SET PROBLEM C
PROBLEM 16-1C
Jumpin Jim Company, a merchandiser, recently completed its calendar-year 2008 operations.
For the year, (1) all sales are credit sales, (2) all credits to accounts receivable reflect cash
receipts from customers, (3) purchases of inventory are on credit, (4) all debits to accounts
payable reflect cash payments for inventory, and (5) other expenses are paid in advance and are
initially debited to Prepaid Expenses. Jumpin Jims balance sheet and income statement follow:
JUMPIN JIM COMPANY
Income Statement
For Year Ended December 31, 2008
$630,700
(278,000)
352,700
Sales
Cost of goods sold
Gross profit
Operating expenses
Depreciation expense
$ 15,620
Other expenses
189,000
Other gains (losses)
Gain on sale of equipment
Income before taxes
Income taxes
Net income
(204,620)
10,200
$158,280
(27,570)
$130,710
JUMPIN JIM COMPANY
Comparative Balance Sheets
December 31,
2008
2007
Assets
Cash
$ 54,400
$ 62,900
Accounts receivable
70,250
55,500
Merchandise inventory
210,800
204,800
Prepaid expenses
250
1,560
Equipment
102,580
88,000
Accum. depreciation Equip.
(25,020)
(24,200)
Total assets
$413,260
$388,560
Liabilities and Equity
Accounts payable
Short-term notes payable
Long-term notes payable
Common stock, $2 par value
Contributed capital in excess
of par, common stock
Retained earnings
Total liabilities and equity
$ 41,090
5,000
26,000
122,000
$ 98,100
-040,000
120,000
70,500
148,670
$413,260
67,500
62,960
$388,560
Additional Information on Year 2008 Transactions
a. The gain on cash sale of equipment is $10,200 (details in b).
b. Sold equipment costing $21,420, with accumulated depreciation of $14,800, for $16,820 cash.
c. Purchased equipment costing $36,000 by paying cash of $10,000 and signing a long-term note
payable for the balance.
d. Borrowed $5,000 cash by signing a short-term note payable.
e. Paid $40,000 cash to reduce the long-term notes payable.
f. Issued 1,000 shares of common stock for cash at $5 per share.
g. Declared and paid cash dividends of $45,000.
Required
1. Prepare a complete statement of cash flows; report its operating activities using the indirect
method. Disclose any noncash investing and financing activities in a note.
Analysis Component
2. Analyze and discuss the cash flow information in your answer to part (1), giving special
attention to the wisdom of the cash dividend payment.
PROBLEM 16-2C
Refer to the information reported about Jumpin Jim Company in Problem 16-1C.
Required
Prepare a statement of cash flows using a spreadsheet as in Exhibit 16A.1 under the indirect
method of reporting cash flows from operating activities. Identify the debits and credits in the
Analysis of Changes columns with letters that correspond to the following list of transactions and
events:
a. Net income is $130,710.
b. Accounts receivable increased.
c. Merchandise inventory increased.
d. Prepaid expenses decreased.
e. Accounts payable decreased.
f. Depreciation expense is $15,620.
g. Sold equipment costing $21,420, with accumulated depreciation of $14,800, for $16,820
cash. This yielded a gain of $10,200.
h. Purchased equipment costing $36,000 by paying $10,000 cash and (i.) by signing a long-term
note payable for the balance.
j. Borrowed cash $5,000 by signing a short-term note payable.
k. Paid $40,000 cash to reduce the long-term notes payable.
l. Issued 1,000 shares of common stock for cash at $5 per share.
m. Declared and paid cash dividends of $45,000.
PROBLEM 16-3C
Refer to Jumpin Jim Companys financial statements and related information in Problem 16-1C.
Required
Prepare a complete statement of cash flows; report its operating activities according to the direct
method. Disclose any noncash investing and financing activities in a note.
PROBLEM 16-4C
Steve Corporation, a merchandiser, recently completed its 2008 operations. For the year, (1) all
sales are credit sales, (2) all credits to accounts receivable reflect cash receipts from customers,
(3) all purchases of inventory are on credit, (4) all debits to accounts payable reflect cash
payments for inventory, (5) other operating expenses are cash expenses, and (6) any change in
income taxes payable reflects the accrual and cash payment of taxes. Steves balance sheet and
income statement follow:
STEVE CORPORATION
Income Statement
For Year Ended December 31, 2008
Sales
Cost of goods sold
Gross profit
Operating expenses
Depreciation expense
Other expenses
Income before taxes
Income taxes
Net income
$1,494,000
(895,500)
508,500
$ 40,500
375,750 (416,250)
182,250
(31,500)
$150,750
STEVE CORPORATION
Comparative Balance Sheets
December 31,
2008
2007
Assets
Cash
Accounts receivable
Merchandise inventory
Equipment
Accum. depreciation Equip.
Total assets
Liabilities and Equity
$130,500
69,750
456,750
249,750
(117,000)
$789,750
$87,750
60,750
400,500
222,750
(76,500)
$695,250
Accounts payable
Income taxes payable
Common stock, $1 par value
Contributed capital in excess
of par value, common stock
Retained earnings
Total liabilities and equity
$51,750
20,250
436,500
$ 72,000
18,000
418,500
148,500
132,750
$789,750
121,500
65,250
$695,250
Additional Information on Year 2008 Transactions
a. Purchased equipment for $27,000 cash.
b. Issued 18,000 shares of common stock for cash at $2.50 per share.
c. Declared and paid $83,250 of cash dividends.
Required
Prepare a complete statement of cash flows; report its cash inflows and cash outflows from
operating activities according to the indirect method.
PROBLEM 16-5C
Refer to the information reported about Steve Corporation in Problem 16-4C.
Required
Prepare a statement of cash flows using a spreadsheet as in Exhibit 16A.1 under the indirect
method of reporting cash flows from operating activities. Identify the debits and credits in the
Analysis of Changes columns with letters that correspond to the following list of transactions and
events:
a. Net income is $150,750.
f. Depreciation expense is $40,500.
b. Accounts receivable increased.
g. Purchased equipment for $27,000 cash.
c. Merchandise inventory increased. h.Issued 18,000 shares at $2.50 per share.
d. Accounts payable decreased.
i. Declared and paid $83,250 of cash dividends.
e. Income taxes payable increased.
PROBLEM 16-6C
Refer to Steve Corporations financial statements and related information in Problem 16-4C.
Required
Prepare a complete statement of cash flows; report its cash flows from operating activities
according to the direct method.