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Concept explainers
Interpreting the Statement of Cash Flows. Montgomery Ward
operates a retail department store chain. It filed for bankruptcy during the first quarter of Year 12.
Exhibit 3.24 presents a statement of cash flows for Montgomery Ward for Year 7 to Year 11.
The firm acquired Lechmere, a discount retailer of sporting goods and electronic products, during Year 9. It acquired Amoco Enterprises, an automobile club, during Year 11. During Year 10, it issued a new series of
REQUIRED
Discuss the relations between net income and cash flow from operations and among cash flows from operating, investing, and financing activities for the firm over the five-year period. Identify signals of Montgomery Ward's difficulties that might have led to its filing for bankruptcy.
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Chapter 3 Solutions
EBK FINANCIAL REPORTING, FINANCIAL STAT
- Dristell Incorporated had the following activities during the year (all transactions are for cash unless stated otherwise): a. A building with a book value of $419,000 was sold for $519,000. b. Additional common stock was issued for $179,000. c. Dristell purchased its own common stock as treasury stock at a cost of $84,500. d. Land was acquired by issuing a 6%, 10-year, $769,000 note payable to the seller. e. A dividend of $59,000 was paid to shareholders. f. An investment in Fleet Corporation's common stock was made for $139,000. g. New equipment was purchased for $74,500. h. A $99,500 note payable issued three years ago was paid in full. i. A loan for $119,000 was made to one of Dristell's suppliers. The supplier plans to repay Dristell this amount plus 10% interest within 18 months. Required: Calculate net cash flows from financing activities. (Cash outflows should be indicated with a minus sign.) DRISTELL INCORPORATED Statement of Cash Flows (partial) For the Year Ended December…arrow_forwardTexas, Inc., sold common stock for $560,000 and preferred stock for $36,000 during the current year. In addition, the company purchased treasury stock for $35,000 and paid dividends on common and preferred stock for $24,000. Determine the amount of cash provided by or used for financing activities during the year.arrow_forwardTrident Corporation had the following cash flows in the current year. Which of the following will be categorized under the financing activities section of the statement of cash flows? O Purchase of $125,000 worth of five-year bonds issued by Towson Utilities O Rent on a warehouse amounting to $1.1 million O Lease income received on a piece of land O Preferred dividends of $330,000 paid to shareholdersarrow_forward
- Comparative financial statements for Weaver Company follow: During this year, Weaver sold some equipment for $10 that had cost $49 and on which there wasaccumulated depreciation of $30. In addition, the company sold long-term investments for $50 thathad cost $38 when purchased several years ago. Weaver paid a cash dividend this year and thecompany repurchased $109 of its own stock. This year Weaver did not retire any bonds. Required:1. Using the direct method, adjust the company’s income statement for this year to a cash basis.2. Using the information obtained in (1) above, along with an analysis of the remaining balance sheetaccounts, prepare a statement of cash flows for this year.arrow_forwardDristell Incorporated had the following activities during the year (all transactions are for cash unless stated otherwise): a. A building with a book value of $415,000 was sold for $515,000. b. Additional common stock was issued for $175,000. c. Dristell purchased its own common stock as treasury stock at a cost of $82,500. d. Land was acquired by issuing a 6%, 10-year, $765,000 note payable to the seller. e. A dividend of $55,000 was paid to shareholders. f. An investment in Fleet Corporation's common stock was made for $135,000. g. New equipment was purchased for $72,500. h. A $97,500 note payable issued three years ago was paid in full. i. A loan for $115,000 was made to one of Dristell's suppliers. The supplier plans to repay Dristell this amount plus 10% interest within 18 months.arrow_forwardDristell Incorporated had the following activities during the year (all transactions are for cash unless stated otherwise): a. A building with a book value of $405,000 was sold for $505,000. b. Additional common stock was issued for $165,000. c. Dristell purchased its own common stock as treasury stock at a cost of $77,500. d. Land was acquired by issuing a 6%, 10-year, $755,000 note payable to the seller. e. A dividend of $45,000 was paid to shareholders. f. An investment in Fleet Corporation's common stock was made for $125,000. g. New equipment was purchased for $67,500. h. A $92,500 note payable issued three years ago was paid in full. i. A loan for $105,000 was made to one of Dristell's suppliers. The supplier plans to repay Dristell this amount plus 10% interest within 18 months. Required: Calculate net cash flows from financing activities. (Cash outflows should be indicated with a minus sign.)arrow_forward
- McCorey Corporation recorded the following events last year: Repurchase by the company of its own common stock Sale of long-term investment Interest paid to lenders Dividends paid to the company's shareholders Collection by McCorey of a loan made to another company Payment of taxes to governmental bodies On the statement of cash flows, some of these events are classified as operating activities, some are classified as investing activities, and some are classified as financing activities. Based solely on the information above, the net cash provided by (used in) financing activities on the statement of cash flows would be: Multiple Choice O $(156,000) $(83,000) $ 27,000 $ 46,000 $ 8,500 $ 56,000 $ 32,000 $ 18,500 $91,500 $188,000arrow_forwardDristell Inc. had the following activities during the year (all transactions are for cash unless stated otherwise): a. A building with a book value of $400,000 was sold for $500,000. b. Additional common stock was issued for $160,000. c. Dristell purchased its own common stock as treasury stock at a cost of $75,000. d. Land was acquired by issuing a 6%, 10-year, $750,000 note payable to the seller. e. A dividend of $40,000 was paid to shareholders. f. An investment in Fleet Corp.'s common stock was made for $120,000. g. New equipment was purchased for $65,000. h. A $90,000 note payable issued three years ago was paid in full. i. A loan for $100,000 was made to one of Dristell's suppliers. The supplier plans to repay Dristell this amount plus 10% interest within 18 months. Required: Calculate net cash flows from financing activities. (Cash outflows should be indicated with a minus sign.) Net cash flowsarrow_forwardMoore Company is preparing its statement of cash flows for the current year. During the year, the company retired two issuances of debt and properly recorded the transactions. These transactions were as follows: Paid cash of $12,700 to retire bonds payable with a face value of $15,000 and a book value of $13,300. Paid cash of $48,000 to retire bonds payable with a face value of $45,000 and a book value of $47,000. Required: Record, in journal entry form, the entries that Moore would make for the preceding transactions on its spreadsheet to prepare its statement of cash flows. If an amount box does not require an entry, leave it blank.arrow_forward
- Burgess also provided the following information: The company sold equipment that had an original cost of $13 million and accumulated depreciation of $8 million. The cash proceeds from the sale were $8 million. The gain on the sale was $3 million. The company did not issue any new bonds during the year. The company paid a cash dividend during the year. The company did not complete any common stock transactions during the year. Required: 1. Using the indirect method, prepare a statement of cash flows for the year. (Enter your answers in millions not in dollars. List any deduction in cash and cash outflows as negative amounts.)arrow_forwardTexas, Inc., sold common stock for $560,000 and preferred stock for $36,000 during the cur-rent year. In addition, the company purchased treasury stock for $35,000 and paid dividends on common and preferred stock for $24,000. Determine the amount of cash provided by or used forfinancing activities during the year.arrow_forwardExtra-Ordinaire, Inc., sells a single product (Pulsa) exclusively through newspaper advertising. The comparative income statements and balance sheets are for the past two years. Additional Information The following information regarding the company’s operations in 2011 is available from the company’s accounting records: Early in the year the company declared and paid a $4,000 cash dividend. During the year marketable securities costing $15,000 were sold for $11,000 cash, resulting in a $4,000 nonoperating loss. The company purchased plant assets for $20,000, paying $8,000 in cash and issuing a note payable for the $12,000 balance. During the year the company repaid a $10,000 note payable, but incurred an additional $12,000 in long-term debt as described in 3, above. The owners invested $35,000 cash in the business as a condition of the new loans described in paragraphs 3 and 4 , above. requried: Prepare a cash flow statement using indirect methodarrow_forward
- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
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