   Chapter 21, Problem 7P ### Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

#### Solutions

Chapter
Section ### Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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# Spreadsheet and Statement of Cash Flows The following information is available for Bott Company: Additional information for the year: a. b. Last year, depreciation expense was inadvertently understated in the amount of $1,800. The correction was made this year to Accumulated Depreciation and to Retained Earnings as a prior period adjustment. The company also received a related income tax refund of$500. c. Sixty shares of treasury stock (common) were reissued at $30 per share. d. Bonds payable with a face amount of$7,000 were issued for $7,750 on April 30, 2019. The bonds mature on April 30, 2021, and pay interest semiannually. The straight-line method is used to amortize the bond premium. Interest expense totaled$460 for 2019. e. Fifty shares of preferred stock (originally issued at $60 per share) were converted into 100 shares of common stock. f. Land costing$2,900 was sold for $3,800. g. Three hundred shares of common stock were sold for$33 per share. h. Equipment costing $32, 000 was purchased during the year. i. Land was acquired at a cost of$9,000 during the year. j. Depreciation expense was $6,000. k. Patent amortization was$400. l. The company loaned money to one of its executives and received a $1,000 short-term note receivable on December 31, 2019. The note matures 90 days from the date of issuance. Required: 1. Prepare a spreadsheet to support a statement of cash flows for 2019. 2. Prepare Bon Company’s 2019 statement of cash flows. Show the reconciliation of the net income to the net cash provided by operating activities in a separate schedule accompanying the statement. 1. To determine Prepare a spreadsheet to support the cash flow statement of B Company for the year 2019. Explanation Worksheet: A worksheet is a spreadsheet used while preparing a financial statement. It is a type of form having multiple columns and it is used in the adjustment process. The use of a worksheet is optional for any organization. A worksheet can neither be considered as a journal nor a part of the general ledger. Statement of cash flows: Statement of cash flow 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. Prepare a spreadsheet entry to support the cash flow statement. Table (1) Table (2) Working notes: a. Calculate the Changes in accounts receivable. Changes in accounts receivable=Closing balanceOpening balance=$4,720$4,600=$120

b. Calculate the changes in inventory.

Changes in inventory = Opening balance Closing balance=$12,000$9,700=$2,300 c. Calculate the change in prepaid item. Change in prepaid item=Opening balanceClosing balance=$1,700$1,380Decrease in prepaid item=$320

d. Calculate the changes in accounts payable.

Changes in accounts payable=Closing balanceOpening balance=$8,210$6,000=$2,210 e. Calculate the changes in salaries payable. Changes in salaries payable=Closing balance Opening balance=$3,500-$2,600=$900

f. Calculate the changes in miscellaneous current payable.

Changes in miscellaneous current payable)=Opening balanceClosing balance=$1,400$1,200=$200 g-1) Understated of depreciation expenses for the last year by$1,800.

g-2) Received income tax refund  of \$500.

2.

To determine

Prepare a cash flow statement under indirect method of B Company for the year 2019 and show operating cash flow in the separate schedule.

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