Chapter 12: Q7DQ (page 565)
Where on the statement of cash flows is the payment of cash dividends reported?
The dividends paid in cash are reported underthe financing activities.
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BTN 12-7 Review the chapter’s opener involving Amazon.com and its founder, Jeff Bezos.
Required
1. In a business such as Amazon, monitoring cash flow is always a priority. Even though Amazon now has billions in annual sales and sometimes earns a positive net income, explain how cash flow can lag behind net income.
2. Amazon is a publicly traded corporation. What are potential sources of financing for its future expansion?
Salt Lake Company’s 2017 income statement and selected balance sheet data (for current assets and current liabilities) at December 31, 2016 and 2017, follow.
SALT LAKE COMPANY Income Statement For Year Ended December 31, 2017 |
Sales revenue | \(156,000 |
Expenses | |
Cost of goods sold | 72,000 |
Depreciation expenses | 32,000 |
Salaries expenses | 20,000 |
Rent expenses | 5,000 |
Insurance expenses | 2,600 |
Interest expenses | 2,400 |
Utilities expenses | 2,000 |
Net income | \)20,000 |
SALT LAKE COMPANY Selected Balance Sheet Accounts |
At December 31 | 2017 | 2016 |
Accounts receivables | \(3,600 | \)3,000 |
Inventory | 860 | 980 |
Account payable | 2,400 | 2,600 |
Salaries payable | 900 | 600 |
Utilities payable | 200 | 0 |
Prepaid insurance | 140 | 180 |
Prepaid rent | 100 | 200 |
Required
Prepare the cash flows from operating activities section only of the company’s 2017 statement of cash flows using the indirect method
Classify the following cash flows as either operating (O), investing (I), or financing (F) activities.
1. Sold long-term investments for cash.
2. Received cash payments from customers.
3. Paid cash for wages and salaries.
4. Purchased inventories for cash.
5. Paid cash dividends.
6. Issued common stock for cash.
7. Received cash interest on a note.
8. Paid cash interest on outstanding notes.
9. Received cash from sale of land at a loss.
10. Paid cash for property taxes on building.
Fitz Company reports the following information. Use the indirect method to prepare only the operating activities section of its statement of cash flows for the year ended December 31, 2017.
| Selected 2017 Income Statement Data | Selected Year-End 2017 Balance Sheet Data | ||
Net income | \(374,000 | Accounts receivable decrease | \)17,100 |
Depreciation expense | 44,000 | Inventory decrease | 42,000 |
Amortization expense | 7,20 0 | Prepaid expenses increase | 4,700 |
Gain on sale of plant assets | 6,000 | Accounts payable decrease | 8,200 |
Salaries payable increase | 1,200 | ||
Refer to Golden Corporation’s financial statements and related information in Problem 12-6A.
Required
Prepare a complete statement of cash flows; report its cash flows from operating activities according to the direct method.
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