Disposals | 0 |
Ending balance 15,000 |
Contributed Capital (SE) | ||
Beginning balance | 100,000 | |
Stock repurchased | (9)Stock issued | 6,000 |
Ending balance | 106,000 |
Beginning balance | 100,000 | |
Stock repurchased | (9) Stock issued | 6,000 |
Ending balance | 106,000 |
Note: L represents liabilities, XA represents contra-asset, A represents asset and SE represents
2.
Prepare the statement of cash flows for the current year.
2.
Explanation of Solution
Statement of cash flows:
This statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period.
Indirect method:
Indirect method uses the accrual basis of accounting, where the Net Income is adjusted to determine the net cash provided from operating activities.
Prepare the statement of cash flows for the current year of Company G.
Company G | ||
Statement of Cash Flows (Indirect Method) | ||
For the year ended December 31 | ||
Particulars | Amount ($) | Amount ($) |
Cash flows from operating activities: | ||
Net income | 20,200 | |
Add: Depreciation expenses | 3,000 | |
Changes in current assets and current liabilities | ||
Less: Increase in inventory | (7,000) | |
Less: Decrease in accounts payable | (3,000) | |
Less: Decrease in wages payable | (1,000) | |
Add: Increase in income taxes payable | 1,500 | |
Net cash flows from operating activities | 13,700 | |
Cash flows from Investing activities: | ||
Less: Purchase of fixed assets | (15,000) | |
Add: Proceeds from sale of equipment | 6,000 | |
Net cash flows from investing activities | (9,000) | |
Cash flows from Financing activities: | ||
Add: Sale of capital stock | 6,000 | |
Less: Dividends paid | (12,000) | |
Net cash flows from financing activities | (6,000) | |
Net increase (decrease) in cash | (1,300) | |
Cash balance at the beginning | 20,500 | |
Cash balance at the end | 19,200 |
Table (1)
Want to see more full solutions like this?
Chapter 12 Solutions
FIN.ACCTG:ACC 101 CUST.CONNECT-W/ETXT C
- Statement of cash flowsdirect method The comparative balance sheet of Martinez Inc. for December 31, 20Y4 and 20Y3, is as follows: The income statement for the year ended December 31, 20Y3, is as follows: Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows: A. Equipment and land were acquired for cash. B. There were no disposals of equipment during the year. C. The investments were sold for 588,000 cash. D. The common stock was issued for cash. E. There was a 528,000 debit to Retained Earnings for cash dividends declared. Instructions Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities.arrow_forwardStatement of Cash Flows The following are several items involving Tejera Companys cash flow activities: a. Net income, 60,400 b. Receipt from issuance of common stock, 32,000 c. Payment for purchase of equipment, 41,500 d. Payment for purchase of land, 19,600 e. Depreciation expense, 20,500 f. Patent amortization expense, 1,200 g. Payment of dividends, 21,000 h. Decrease in salaries payable, 2,600 i. Increase in accounts receivable, 10,300 j. Beginning cash balance, 30,700 Required: Prepare Tejeras statement of cash flows using the direct method.arrow_forwardNet Cash Flow from Operating Activities The following are accounting items taken from Tyrone Shoelaces Required: a. Net income, 22,900 b. Payment for purchase of land, 4,000 c. Payment for retirement of bonds, 6,000 d. Depreciation expense, 7,800 e. Receipt from issuance of common stock, 7,000 f. Patent amortization expense, 2,700 g. Increase in accounts receivable, 3,400 h. Payment of dividends, 5,000 i. Decrease in accounts payable, 2,600 Required: Prepare the operating activities section of Tyrones statement of cash flows using the indirect method.arrow_forward
- EXPANDED STATEMENT OF CASH FLOWS Financial statements for McGinnis Company as well as additional information relevant to cash flows during the period are given below and on the next page. Additional information: 1. Office equipment was sold in 20-2 for 35,000. Additional information on the office equipment sold is provided below. 2. Depreciation expense for the year was 70,000. 3. The following purchases were made for cash: 4. Declared and paid cash dividends of 40,000. 5. Issued 10,000 shares of 10 par common stock for 22 per share. 6. Acquired additional office equipment by issuing a note payable for 8,000. REQUIRED Prepare a statement of cash flows explaining the change in cash and cash equivalents for the year ended December 31, 20-2.arrow_forwardEXPANDED STATEMENT OF CASH FLOWS Financial statements for McGinnis Company as well as additional information relevant to cash flows during the period are given below and on the next page. Additional information: 1. Office equipment was sold in 20-2 for 35,000. Additional information on the office equipment sold is provided below. 2. Depreciation expense for the year was 70,000. 3. The following purchases were made for cash: 4. Declared and paid cash dividends of 40,000. 5. Issued 10,000 shares of 10 par common stock for 22 per share. 6. Acquired additional office equipment by issuing a note payable for 8,000. REQUIRED Prepare a statement of cash flows explaining the change in cash and cash equivalents for the year ended December 31, 20-2. STATEMENT OF CASH FLOWS UNDER THE DIRECT METHOD Using the information provided in Problem 23-12B for McGinnis Company, prepare the following: 1. A schedule for the calculation of cash generated from operating activities for McGinnis Company for the year ended December 31, 20-2. 2. A statement of cash flows for McGinnis Company prepared under the direct method for the year ended December 31, 20-2.arrow_forwardEXPANDED STATEMENT OF CASH FLOWS Financial statements for McDowell Company as well as additional information relevant to cash flows during the period are given below and on the next page. Additional information: 1. Store equipment was sold in 20-2 for 35,000. Additional information on the store equipment sold is provided below. 2. Depreciation expense for the year was 112,000. 3. The following purchases were made for cash: 4. Declared and paid cash dividends of 60,000. 5. Issued 10,000 shares of 10 par common stock for 142 per share. 6. Acquired additional office equipment by issuing a note payable for 16,000. REQUIRED Prepare a statement of cash flows explaining the change in cash and cash equivalents for the year ended December 31, 20-2. SCHEDULE FOR CALCULATION OF CASH GENERATED FROM OPERATING ACTIVITIES Using the information provided in Problem 23-12A for McDowell Company, prepare the following: 1. A schedule for the calculation of cash generated from operating activities for McDowellCompany for the year ended December 31, 20-2. 2. A partial statement of cash flows for McDowell Company reporting cash from operating activities under the direct method for the year ended December 31, 20-2.arrow_forward
- Statement of Cash Flows A list of Fischer Companys cash flow activities is presented here: a. Patent amortization expense, 3,500 b. Machinery was purchased for 39,500 c. At year-end, bonds payable with a face value of 20,000 were issued for 17,000 d. Net income, 47,200 k. Inventories increased by 15,400 e. Dividends paid, 16,000 f. Depreciation expense, 12,900 g. Preferred stock was issued for 13,600 h. Investments were acquired for 21,000 i. Accounts receivable increased by 4,300 j. Land was sold at cost, 11,000 k. Inventories increased by 15,400 l. Accounts payable increased by 2,700 m. Beginning cash balance, 19,400 Required: Prepare Fischers statement of cash flows.arrow_forwardThe following financial statements were provided by Roberts Company: At the end of 20X2, Roberts purchased some additional equipment for 20,000. Required: Prepare a statement of cash flows using the indirect method.arrow_forwardStatement of Cash Flows The following items involve the cash flow activities of Rocky Horror Picture Co.: a. Net income, 41,000 b. Payment of dividends, 16,000 c. Ten year, 28,000 bonds payable were issued at face value d. Depreciation expense, 11,000 e. Building acquired at a con of 40,000 f. Accounts receivable decreased by 2,000 g. Accounts payable decreased by 4,000 h. Equipment acquired at a cost of 8,000 i. Inventories increased by 7,000 j. Beginning cash balance, 13,000 Required: Prepare Rocky Horror Pictures statement of cash flows using the indirect method.arrow_forward
- Solpoder Corporation has the following comparative financial statements: Dividends of 17,100 were paid. No equipment was purchased or retired during the current year. Required: Prepare a statement of cash flows using the direct method.arrow_forwardProvide journal entries to record each of the following transactions. For each, also identify *the appropriate section of the statement of cash flows, and s utility bill, $1,500arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubCollege Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning