unit_08_key - Solutions to Suggested Exercises &...

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E13–1. O 1. Depreciation and amortization NA 2. Cash collections from customers F 3. Dividends paid O 4. [Change in] Inventory I 5. Payments to acquire property and equipment F 6. Repayments of long-term debt O 7. Net income F 8. Proceeds from issuance of common stock to employees F 9. Net repayments of notes payable to banks O 10. [Change in] Accounts payable and accrued expenses E13–3. 1. – NCFI Plant and equipment Cash 2. NE Inventory Accounts payable 3. + NCFO Cash Accounts receivable 4. NE Salaries expense Accrued salaries payable 5. – NCFO Interest expense Cash 6. – NCFF Short-term debt Cash 7. – NCFO Prepaid expenses (rent) Cash 8. + NCFI Cash Accumulated depreciation Plant and equipment 9. – NCFO Accounts payable Cash 10. – NCFF Retained earnings Cash
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E13–4. 1. NCFO Income tax expense Cash 2. + NCFI Cash Plant and equipment (net) 3. + NCFF Cash Long-term Debt 4. + NCFO Cash Accounts receivable 5. NE Inventory Accounts payable 6. NCFI Investment securities Cash 7. NE Plant and equipment Note payable 8. + NCFF Cash Common stock Additional paid-in capital 9. NCFO Prepaid expenses (rent) Cash 10. NE Expense Prepaid expense E13–7. Req. 1 Cash flows from operating activities—indirect method Net loss. ..................................................................................................... ($6,000) Depreciation expense. ............................................................................... 7,000 Amortization of copyrights. ........................................................................ 300 Accounts receivable decrease (8,000 – 20,000) . ..................................... 12,000 Salaries payable increase (12,000 – 3,000) . ............................................ 9,000 Other accrued liabilities decrease (1,000 – 5,000). ................................... (4,000) Net cash provided by operating activities. ........................................... $18,300
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Req. 2 The first reason for the net loss was the depreciation expense. This is a non- cash expense. Depreciation expense, along with decreased working capital requirements (current assets - current liabilities), turned the net loss into positive operating cash flow from operations. The reasons for the difference between net income and cash flow are important because they help the financial analyst to determine if the trends are sustainable or whether they represent one-time
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unit_08_key - Solutions to Suggested Exercises &...

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