Chapter 12: Q15QS (page 568)
Refer to the data in QS 12-11.
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Refer to the information reported about Gazelle Corporation in Problem 12-3B. 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 \(158,100.
b. Accounts receivable decreased.
c. Inventory decreased.
d. Prepaid expenses decreased.
e. Accounts payable decreased.
f. Depreciation expense was \)38,600.
g. Sold equipment costing \(51,000, with accumulated depreciation of \)22,850, for \(26,050 cash. This yielded a loss of \)2,100.
h. Purchased equipment costing \(113,250 by paying \)43,250 cash and (i.) by signing a long-term note payable for the balance.
j. Borrowed \(5,000 cash by signing a short-term note payable.
k. Paid \)47,500 cash to reduce the long-term notes payable.
l. Issued 3,000 shares of common stock for \(15 cash per share.
m. Declared and paid cash dividends of \)53,600.
The following transactions and events occurred during the year. Assuming that this company uses the direct method to report cash provided by operating activities, indicate where each item would appear on the statement of cash flows by placing an x in the appropriate column.
| Statement of Cash flow | ||||||
Operating Activities | Investing activities | Financing Activities | Non-cash investing and financing activities | Not reported on the statement or in notes | ||
a | Retired long-term notes payable by issuing common stock | |||||
b | Paid cash toward accounts payable | |||||
c | Sold inventory for cash | |||||
d | Paid cash dividend that was declared in a prior period | |||||
e | Accepted six-month note receivable in exchange for plant assets | |||||
f | Recorded depreciation expense | |||||
g | Paid cash to acquire treasury stock | |||||
h | Collected cash from sales | |||||
i | Borrowed cash from bank by signing a nine-month note payable | |||||
j | Paid cash to purchase a patent | |||||
Use the following financial statements and additional information to
MONTGOMERY INC. Comparative Balance Sheets December 31, 2018, and 2017 | ||
2018 | 2017 | |
Assets | ||
Cash | \( 30,400 | \) 30,550 |
Accounts receivable, net | 10,050 | 12,150 |
Inventory | 90,100 | 70,150 |
Total current assets | 130,550 | 112,850 |
Equipment | 49,900 | 41,500 |
Accum. depreciation—Equipment | (22,500) | (15,300) |
Total assets | \(157,950 | \)139,050 |
Liabilities and Equity | ||
Accounts payable | 23,900 | \( 25,400 |
Salaries payable | 500 | 600 |
Total current liabilities | 24,400 | 26,000 |
Equity | ||
Common stock, no par value | 110,000 | 100,000 |
Retained earnings | 23,550 | 13,050 |
Total liabilities and equity | \)157,950 | \(139,050 |
MONTGOMERY INC. Income Statement For Year Ended December 31, 2018 | |
Sales | \)45,575 |
Cost of goods sold | (18,950) |
Gross profit | 26,625 |
Operating expenses | |
Depreciation expense \(7,200 | |
Other expenses 5,550 | |
Total operating expense | 12,750 |
Income before taxes | 13,875 |
Income tax expense | 3,375 |
Net income | \)10,500 |
Additional Information
a. No dividends are declared or paid in 2018.
b. Issued additional stock for $10,000 cash in 2018.
c. Purchased equipment for cash in 2018; no equipment was sold in 2018.
The following transactions and events occurred during the year. Assuming that this company uses the indirect method to report cash provided by operating activities, indicate where each item would appear on its statement of cash flows by placing an x in the appropriate column.
Statement of Cash Flows | ||||||
S.no. | Operating Activities | Investing Activities | Financing Activities | Noncash Investing and Financing Activities | Not Reported on Statement or in Notes | |
a | Declared and paid a cash dividend | |||||
b | Recorded depreciation expense | |||||
c | Paid cash to settle long-term note payable | |||||
d | Paid cash to settle long-term note payable | |||||
e | Accounts receivable decreased in the yea | |||||
f | Purchased land by issuing common stock | |||||
g | Inventory increased in the year | |||||
h | Sold equipment for cash, yielding a loss | |||||
i | Accounts payable decreased in the year | |||||
j | Income taxes payable increased in the year | |||||
Refer to the information about Sonad Company in Exercise 12-4. Use the direct method to prepare only the cash provided or used by operating activities section of the statement of cash flows for this company.
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