Chapter 23: Q6E (page 1376)
Data for Krauss Company are presented in E23-5.
Instructions
Prepare the operating activities section of the statement of cash flows using the indirect method.
The net cash provided by operating activities is computed as $198,500.
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Founded in the early 1980s, the Vermont Teddy Bear Co. designs and manufactures American-made teddy bears and markets them primarily as gifts called Bear-Grams or Teddy Bear-Grams. Bear-Grams are personalized teddy bears delivered directly to the recipient for special occasions such as birthdays and anniversaries. The Shelburne, Vermont, company’s primary markets are New York, Boston, and Chicago. Sales have jumped dramatically in recent years. Such dramatic growth has significant implications for cash flows. Provided below are the cash flow statements for two recent years for the company.
Current Year | Prior Year | |
Cash flows from operating activities: | ||
Net income | \( 17,523 | \) 838,955 |
Adjustments to reconcile net income to net cash provided by operating activities | ||
Deferred income taxes | (69,524) | (146,590) |
Depreciation and amortization | 316,416 | 181,348 |
Changes in assets and liabilities: | ||
Accounts receivable, trade | (38,267) | (25,947) |
Inventories | (1,599,014) | (1,289,293) |
Prepaid and other current assets | (444,794) | (113,205) |
Deposits and other assets | (24,240) | (83,044) |
Accounts payable | 2,017,059 | (284,567) |
Accrued expenses | 61,321 | 170,755 |
Accrued interest payable, debentures | - | (58,219) |
Other | - | (8,960) |
Income taxes payable | - | 117,810 |
Net cash provided by (used for) operating activities | 236,480 | (700,957) |
Net cash used for investing activities | (2,102,892) | (4,422,953) |
Net cash (used for) provided by financing activities | (315,353) | 9,685,435 |
Net change in cash and cash equivalents | (2,181,765) | 4,561,525 |
Other information: | ||
Current liabilities | \( 4,055,465 | \) 1,995,600 |
Total liabilities | 4,620,085 | 2,184,386 |
Net sales | 20,560,566 | 17,025,856 |
Instructions
In 2017, Leppard Inc. issued 1,000 shares of \(10 par value common stock for land worth \)40,000.
(a) Prepare Leppard’s journal entry to record the transaction.
(b) Indicate the effect the transaction has on cash.
(c) Indicate how the transaction is reported on the statement of cash flows.
Bloom Corporation had the following 2017 income statement.
Sales revenue | \(200,000 |
Cost of goods sold | 120,000 |
Gross profit | 80,000 |
Operating expenses (including depreciation of \)21,000) | 50,000 |
Net income | \(30,000 |
The following accounts increased during 2017: Accounts Receivable \)12,000, Inventory \(11,000, and Accounts Payable \)13,000. Prepare the cash flows from the operating activities section of Bloom’s 2017 statement of cash flows using the direct method.
What are the major sources of cash (inflows) in a statement of cash flows? What are the major uses (outflows) of cash?
In 2017, Wild Corporation reported a net loss of \(70,000. Wild’s only net income adjustments were depreciation expense \)81,000, and increase in accounts receivable $8,100. Compute Wild’s net cash provided (used) by operating activities.
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