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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Briefly describe some of the similarities and differences between GAAP and IFRS with respect to cash flow reporting.
Question: The Procter & Gamble Company (P&G)
The financial statements of P&G are presented in Appendix B. The company’s complete annual report, including the notes to the financial statements, is available online.
Instructions
Refer to P&G’s financial statements and the accompanying notes to answer the following questions.
(a) Which method of computing net cash provided by operating activities does P&G use? What were the amounts of net cash provided by operating activities for the years 2012, 2013, and 2014? Which two items were most responsible for the decrease in net cash provided by operating activities in 2014?
(b) What was the most significant item in the cash flows used for investing activities section in 2014?
What was the most significant item in the cash flows used for financing activities section in 2014?
(c) Where is “deferred income taxes” reported in P&G’s statement of cash flows? Why does it appear in that section of the statement of cash flows?
(d) Where is depreciation reported in P&G’s statement of cash flows? Why is depreciation added to net income in the statement of cash flows?
Dingel Corporation has contracted with you to prepare a statement of cash flows. The controller has provided the following information.
| December 31 | ||
2017 | 2016 | |
Buildings | \( –0– | \)29,750 |
Equipment | 45,000 | 20,000 |
Patents | 5,000 | 6,250 |
Investments | –0– | 3,000 |
Inventory | 12,000 | 9,000 |
Accounts receivable | 12,250 | 10,000 |
Cash | 33,500 | 13,000 |
\(107,750 | \)91,000 | |
Share capital—ordinary | \( 43,000 | \)33,000 |
Retained earnings | 20,750 | 6,000 |
Allowance for doubtful accounts | 3,000 | 4,500 |
Accumulated depreciation on equipment | 2,000 | 4,500 |
Accumulated depreciation on buildings | –0– | 6,000 |
Accounts payable | 5,000 | 3,000 |
Dividends payable | –0– | 5,000 |
Long-term notes payable | 31,000 | 25,000 |
Notes payable, short-term (non-trade) | 3,000 | 4,000 |
\(107,750 | \)91,000 | |
Additional data related to 2017 are as follows.
Instructions Prepare a statement of cash flows using the indirect method.
Question:Comparative balance sheet accounts of Marcus Inc. are presented below.
MARCUS INC.
COMPARATIVE BALANCE SHEET ACCOUNTS
AS OF DECEMBER 31, 2017 AND 2016
December 31
2017 2016
Debit Accounts
Cash \( 42,000 \) 33,750
Accounts Receivable 70,500 60,000
Inventory 30,000 24,000
Equity investments 22,250 38,500
Machinery 30,000 18,750
Buildings 67,500 56,250
Land 7,500 7,500
\(269,750 \)238,750
Credit Accounts
Allowance for Doubtful Accounts \( 2,250 \) 1,500
Accumulated Depreciation—Machinery 5,625 2,250
Accumulated Depreciation—Buildings 13,500 9,000
Accounts Payable 35,000 24,750
Accrued Payables 3,375 2,625
Long-Term Notes Payable 21,000 31,000
Common Stock, no-par 150,000 125,000
Retained Earnings 39,000 42,625
\(269,750 \)238,750
Additional data (ignoring taxes):
1. Net income for the year was \(42,500.
2. Cash dividends declared and paid during the year were \)21,125.
3. A 20% stock dividend was declared during the year. \(25,000 of retained earnings was capitalized.
4. Equity investments (level of ownership is less than 20%) that cost \)25,000 were sold during the year for \(28,750. No unrealized gains and losses were recorded on these investments in 2017.
5. Machinery that cost \)3,750, on which \(750 of depreciation had accumulated, was sold for \)2,200. Marcus’s 2017 income statement follows (ignoring taxes).
Sales revenue \(540,000
Less: Cost of goods sold 380,000
Gross margin 160,000
Less: Operating expenses (includes \)8,625 depreciation and \(5,400 bad debts) 120,450
Income from operations 39,550
Other: Gain on sale of investments \)3,750
Loss on sale of machinery (800) 2,950
Net income $ 42,500
Instructions
(b) Prepare a statement of cash flows using the indirect method.
Question; In the case of a bank overdraft:
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