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Statement of cash flows—direct method applied to PR–1A The comparative balance sheet of Navaria Inc. for December 31, 20Y3 and 20Y2, is as follows: Dec 31, 20Y3 Dec 31, 20Y2 Assets Cash ......................................................... $ 155,000 $ 150,000 Accounts receivable (net) 450,000 400, 000 Inventories 770,000 750,000 Investments............................................... 0 100,000 Land....................................... 500,000 Equipment................................................... 1,400,000 1,200,000 Accumulated depreciation—equipment........................ (600,000) (500,000) $2,675,000 $2,100,00 Liabilities and Stockholders' Equity Accounts payable............................................. $ 340,000 $ 300,000 Accrued expenses payable.................................... 45,000 50,000 Dividends payable............................................. 30,000 25,000 Common stock. $4 par......................................... 700,000 600,000 Paid-in capital: Excess of issue price over par—common stock 200,000 175,000 Retained earnings............................................. 1,360,000 950,000 Total liabilities and stockholders' equity...................... $2,675,000 $2,100,000 The income statement for the year ended December 31, 20Y3, is as follows: Sales........................................... $3,000,000 Cost of merchandise sold......................... 1,400,000 Gross profit...................................... $1,600,000 Operating expenses: Depreciation expense........................ $ 100,000 Other operating expenses.................... 950,000 Total operating expenses................ 1,050,000 Operating income.............................. $ 550,000 Other income: Gain on sale of investments.................. 75,000 Income before income tax....................... $ 625,000 Income tax expense............................. 125,000 Net income...................................... $ 500,000 Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows: a. The investments were sold for $175,000 cash. b. Equipment and land were acquired for cash. c. There were no disposals of equipment during the year. d. The common stock was issued for cash. e. There was a $90,000 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.

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 16, Problem 16.5APR
Textbook Problem

Statement of cash flows—direct method applied to PR–1A

The comparative balance sheet of Navaria Inc. for December 31, 20Y3 and 20Y2, is as follows:

  Dec 31, 20Y3 Dec 31, 20Y2
Assets    
Cash ......................................................... $ 155,000 $ 150,000
Accounts receivable (net) 450,000 400, 000
 Inventories 770,000 750,000
Investments............................................... 0 100,000
Land....................................... 500,000  
Equipment................................................... 1,400,000 1,200,000
Accumulated depreciation—equipment........................ (600,000) (500,000)
$2,675,000 $2,100,00
Liabilities and Stockholders' Equity
Accounts payable............................................. $ 340,000 $ 300,000
Accrued expenses payable.................................... 45,000 50,000
Dividends payable............................................. 30,000 25,000
Common stock. $4 par......................................... 700,000 600,000
Paid-in capital: Excess of issue price over par—common stock 200,000 175,000
Retained earnings............................................. 1,360,000 950,000
Total liabilities and stockholders' equity...................... $2,675,000 $2,100,000

The income statement for the year ended December 31, 20Y3, is as follows:

Sales...........................................   $3,000,000
Cost of merchandise sold.........................   1,400,000
Gross profit......................................   $1,600,000
Operating expenses:    
Depreciation expense........................ $ 100,000  
Other operating expenses.................... 950,000  
Total operating expenses................   1,050,000
Operating income..............................   $ 550,000
Other income:    
Gain on sale of investments..................   75,000
Income before income tax.......................   $ 625,000
Income tax expense.............................   125,000
Net income......................................   $ 500,000

Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows:

a. The investments were sold for $175,000 cash.

b. Equipment and land were acquired for cash.

c. There were no disposals of equipment during the year.

d. The common stock was issued for cash.

e. There was a $90,000 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.

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Chapter 16 Solutions

Accounting
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Ch. 16 - Classifying cash flows Identify whether each of...Ch. 16 - Classifying cash flows Identify whether each of...Ch. 16 - Adjustments to net incomeindirect method Ripley...Ch. 16 - Adjustments to net incomeindirect method Ya Wen...Ch. 16 - Changes in current operating assets and...Ch. 16 - Changes in current operating assets and...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Land transactions on the statement of cash flows...Ch. 16 - Land transactions on the statement of cash flows...Ch. 16 - Cash received from customersdirect method Sales...Ch. 16 - Cash received from customersdirect method Sales...Ch. 16 - Cash payments for merchandisedirect method The...Ch. 16 - Cash payments for merchandisedirect method The...Ch. 16 - Free cash flow McMahon Inc. reported the following...Ch. 16 - Free cash flow Dillin Inc. reported the following...Ch. 16 - Cash flows from operating activities On its income...Ch. 16 - Effect of transactions on cash flows State the...Ch. 16 - Classifying cash flows Identify the type of cash...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Determining cash payments to stockholders The...Ch. 16 - Reporting changes in equipment on statement of...Ch. 16 - Reporting changes in equipment on statement of...Ch. 16 - Reporting land transactions on statement of cash...Ch. 16 - Reporting stockholders equity items on statement...Ch. 16 - Reporting land acquisition for cash and mortgage...Ch. 16 - Reporting issuance and retirement of longterm debt...Ch. 16 - Determining net income from net cash flow from...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Cash flows from operating activitiesdirect method...Ch. 16 - Cash paid for merchandise purchases The cost of...Ch. 16 - Determining selected amounts for cash flows from...Ch. 16 - Cash flows from operating activitiesdirect method...Ch. 16 - Cash flows from operating activitiesdirect method....Ch. 16 - Free cash flow Sweeter Enterprises Inc. has cash...Ch. 16 - Free cash flow The financial statement for Nike,...Ch. 16 - Free cash flow Lovato Motors Inc. has cash flows...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsdirect method The...Ch. 16 - Statement of cash flowsdirect method applied to...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsdirect method The...Ch. 16 - Statement of cash flowsdirect method applied to PR...Ch. 16 - Ethics in Action Lucas Hunter, president of...Ch. 16 - Communication Tidewater Inc., a retailer, provided...Ch. 16 - Using the statement of cash flows You are...Ch. 16 - Dillip Lachgar is the president and majority...

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