Concept explainers
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 the ending balance of cash at the end of the accounting period.
To Prepare: The Statement of cash flow for Company D, using the T-Accounts.
Explanation of Solution
T-account: T-account is the form of the ledger account, where the
The components of the T-account are as follows:
a) The title of the account
b) The left or debit side
c) The right or credit side
The T-accounts for Company D, for various accounts are shown below:
Cash (Statement of Cash Flows) (Amount ($) in millions) | |||
Cash Balance | 13 | ||
Operating activities: | |||
From customers | (1) 202 | (3) 132 | To suppliers of goods |
From dividends received | (2) 2 | (4) 28 | To employees |
(6) 5 | For interest | ||
(8) 17 | For income taxes | ||
Investing activities: | |||
Sale of equipment | (7) 7 | (10) 5 | Purchase of long term investment |
(12) 15 | Purchase of equipment | ||
Financing activities: | |||
Sale of bonds payable | (13) 25 | (15) 13 | Payment of dividends |
(16) 8 | Purchase of |
Table (1)
Accounts Receivable:
Accounts Receivable Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Decrease in accounts receivable | 2 | ||||
Balance | (1) 2 |
Table (2)
Allowance for uncollectible accounts:
Allowance for uncollectible accounts | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in allowance for uncollectible accounts | 1 | ||||
Balance | (1) 1 |
Table (3)
Inventory:
Inventory Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in inventory | 5 | ||||
Balance | (3) 5 |
Table (4)
Dividend Receivable:
Dividend Receivable Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in dividend receivable | 1 | ||||
Balance | (2) 1 |
Table (5)
Long-Term Investment:
Long-Term Investment Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in long-term investment | 5 | ||||
Balance | (10) 5 |
Table (6)
Land:
Land Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in land | 30 | ||||
Balance | X (11) 30 |
Table (7)
Building and Equipment:
Building and Equipment Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Decrease in building and equipment | 25 | ||||
December 31, 2018 | Purchase of equipment | (12) 15 | Balance | (7) 40 |
Table (8)
Accumulated Depreciation Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Accumulated depreciation | 25 | ||||
Depreciation | (7) 30 | December 31, 2018 | Balance | (5) 5 |
Table (9)
Accounts Payable:
Accounts Payable Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Decrease in accounts payable | 7 | ||||
Balance | (3) 7 |
Table (10)
Salary Payable:
Salary Payable Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Decrease in salary payable | 3 | ||||
Balance | (4) 3 |
Table (11)
Interest Payable:
Interest Payable Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in interest payable | 2 | ||||
Balance | (6) 2 |
Table (12)
Income Tax Payable:
Income Tax Payable Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Decrease in income tax payable | 1 | ||||
Balance | (8) 1 |
Table (13)
Notes Payable:
Notes Payable Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Notes payable | 30 | ||||
Balance | X (11) 30 |
Table (14)
Bonds Payable:
Bonds Payable Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Bonds payable | 25 | ||||
Balance | (13) 25 |
Table (15)
Discount on Bonds:
Discount on Bonds Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Discount on bond | 1 | ||||
Balance | (6) 1 |
Table (16)
Common stock:
Common stock Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Common stock | 10 | ||||
Balance | (14) 10 |
Table (17)
Paid-in Capital:
Paid-in Capital Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Paid-in capital | 4 | ||||
Balance | (14) 4 |
Table (18)
Retained Earnings Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Payment of cash dividend | (15) 13 | Balance | (9) 25 | ||
Retained earning | (14) 14 |
Table (19)
Treasury Stock:
Treasury Stock Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Treasury stock | 8 | ||||
Balance | (16) 8 |
Table (20)
Note (X):
Purchase $30,000 worth of land by issuing a 13%, 7-year note is considered as non cash investing and financing activities.
Prepare T-account for income statement account of DUX Company for the year ended December 31, 2018:
Sales:
Sales Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Sales revenue | 200 | ||||
Balance | (1) 200 |
Table (21)
Dividend Revenue:
Dividend Revenue Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Dividend revenue | 3 | ||||
Balance | (2) 3 |
Table (22)
Cost of Goods Sold:
Cost of Goods Sold Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Cost of Goods Sold | 120 | ||||
Balance | (3) 120 |
Table (23)
Salaries Expense:
Salaries Expense Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Salaries Expense | 25 | ||||
Balance | (4) 25 |
Table (24)
Depreciation Expense:
Depreciation Expense Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Depreciation Expense | 5 | ||||
Balance | (5) 5 |
Table (25)
Bad debt Expense Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Bad debt Expense | 1 | ||||
Balance | (1) 1 |
Table (26)
Interest Expense:
Interest Expense Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Interest Expense | 8 | ||||
Balance | (6) 8 |
Table (27)
Loss on Sale of Building:
Loss on Sale of Building Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Loss on sale of building | 3 | ||||
Balance | (7) 3 |
Table (28)
Income Tax Expense:
Income Tax Expense Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Income Tax Expense | 16 | ||||
Balance | (8) 16 |
Table (29)
Net income (income summary):
Net Income (income summary)Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Net income | 25 | ||||
Balance | (9) 25 |
Table (30)
Prepare the statement of cash flows using direct method for DUX Company for the year ended December 31, 2018:
DUX Company | ||
Statement of Cash Flows | ||
Year Ended December 31, 2018 | ||
Details | Amount ($) | Amount ($) |
Cash flows from operating activities: | ||
From customers | 202 | |
From dividends received | 2 | |
To suppliers of goods | (132) | |
To employees | (28) | |
For interest | (5) | |
For income taxes | (17) | |
Net cash flows from operating activities | 22 | |
Cash flows from investing activities: | ||
Sale of building | 7 | |
Purchase of long-term investment | (5) | |
Purchase of equipment | (15) | |
Net cash flows from investing activities | (13) | |
Cash flows from financing activities: | ||
Sale of bonds payable | 25 | |
Purchase of treasury stock | (8) | |
Payment of cash dividends | (13) | |
Net cash flows from financing activities | 4 | |
Net increase in cash | 13 | |
Cash balance, January 1, | 20 | |
Cash balance, December 31, | 33 |
Table (31)
Hence, the opening cash balance is $20 million and closing cash balance is $33 million.
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Chapter 21 Solutions
Intermediate Accounting
- Exercise 21-27 (Algo) Statement of cash flows; direct method [LO21-3, 21-5, 21-6, 21-8] Comparative balance sheets for 2024 and 2023, a statement of income for 2024, and additional information from the accounting records of Red, Incorporated, are provided below: RED, INCORPORATED Comparative Balance Sheets December 31, 2024 and 2023 ($ in millions)  2024 2023 Assets   Cash $ 26 $ 114 Accounts receivable 203 134 Prepaid insurance 11 6 Inventory 289 177 Buildings and equipment 384 352 Less: Accumulated depreciation (121) (242)  $ 792 $ 541 Liabilities   Accounts payable $ 90 $ 104 Accrued liabilities 10 15 Notes payable 52 0 Bonds payable 161 0 Shareholdersâ Equity   Common stock 402 402 Retained earnings 77 20  $ 792 $ 541 RED, INCORPORATED Statement of Income For Year Ended December 31, 2024 ($ in millions) Revenues   Sales revenue  $ 2,010 Expenses   Cost of goods sold $ 1,439  Depreciation expense 41âĤarrow_forwardProblem 21-17 (Algo) Statement of cash flows; indirect method [LO21-4, 21-8] Comparative balance sheets for 2021 and 2020 and a statement of income for 2021 are given below for Metagrobolize Industries. Additional information from the accounting records of Metagrobolize also is provided. METAGROBOLIZE INDUSTRIESComparative Balance SheetsDecember 31, 2021 and 2020($ in thousands)  2021 2020 Assets         Cash $ 405   $ 245   Accounts receivable  350    190   Inventory  500    275   Land  500    450   Building  900    900   Less: Accumulated depreciation  (200 )   (180 )  Equipment  2,500    2,150   Less: Accumulated depreciation  (325 )   (300 )  Patent  1,000    1,150    $ 5,630   $ 4,880   Liabilities         Accounts payable $ 600   $ 400   Accrued liabilities  150    130   Lease liabilityâland  130    0   Shareholders' Equity         Common stockâĤarrow_forwardStatement of cash flows direct method The comparative balance sheet of Martinez Inc. for December 31, 20Y4 and 20Y3, is as follows: Dec. 31, 20Y4 Dec. 31, 20Y3 Assets Cash 661,920 683,100 Accounts receivable (net) 992,640 914,400 Inventories 1,394,400 1,363,800 Investments 0 432,000 Land 960,000 0 Equipment 1,224,000 984,000 Accumulated depreciationequipment (481,500) (368,400) Total assets 4,751,460 4,008,900 Liabilities and Stockholders' Equity Accounts payable (merchandise creditors) 1,080,000 966,600 Accrued expenses payable (operating expenses) 67,800 79,200 Dividends payable 100,800 91,200 Common stock, 5 par 130,000 30,000 Paid in capital: Excess of issue price over parcommon stock 950,000 450,000 Retained earnings 2,422,860 2,391,900 Total liabilities and stockholders' equity 4,751,460 4,008,900 The income Statement for the year ended December 51. 20Y3. is as follows: Sales 4,512,000 Cost of goods sold 2,352,000 Gross profit 2,160,000 Operating expenses: Depredation expense 113,100 Other operating expenses 1,344,840 Total operating expenses 1,457,940 Operating income 702,060 Other income: Gain on sale of investments 156,000 Income before income tax 858,060 Income tax expense 299,100 Net income 558,960 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_forward
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