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 Industries M, 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 Industries M, for various accounts are shown below:
Cash Account:
Cash (Statement of Cash Flows) (Amount ($) in millions) | |||
Cash balance | 205 | ||
Operating activities: | |||
From customers | (1) 2,495 | (4) 675 | To suppliers |
(9) 425 | For expenses | ||
Investing activities: | |||
Sale of land | (3) 165 | (11) 90 0 | Purchase of equipment |
Sale of equipment | (7) 15 | ||
Financing activities: | |||
(2) 20 | Payment on lease | ||
(13) 450 | Payment of dividend |
Table (1)
Accounts Receivable Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in accounts receivable | 150 | ||||
Balance | (1) 150 |
Table (2)
Inventory:
Inventory Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in inventory | 375 | ||||
Balance | (4) 375 |
Table (3)
Land:
Land Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in land | 75 | ||||
Lease liability | X (2) 150 | December 31, 2016 | Balance | 75 |
Table (4)
Accumulated Depreciation - Building Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Accumulated depreciation | 30 | ||||
December 31, 2018 | Balance | (5) 30 |
Table (5)
Equipment:
Equipment Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in equipment | 600 | ||||
December 31, 2018 | Balance | (11) 900 | December 31, 2018 | Sale of equipment | (7) 300 |
Table (6)
Accumulated Depreciation - Equipment:
Accumulated Depreciation - Equipment Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Accumulated depreciation | 45 | ||||
December 31, 2018 | Increase in equipment | (7) 270 | December 31, 2018 | Balance | (6) 315 |
Table (7)
Patent:
Patent Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Decrease in patent | 300 | ||||
December 31, 2018 | Balance | (8) 300 |
Table (8)
Accounts Payable:
Accounts Payable Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in accounts payable | 300 | ||||
Balance | (4) 300 |
Table (9)
Accrued Expense Payable:
Accrued Expense Payable Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in accrued expense payable | 75 | ||||
Balance | (9) 75 |
Table (10)
Lease Liability – Land:
Lease Liability – Land Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in lease liability | 130 | ||||
(2) 20 | Balance | X (2) 150 |
Table (11)
Common Stock:
Common Stock Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in common stock | 150 | ||||
Balance | (12) 150 |
Table (12)
Paid-in Capital:
Paid-in Capital Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in paid-in capital | 75 | ||||
Balance | (12) 75 |
Table (13)
Retained Earnings Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | December 31, 2018 | Balance of retained earnings | 300 | |||
Payment of cash dividend | (13) 450 | Balance | (10) 975 | |||
Retained earning | (12) 225 |
Table (14)
Note (X):
Purchase $150 worth of land by lease is considered as non cash investing and financing activities.
Prepare T-account for income statement account of Industries Mfor the year ended December 31, 2018:
Sales:
Sales Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Sales revenue | 2,645 | ||||
Balance | (1) 2,645 |
Table (15)
Gain on Sale of Land:
Gain on Sale of Land Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Gain on sale of land | 90 | ||||
Balance | (3) 90 |
Table (16)
Cost of Goods Sold:
Cost of Goods Sold Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Cost of Goods Sold | 600 | ||||
Balance | (4) 600 |
Table (17)
Depreciation Expense - Building:
Depreciation Expense - Building Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Depreciation Expense - Building | 30 | ||||
Balance | (5) 30 |
Table (18)
Depreciation Expense - Equipment:
Depreciation Expense - Equipment Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Depreciation Expense – Equipment | 315 | ||||
Balance | (6) 315 |
Table (19)
Loss on Sale of Equipment:
Loss on Sale of Equipment Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Loss on sale of building | 15 | ||||
Balance | (7) 15 |
Table (20)
Amortization of Patent:
Amortization of Patent Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Amortization of patent | 300 | ||||
Balance | (8) 300 |
Table (21)
Operating Expenses:
Operating Expenses Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Operating expense | 500 | ||||
Balance | (9) 500 |
Table (22)
Net income (income summary):
Net Income (income summary)Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Net income | 975 | ||||
Balance | (10) 975 |
Table (23)
The spreadsheet of M Company shows the analysis of cash flows in the reporting year 2018:
Industries M | ||
Statement of Cash Flows (Direct Method) | ||
Year Ended December 31, 2018 | ||
Details | Amount ($) | Amount ($) |
Cash flows from operating activities: | ||
From customers | 2,495 | |
To suppliers of goods | (675) | |
For operating expenses | (425) | |
Net cash flows from operating activities | 1,395 | |
Cash flows from investing activities: | ||
Purchase of equipment | (900) | |
Sale of land | 165 | |
Sale of equipment | 15 | |
Net cash flows from investing activities | (720) | |
Cash flows from financing activities: | ||
Payment on lease liability | (20) | |
Payment of cash dividends | (450) | |
Net cash flows from financing activities | (470) | |
Net increase in cash | 205 | |
Cash balance, January 1, | 375 | |
Cash balance, December 31, | 580 |
Table (24)
Note (X):
Schedule of Non Cash Investing and Financing Activities: | ||
Land acquire by lease | $150 |
Table (25)
Hence, the opening cash balance is $375 million and closing cash balance is $580 million.
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Chapter 21 Solutions
INTERMEDIATE ACCTG W/CONNECT HARDCOVER
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