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Chapter 12: 8QS (page 567)

Compute cash flows from investing activities using the following company information.

Sale of short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,000

Cash collections from customers . . . . . . . . . . . . . . . . . . . . . . . . . 16,000

Purchase of used equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000

Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000

Short Answer

Expert verified

The cash flows from investing activities are computed as $1,000

Step by step solution

01

Definition of Investing Activities

Investing activities refer to those activities that are related to the purchase and sale of long-term assets or investments of the business.

02

Computation of Cash flows from investing activities

Investing activity

Sale of short term stock investments

$6,000

Less: Cash purchase of used equipment

$5,000

Cash flow provided by investing activity

$1,000

Note: Cash collections from customers and depreciation expense are included in operating activity.

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Most popular questions from this chapter

Use the following information to determine this company’s cash flows from operating activities using the indirect method.

MOSS COMPANY

Selected Balance Sheet Information

December 31, 2017 and 2016

2017 2016

Current assets

Cash . . . . . . . . . . . . . . . . . . . . . . . \(84,650 \)26,800

Accounts receivable . . . . . . . . . . 25,000 32,000

Inventory . . . . . . . . . . . . . . . . . . . 60,000 54,100

Current liabilities

Accounts payable . . . . . . . . . . . . 30,400 25,700

Income taxes payable . . . . . . . . . 2,050 2,200

MOSS COMPANY

Income Statement

For Year Ended December 31, 2017

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . \(515,000

Cost of goods sold . . . . . . . . . . . . . . . . . 331,600

Gross profit . . . . . . . . . . . . . . . . . . . . . . 183,400

Operating expenses

Depreciation expense . . . . . . . . . . . . \) 36,000

Other expenses . . . . . . . . . . . . . . . . . 121,500 157,500

Income before taxes . . . . . . . . . . . . . . . 25,900

Income taxes expense . . . . . . . . . . . . . . 7,700

Net income . . . . . . . . . . . . . . . . . . . . . . . $ 18,200

Refer to the information in Exercise 12-11. Using the direct method, prepare the statement of cash flows for the year ended June 30, 2017.

Lansing Company’s 2017 income statement and selected balance sheet data (for current assets and current liabilities) at December 31, 2016 and 2017, follow.

LANSING COMPANY

Selected Balance Sheet Accounts

At December 31

2017

2016

Accounts receivable

\(5,600

\)5,800

Inventory

1,980

1,540

Account payable

4,400

4,600

Salaries payable

880

700

Utilities payable

220

160

Prepaid insurance

260

280

Prepaid rent

220

180

LANSING COMPANY

Income Statement

For Year Ended December 31, 2017

Sales revenue

\(97,200

Expenses

Cost of goods sold

42,000

Depreciation expenses

12,000

Salaries expenses

18,000

Rent expenses

9,000

Insurance expenses

3,800

Interest expenses

3,600

Utilities expenses

2,800

Net income

\)6,000

Required

Prepare the cash flows from operating activities section only of the company’s 2017 statement of cash flows using the indirect method.

Satu Company, a merchandiser, recently completed its 2017 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes. The company’s balance sheets and income statement follow.

SATU COMPANY

Comparative Balance Sheets

December 31, 2017 and 2016

2017

2016

Assets:

Cash

\(58,750

\)28,400

Accounts receivables

20,222

25,860

Total current assets

78,972

54,260

Inventory

165,667

140,320

Equipment

107,750

77,500

Accumulated depreciation

(46,700)

(31,000)

Total assets

\(305,689

\)241,080

Liability and equity

Account payable

\(20,372

\)157,530

Income tax payable

2,100

6,100

Total current liabilities

22,472

163,630

Equity

Common stock, \(5 par value

40,000

25,000

Paid-in-capital in excess of par value, common stock

68,000

20,000

Retained earnings

175,217

32,450

Total liabilities and equity

\)305,689

\(241,080

SATU COMPANY

Income Statement

For Year Ended December 31, 2017

Sales

\)750,800

Cost of goods sold

269,200

Gross profit

481,600

Operating expenses

Depreciation expenses

15,700

Other expenses

173,933

189,633

Income before taxes

291,967

Income tax expenses

89,200

Net income

\(202,767

Additional Information on Year 2017 Transactions

a. Purchased equipment for \)30,250 cash.

b. Issued 3,000 shares of common stock for \(21 cash per share.

c. Declared and paid \)60,000 of cash dividends.

Required

Prepare a complete statement of cash flows; report its cash inflows and cash outflows from operating activities according to the indirect method

Refer to the information reported about Forten Company in Problem 12-3A.

Required

Prepare a complete statement of cash flows using a spreadsheet as in Exhibit 12A.1; report its operating activities using the indirect method. Identify the debits and credits in the Analysis of Changes columns with letters that correspond to the following list of transactions and events.

a. Net income was \(114,975.

b. Accounts receivable increased.

c. Inventory increased.

d. Prepaid expenses decreased.

e. Accounts payable decreased.

f. Depreciation expense was \)20,750.

g. Sold equipment costing \(46,875, with accumulated depreciation of \)30,125, for \(11,625 cash. This yielded a loss of \)5,125.

h. Purchased equipment costing \(96,375 by paying \)30,000 cash and (i.) by signing a long-term note payable for the balance.

j. Borrowed \(4,000 cash by signing a short-term note payable.

k. Paid \)50,125 cash to reduce the long-term notes payable.

l. Issued 2,500 shares of common stock for \(20 cash per share.

m. Declared and paid cash dividends of \)50,100.
See all solutions

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