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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Refer to the information provided in Brief Exercises 14-19, 14-20, and 14-21.

Required:

  1. 1. Prepare a statement of cash flows for Swasey for 20X2.
  2. 2. What is the relationship between the statement of cash flows and the change in cash calculated in Brief Exercise 14-18?

Swasey Company provided the following information:

Chapter 14, Problem 22BEA, Refer to the information provided in Brief Exercises 14-19, 14-20, and 14-21. Required: 1. Prepare a , example  1

Required:

  1. 1. Calculate the change in cash.
  2. 2. Explain the role of the change in cash in the statement of cash flows.

Swasey Company provided the following partial comparative balance sheets and the income statement for 20X2

Chapter 14, Problem 22BEA, Refer to the information provided in Brief Exercises 14-19, 14-20, and 14-21. Required: 1. Prepare a , example  2

Chapter 14, Problem 22BEA, Refer to the information provided in Brief Exercises 14-19, 14-20, and 14-21. Required: 1. Prepare a , example  3

Required:

Compute operating cash flows using the indirect method.

During the year, Swasey Company sold equipment with a book value of $560,000 for $760,000 (original purchase cost of $960,000). New equipment was purchased.

Swasey provided the following comparative balance sheets:

Chapter 14, Problem 22BEA, Refer to the information provided in Brief Exercises 14-19, 14-20, and 14-21. Required: 1. Prepare a , example  4

Required:

Calculate the investing cash flows for the current year.

Swasey Company earned net income of $1,800,000 in 20X2. Swasey provided the following information:

Chapter 14, Problem 22BEA, Refer to the information provided in Brief Exercises 14-19, 14-20, and 14-21. Required: 1. Prepare a , example  5

Chapter 14, Problem 22BEA, Refer to the information provided in Brief Exercises 14-19, 14-20, and 14-21. Required: 1. Prepare a , example  6

Required:

Compute the financing cash flows for the current year.

1.

To determine

Chart the statement of cash flows for Company S for 20X2.

Explanation

Cash Flow Statement:

Cash flow statement is a financial statement prepared to provide information about the sources and uses of cash in a firm. In this statement, the activities increasing cash are referred as cash inflows and the activities that decrease cash are referred as cash outflows. Financing and investing activities are two category of a cash flow statement.

The statement of cash flows for Company S for 20X2 is shown below:

S Company
Statement of Cash Flows
For the year ended December 31, 20X2
Cash flows from operating activities:
ParticularsAmount ($)Amount ($)
Net income1,800,000 
Add/ Less:  
    Decrease in accounts receivable1335,000 
    Decrease in wages payable2(370,000) 
    Increase in inventories3(40,000) 
    Depreciation expense540,000 
    Gain on sale of equipment(200,000) 
        Net cash from operating activities 2,065,000
Cash flows from investing activities:
    Sale of equipment760,000 
    Purchase of equipment4(860,000) 
    Purchase of land5(875,000) 
        Net cash from investing activities (975,000)
Cash flows from financing activities:
    Issuance of bonds payable770,000 
    Payment of mortgage(200,000) 
    Payment of dividends6(800,000) 
        Net cash from financing activities (230,000)
Net increase in cash 860,000

Table (1)

Therefore, there is a net increase in cash of $860,000.

Working Note:

1.

Calculation of difference in accounts receivable:

(DifferenceinAccountsReceivable)=(AmountofAccountsReceivableof20X2AmountofAccountsReceivableof20X1)=($1,165,000$1,500,000)=$335,000

2.

Calculation of difference in wages payable:

(DifferenceinWagesPayable)=(AmountofWagesPayableof20X2AmountofWagesPayableof20X1)=($1,030,000$1,400,000)=$370,000

3

2.

To determine

Explain the relationship between the statement of cash flows and the change in cash.

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