Chapter 23: Q6Q (page 1372)
Identify the following items as (1) operating, (2) investing, or (3) financing activities: purchase of land, payment of dividends, cash sales, and purchase of treasury stock.
The two items come under financing activities, and the rest two of them comes under operating and investing activities.
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The following data are taken from the records of Alee Company
December 31, December 31,
2017 2016
Cash \( 15,000 \) 8,000
Current assets other than cash 85,000 60,000
Long-term debt investments 10,000 53,000
Plant assets 335,000 215,000
\(445,000 \)336,000
December 31, December 31,
2017 2016
Accumulated depreciation \( 20,000 \) 40,000
Current liabilities 40,000 22,000
Bonds payable 75,000 –0–
Common stock 254,000 254,000
Retained earnings 56,000 20,000
\(445,000 \)336,000
Additional information:
1. Held-to-maturity securities carried at a cost of \(43,000 on December 31, 2016, were sold in 2017 for \)34,000. The loss (not unusual) was incorrectly charged directly to Retained Earnings.
2. Plant assets that cost \(50,000 and were 80% depreciated were sold during 2017 for \)8,000. The loss was incorrectly charged directly to Retained Earnings.
3. Net income as reported on the income statement for the year was \(57,000.
4. Dividends paid amounted to \)10,000.
5. Depreciation charged for the year was $20,000.
Instructions
Prepare a statement of cash flows for the year 2017 using the indirect method
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: CA23-5 (Purpose and Elements of SCF) GAAP requires the statement of cash flows be presented when financial statements are prepared.
Instructions
(a) Explain the purposes of the statement of cash flows.
(b) List and describe the three categories of activities that must be reported in the statement of cash flows.
(c) Identify and describe the two methods that are allowed for reporting cash flows from operations.
(d) Describe the financial statement presentation of noncash investing and financing transactions. Include in your description an example of a noncash investing and financing transaction.
Wainwright Corporation had the following activities in 2017:
1. Sale of land \(180,000. | 4. Purchase of equipment \)415,000. |
2. Purchase of inventory \(845,000. | 5. Issuance of common stock \)320,000. |
3. Purchase of treasury stock \(72,000. | 6. Purchase of available-for-sale debt securities \)59,000. |
Compute the amount Wainwright should report as net cash provided (used) by investing activities in its 2017 statement of cash flows.
For purposes of the statement of cash flows, under IFRS, income taxes paid are treated as:
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