Chapter 12: Q5DQ (page 565)
When a statement of cash flows is prepared using the direct method, what are some of the operating cash flows?
The operating activities include cash received from customers, cash paid tosuppliers, wages paid, etc.
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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.
CRUZ, INC.
Income Statement
For Year Ended December 31, 2017
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \(488,000
Cost of goods sold . . . . . . . . . . . . . . . . . . 314,000
Gross profit . . . . . . . . . . . . . . . . . . . . . . . 174,000
Operating expenses
Depreciation expense . . . . . . . . . . . . . \)37,600
Other expenses . . . . . . . . . . . . . . . . . . 89,100 126,700
Income before taxes . . . . . . . . . . . . . . . . 47,300
Income taxes expense . . . . . . . . . . . . . . . 17,300
Net income . . . . . . . . . . . . . . . . . . . . . . . . \( 30,000
CRUZ, INC.
Comparative Balance Sheets
December 31, 2017
2017 2016
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \) 94,800 \( 24,000
Accounts receivable, net . . . . . . . . . . . . . . . . . . . 41,000 51,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,800 95,800
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . 5,400 4,200
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 227,000 175,000
Furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,000 119,000
Accum. depreciation—Furniture . . . . . . . . . . . . . (17,000) (9,000)
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \)319,000 \(285,000
Liabilities and Equity
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . \) 15,000 \( 21,000
Wages payable . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000 5,000
Income taxes payable . . . . . . . . . . . . . . . . . . . . . 1,400 2,600
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 25,400 28,600
Notes payable (long-term) . . . . . . . . . . . . . . . . . 29,000 69,000
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,400 97,600
Equity Common stock, \)5 par value . . . . . . . . . . . . . . . 229,000 179,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 35,600 8,400
Total liabilities and equity . . . . . . . . . . . . . . . . . . \(319,000 \)285,000
Required Use the indirect method to prepare the cash provided or used from operating activities section only of the statement of cash flows for this company.
Question:The following selected information is from Princeton Company’s comparative balance sheets.
At December 31 2017 2016
Common stock, \(10 par value . . . . . . . . . . . . \)105,000 \(100,000
Paid-in capital in excess of par . . . . . . . . . . . . 567,000 342,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . 313,500 287,500
The company’s net income for the year ended December 31, 2017, was \)48,000.
1. Compute the cash received from the sale of its common stock during 2017.
2. Compute the cash paid for dividends during 2017.
Use the following information about the cash flows of Ferron Company to prepare a complete statement of cash flows (direct method) for the year ended December 31, 2017. Use a note disclosure for any noncash investing and financing activities.
Cash and cash equivalent balance, December 31, 2016 | $40,000 |
Cash and cash equivalent balance, December 31, 2017 | 148,000 |
Cash received as interest | 3,500 |
Cash paid for salaries | 76,500 |
Bonds payable retired by issuing common stock (no gains or loss on retirement) | 185,500 |
Cash paid to retire long-term note payable | 100,000 |
Cash received from sale of equipment | 60,250 |
Cash received in exchange of six month note payable | 35,000 |
Land purchased by issuing long-term note payable | 105,250 |
Cash paid for store equipment | 24,750 |
Cash dividend paid | 10,000 |
Cash paid for other expenses | 20,000 |
Cash received from customers | 495,000 |
Cash paid for inventory | 254,500 |
Refer to Satu Company’s financial statements and related information in Problem 12-6B.
Required
Prepare a complete statement of cash flows; report its cash flows from operating activities according to the direct method.
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