ACCT 373 Midterm 2 Review.docx - Chapter 5 Statement of...

Chapter 5 (Statement of Cash Flows)
The Three Classifications of Cash Flow include the following:
- Operating Activities ( the principle revenue producing activities of the enterprise and the related
expenditures)
- Investing Activities ( those activities that relate to the long-term assets - capital assets and long-
term investments)
- Financing Activities ( those activities that relate to borrowings and contributed owners’ equity)
TR5-1
Cash #1 = $230,000 - $20,000 = $210,000
Cash #2 = $15,000 – ($70,000) = $85,000
ST Investments = $300,000 - $0 = $300,000
$210,000 + $85,000 + $300,000 = $595,000
TR5-3
Net Income $125,000
Dep Expense (+) $20,000
Prepaid Insurance (+) $12,000
Inventory (-) ($4,000)
Rent Payable (-) ($3,000)
Pension Liability (+) $15,000
Total Cash from Operations = $165,000
A5-5
Note the Following:

- Cash Dividends were Declared in 2015
- Equipment Costing $400,000, Net Book Value $150,000, was sold for $150,000
- LTI was sold for $135,000 (No other LT Investments throughout the Year)
- STI are Treasury Bills with a 3 month Term
Operating Activities
Net Earnings
= $690,000
Depreciation = 2015 Acc Dep $450,000 + $250,000 ($400,000 - $150,000 Pulled from above Information)
– 2014 Acc Dep $450,000 = $250,000
Inventory = (-) = $680,000 - $600,000
= ($80,000)
Patent = (+) = $100,000 - $90,000
= $10,000
A/P = (+) = $825,000 - $720,000
= $105,000
Gain on Sale of Investment = -$200,000 - $135,000 + $300,000
= ($35,000)
Total Cash from Operating Activities
= $940,000
Investment Activities
Plant Assets = 2015 Plant Assets ($1,700,000) - $400,000 (Equipment Sold) + 2014 Plant Assets
$1,000,000 = ($1,100,000)
Cash from the Sale of Equipment
= $150,000
Cash from the Sale of investment
= $135,000
Total Cash from Investing Activities
= ($815,000)
Finance Activities

ST Bank Debt = (+) = $325,000
= $325,000
Common Shares = (+) = $1,170,000 - $950,000 =
= $220,000
Dividends = $940,000 - $690,000 - $490,000
= ($240,000)
Total Cash from Financing Activities
= $305,000
Opening Cash + Cash Equivalents
= $100,000
Closing Cash + Equivalents = $230,000 + $300,000
= $530,000
Assignment Q1
Operating Activities
Net Earnings = $395,000
Depreciation Expense = $36,500
A/R = ($43,000)
Inventory = $64,200
A/P = ($65,500)
Total Operating Cash = $387,200
** ST Bank Loan Payable is a Financing Activity

Assignment Q2
Operating Activities
Net Earnings = $173,000
Depreciation = $25,900
Loss on Sale of Investment = $3,100
Gain on Sale of investment = ($1,900)
Corrections = $200,100
A/R = $13,600
Inventory = ($12,000)
A/P = ($42,700)
Income Tax Payable = $3,000
Investment Activities
**Cash Received for Sale of Equipment = $72,400
Equipment = - $564,700 - $101,400 + $483,600 = ($182,500)
Investment = Change in Invest + Loss = $26,700
Financing Activities
New Bond Funds = $46,500
***Dividends $305,600 - $200,100 - $244,800 = ($139,300)
Change in Cash = $14,400

Opening Cash = $56,000
Closing Cash = $70,400
** First calculate Dep = 20x1 Dep $232,900 + Dep $25,900 – 20x2 Dep $234,400 = $24,400
Then take the Dep Calculation and subtract it from the sale price minus the Loss
$101,400 - $24,400 - $3,100 = $73,900
*** $305,600 - $173,000 (Don’t add up just Net Earnings) - $244,800 = ($112,200)
Practice Q1
Operating Activities
Net Earnings = $62,500
Dep = $10,000
Prepaid Insurance = $6,000
Inventory = ($2,000)
Rent Payable = ($1,500)
A/P = $7,500
Cash from Operating Activities = $82,500
Practice Q2
Operating Activities
Equipment Depreciation = $53,100
Building Depreciation = $87,500
Machinery Depreciation = $118,600
Investing Activities