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Chapter_16_Solutions_7e

# Chapter_16_Solutions_7e - Chapter 16 The Statement of Cash...

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Chapter 16 The Statement of Cash Flows Quick Check Answers: 1. a 3. a 5. c 7. b 9. d 2. d 4. b 6. a 8. c 10. c Explanations: 5. c. \$72,000 = Net income (\$60,000) + Depreciation (\$4,000) + Decrease in current assets (\$3,000) + Increase in current liabilities (\$5,000) 6. a. Investing cash flows—cash receipt of \$40,000, computed as follows: Book value of plant assets sold……………… \$ 50,000 Less: Loss on sale……………………………. (10,000 ) Investing cash flows—cash receipt…………. \$ 40,000 7. b. Net cash provided by financing activities = \$20,000 computed as follows: Cash received from borrowing……………….. \$ 35,000 Cash received by issuing common stock…... 10,000 Cash paid for dividends………………………... (25,000 ) Net cash provided by financing activities…... \$ 20,000 Chapter 16 The Statement of Cash Flows 225

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APPENDIX A: DIRECT METHOD 9. d. Collections from customers = \$80,000, computed as follows: Collections Increase in from Customers = Revenue Accounts Receivable \$80,000 = \$110,000 (\$50,000 \$20,000) 10. c. Payments for operating expenses were \$44,000, computed as follows: Payment for Operating Decrease in Operating Expense = Expense + Accrued Liabilities \$44,000 = \$40,000 + (\$8,000 \$4,000) Accounting 7/e Solutions Manual 226
Short Exercises (10 min.) S 16-1 The statement of cash flows helps investors and creditors: a. Predict future cash flows by reporting past cash receipts and payments, which are good predictors of future cash flows. b. Evaluate management decisions by reporting on managers’ investments. Wise investments help companies prosper. Unwise investments cause problems. c. Predict the ability to pay debts and dividends by reporting where cash came from and how the cash was spent. Cash- flow information helps investors and creditors predict whether the business can pay its debts and dividends. Chapter 16 The Statement of Cash Flows 227

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(10 min.) S 16-2 a. 1. Operating 2. Investing 3. Financing b. The check figure is the increase or decrease in cash —from the balance sheet. c. Net income (10 min.) S 16-3 O+ a. Increase in accounts O+ f. Loss on sale of land payable O+ g. Depreciation expense F b. Payment of dividends O h. Increase in inventory O c. Decrease in accrued O+ i. Decrease in accounts liabilities receivable F d. Issuance of common I j. Purchase of stock equipment O e. Gain on sale of building Accounting 7/e Solutions Manual 228
(10 min.) S 16-4 Cash flows from operating activities: Net income…………………………………………... \$42,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation……………………………………… 8,000 Increase in accounts receivable……………… (6,000) Decrease in accounts payable………………... (4,000 ) Net cash provided by operating activities…….. \$40,000 (10 min.) S 16-5 One Way Cellular Statement of Cash Flows (partial) Year ended June 30, 2008 Cash flows from operating activities: Net income \$60,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation \$ 15,000 Increase in current assets other than cash (12,000) Decrease in current liabilities (5,000 ) (2,000 ) Net cash provided by operating activities \$58,000 Chapter 16 The Statement of Cash Flows 229

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Chapter_16_Solutions_7e - Chapter 16 The Statement of Cash...

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