Concept explainers
(Appendix 21.1) Operating
Required:
- 1. Using the direct method, prepare the operating activities section of the 2019 statement of cash flows for Lamberson.
- 2. (Optional). If you completed P21-6 earlier, prepare the remaining portion of the statement of cash flows. (A separate schedule reconciling net income to cash provided by operating activities is not necessary.)
Prepare the operating activities section under direct method of L Company for the year 2019.
Explanation of Solution
Statement of cash flows: Cash flow 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. Statement of cash flows includes the changes in cash balance due to operating, investing, and financing activities.
Operating Activities: Operating activities include cash inflows and outflows from business operations.
Prepare the operating activities section under direct method:
L Company | ||
Statement of cash flows for the year, 2019 | ||
Particulars | Amount($) | Amount($) |
Operating Activities: | ||
Cash inflows: | ||
Collection from customers(Working note 1) | 40,040 | |
Dividends collected | 820 | |
Cash inflows from operating activities | 40,860 | |
Cash outflows: | ||
Payments to suppliers(Working note 2) | (19,350) | |
Payment to employees(Working Note 3) | (11,450) | |
Other operating payments(Working Note 4) | (1,410) | |
Payments of income taxes (Working Note 5) | (1,550) | |
Cash outflows for operating activities | (33,760) | |
Net cash provided by operating activities | 7,100 |
Table (1)
Working note 1: Calculate the cash collection from customers.
Working note 2: Calculate payments made to suppliers.
Working note 3: Calculate the payments to employees.
Working note 4: Calculate the other operating payments.
Working note 5: Calculate the income taxes paid.
Therefore, the net cash provided by operating activities is $7,100.
2.
Prepare the remaining sections in the cash flow statement of L Company for the year 2019.
Explanation of Solution
Prepare the cash flow statement for the year 2019.
L Company | ||
Statement of cash flows for the year, 2019 | ||
Particulars | Amount($) | Amount($) |
Investing Activities: | ||
Payment for purchase of short-term marketable securities | (1,300) | |
Proceeds from sale of long-term investment | 2,300 | |
Proceeds from sale of equipment | 100 | |
Payment for purchase of equipment | (16,200) | |
Net cash used for investing activities | (15,100) | |
Financing Activities: | ||
Proceeds from issuance of 12% bonds | 9,700 | |
Payment of dividends | (700) | |
Net cash provided by financing activities | 9,000 | |
Net increase in cash(schedule 1) | 1,000 | |
Cash, January 1, 2019 | 1,400 | |
Cash December 31, 2019 | 2,400 | |
Schedule 1: investing and financing activities not affecting cash | ||
Financing Activities: | ||
Conversion of preferred stock to common stock | (9,000) | |
Issuance of common stock to convert preferred stock | 9,000 | |
Payment of long-term note by issuing common stock | (3,500) | |
Issuance of common stock to pay long- term note | 3,500 |
Table (1)
Therefore, the net increase in cash is $2,400.
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Chapter 21 Solutions
INTERM.ACCT.:REPORTING...-CENGAGENOWV2
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