121_12A - Question 1 Classify each transaction as (0)...

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Unformatted text preview: Question 1 Classify each transaction as (0) operating, (I) investing, (F) financing or (NC) if the transaction does not involve cash. Use a + to show a cash inflow and a − to show a cash outflow O+ Collected accounts receivable I− Purchased long-term investments, paid cash NC Recorded depreciation expense for the period F+ Borrowed cash by issuing bonds O+ Received interest on long-term investments F+ Issued common stock and collected cash I− Purchased equipment and paid cash O− Paid rent for the month NC Accrued utilities expense for the month F− Made principal payment on long-term debt O− Made interest payment on long-term debt F− Purchased of treasury stock O+ Received dividends from long-term investments O− Paid wages to employees I+ Sold long-term investments F− Paid cash dividend to shareholders I+ Sold land and collected cash O+ Made sale to customer and collected cash What did you learn? Chapter 12 – Page 1 of 33 Question 2 The table below shows information for Nimbus Corporation for the year ended December 31, 2011. Prepare a statement of cash flows. Cash paid to purchase land Cash received from sale of stock Cash collected from customers Cash paid on notes payable Cash received from sale of equipment Cash paid to suppliers and employees Cash paid to purchase furniture Cash received from interest Cash received from issuing notes payable Cash dividends paid Cash paid for interest Cash paid for income taxes 45 140 170 50 5 70 15 10 80 20 25 35 Nimbus Corporation Statement of Cash Flows For the year ended December 31, 2011 Operating activities (related to revenues, expenses) Cash collected from customers Cash received from interest Cash paid to suppliers and employees Cash paid for interest Cash paid for income taxes Net operating cash flow 170 10 (70) (25) (35) Investing activities (related to long-term assets) Cash received from sale of equipment Cash paid to purchase land Cash paid to purchase furniture Net investing cash flow 5 (45) (15) Financing activities (related to SE and note payable) Cash received from sale of stock Cash received from issuing notes payable Cash dividends paid Cash paid on notes payable Net financing cash flow Net change in cash What did you learn? Chapter 12 – Page 2 of 33 50 (55) 140 80 (20) (50) 150 145 Question 3 Use the cash T-account below to prepare a statement of cash flows for Cumulus Corporation for the year ended December 31, 2011. Issued stock Cash sales to customers Collected interest Collections on account New loan from bank Collections on account Cash sales to customers Sold equipment Cash 100 35 10 15 30 25 20 8 20 4 12 8 2 30 7 5 1 3 Bought equipment Paid wages for month Prepaid 6 months rent Paid insurance for year Paid advertising Bought land Paid dividends Pay principle on loan Paid interest on loan Made tax payment Cumulus Corporation Statement of Cash Flows For the year ended December 31, 2011 Operating activities Cash collected from customers Cash received from interest Cash paid to suppliers Cash paid for interest Cash paid for income taxes Net operating cash flow 95 10 (26) (1) (3) Investing activities Cash received from sale of equipment Cash paid to purchase equipment Cash paid to purchase land Net investing cash flow 8 (20) (30) Financing activities Cash received from sale of stock Cash received from bank loan Cash dividends paid Cash paid on principle of bank loan Net financing cash flow Net change in cash What did you learn? Chapter 12 – Page 3 of 33 75 (42) 100 30 (7) (5) 118 151 Beg. A/R End A/R Increase Sales $80 $93 $13 $284 Sales 284 – increase A/R 13 = Cash flow 271 Date Description Accounts receivable Cash Increase Assets Liabilities Equity Chapter 12 – Page 4 of 33 Debit 13 Credit 13 Decrease Relationship of Balance Sheet Accounts to Categories used on the Statement of Cash Flows Radial Corporation Comparative Balance Sheet December 31, 2009 Operating activities Investing activities Operating activities Financing activities 2009 2008 Current assets: Cash................................................................................................................... $19 ........................$3 Accounts receivable ............................................................................................ 72 ........................81 Interest receivable ................................................................................................. 6 ..........................8 Inventory ........................................................................................................... 103 ........................93 Prepaid expenses ................................................................................................... 2 ..........................6 Total current assets......................................................................................... 202 ......................191 Long-term assets: Investment in marketable securities (long term) ................................................. 15 ..........................7 Notes receivable (long term) ............................................................................... 79 ........................85 Equipment ......................................................................................................... 275 ......................150 Less accumulated depreciation............................................................................ 25 ........................35 Total assets................................................................................................... $546 ....................$398 Current liabilities: Accounts payable ............................................................................................ $105 ......................$90 Accrued liabilities ................................................................................................. 6 ........................12 Interest payable ..................................................................................................... 2 ..........................1 Income taxes payable ............................................................................................ 6 ........................10 Total current liabilities ................................................................................... 119 ......................113 Long-term liabilities and equity: Notes payable (long term) ................................................................................... 78 ........................98 Common stock .................................................................................................. 179 ........................77 Retained earnings.............................................................................................. 170 ......................110 Total liabilities and stockholders' equity ...................................................... $546 ....................$398 Chapter 12 – Page 5 of 33 Statement of Cash Flows Relationship of Cash to Long-term Asset, Long-term Liability and Equity Accounts Cash Flow from Investing and Financing Activities Assume the transaction involves cash and long-term assets, long-term liabilities, or equity, but not revenues or expenses. Long-Term Assets Cash used to purchase assets Cash outflow Decrease Asset sold for cash Cash inflow Increase Cash borrowed Stock sold for cash Cash inflow Decrease Long-Term Liabilities and Equity Increase Cash used to pay debts Cash used to pay dividends, purchase treasury stock Cash outflow Statement of Cash Flows Relationship of Revenues and Expenses to Non-cash Current Asset and Current Liability Accounts Cash Flow from Operating Activities Assume the transaction involves revenue or expense, but not cash. Since revenue and expense accounts are prepared on an accrual basis, current asset and current liability accounts must be adjusted to a cash basis. Current Increase Not all revenue collected in cash: Cash outflow Assets Revenue on the accrual basis overstates cash inflow Decrease Current Liability And Equity Expenses consumed non-cash assets: Expenses on the accrual basis overstates cash outflow Cash inflow Increase Expenses not paid in cash: Expenses on the accrual basis overstates cash outflow Cash inflow Decrease Cash payments exceed expenses: Expenses on the accrual basis understates cash outflow Cash outflow Chapter 12 – Page 6 of 33 Check figures for the following four questions Radial Operating activities Cash received from customers Cash received from interest and dividends Cash paid to suppliers and employees Cash paid for interest Cash paid for income taxes Net cash flow from operating activities Investing activities Cash paid to purchase marketable securities Cash received from sale of marketable securities Cash received from collection of notes receivable Cash paid to issue note receivable Cash paid to purchase equipment Cash received from sale of equipment Net cash flow from investing activities Cascade Butterfield 509 16 (381) (11) (31) 102 679 25 (617) (26) (18) 43 1,472 87 (1,153) (59) (82) 265 2,526 19 (2,565) (104) (25) (149) (30) 24 6 (20) 28 (65) 55 40 (15) 79 (225) 68 (157) (41) (26) 22 (37) (226) 61 (135) (14) (112) 111 49 4 (24) 102 (11) 71 49 (8) 48 (108) (19) 5 (12) 5 (109) (111) 21 (14) 108 (40) 75 16 3 19 Financing Activities Cash received from issuing new debt Cash paid on principal of debt Cash received from issuing stock Cash paid for dividends Net cash flow from financing activities Net change in cash Beginning cash balance Ending cash balance Madrid (13) 34 21 19 95 114 (25) 201 176 Chapter 12 – Page 7 of 33 Question 4 Radial Corporation – Income Statement – For the year ended December 31, 2009 Sales.......................................................................................................$500 Cost of goods sold ...................................................................................300 Selling expenses.........................................................................................57 General and administrative expenses.........................................................27 Depreciation expense.................................................................................17 Interest revenue..........................................................................................14 Interest expense .........................................................................................12 Gain on sale of marketable securities ............2 Loss on sale of equipment............................................................................5 Income tax expense....................................................................................27 Net income............................................................................................$71 Radial Corporation – Balance Sheet – As of December 31 2009 Cash .................................................................................................................$19 Accounts receivable...........................................................................................72 Interest receivable................................................................................................6 Inventory..........................................................................................................103 Prepaid expenses .................................................................................................2 Total current assets .......................................................................................202 Investment in marketable securities (long term)................................................15 Notes receivable (long term) .............................................................................79 Equipment........................................................................................................275 Less accumulated depreciation ..........................................................................25 Total assets .................................................................................................$546 2008 $3 81 8 93 6 191 7 85 150 35 $398 Accounts payable...........................................................................................$105 Accrued liabilities................................................................................................6 Interest payable....................................................................................................2 Income taxes payable...........................................................................................6 Total current liabilities..................................................................................119 Notes payable (long term) .................................................................................78 Common stock.................................................................................................179 Retained earnings ............................................................................................170 Total liabilities and stockholders' equity ....................................................$546 $90 12 1 10 113 98 77 110 $398 Additional information needed to analyze investing and financing cash flows: 1. Marketable securities worth $30 were purchased during the year. Some marketable securities were sold. 2. Equipment with a cost of $100 was sold during the year. New equipment was purchased during the year. 3. During the year $24 of principal was repaid on the long term notes payable. New notes payable were created during the year. 4. The only activity in the retained earnings account involved net income and cash dividends. 5. All other transactions involved only cash. Chapter 12 – Page 8 of 33 Operating Activities (Direct Method) Cash received from customers Interest and dividends received Cash paid to suppliers and employees Chapter 12 – Page 9 of 33 Interest paid Income taxes paid Operating Activities Direct method Indirect method Cash received from customers Net income Interest and dividends received Cash paid to suppliers and employees Interest paid Income taxes paid Net cash flow from operating Net cash flow from operating Chapter 12 – Page 10 of 33 Equipment Marketable securities Beg bal. Beg bal. Purchases Sales (at cost) End bal. Purchases Sales (at cost) End bal. Accumulated depreciation Notes receivable Beg bal. Sales Dep. exp. End bal. Beg bal. New issues Collections End bal. Equipment Cash received Less book value Gain (Loss) Cost of equipment Less acc. dep. Net book value Investing Activities Net cash flow from investing activities Chapter 12 – Page 11 of 33 Mkt. Sec. Notes payable Common stock Beg bal. New borrowing Issued End bal. Payments Beg bal. End bal. Retained earnings Beg bal. Dividends Net income End bal. Financing Activities Net cash flow from financing activities Summary of Cash Flows Net cash flows from operating activity Net cash flows from investing activity Net cash flows from financing activity Net increase (decrease) in cash Cash, beginning of the year Cash, end of year Chapter 12 – Page 12 of 33 Operating Activities (Direct Method) Cash received from customers Sales revenue Cash paid to suppliers and employees Interest paid 14 Cost of goods sold (300) Interest expense Decrease in interest receivable 2 Selling expenses (57) Increase in interest payable (10) Decrease in prepaid expenses 509 Total 16 Income taxes (27) 1 Decrease in income taxes payable (4) (11) Total (31) 15 Decrease in accrued liabilities (12) 4 Increase in accounts payable Total Income taxes paid (27) Increase in inventory 9 Interest revenue General and administrative expenses Decrease in accounts receivable 500 Interest and dividends received (6) Total (381) Chapter 12 – Page 13 of 33 Total Operating Activities Direct method Indirect method Cash received from customers 509 Net income 71 Interest and dividends received 16 Depreciation expense 17 (2) Cash paid to suppliers and employees (381) Gain on sale of marketable securities Interest paid (11) Loss on sale of equipment 5 Income taxes paid (31) Decrease in accounts receivable 9 Decrease in interest receivable 2 Increase in inventory (10) Decrease in prepaid expenses 4 Increase in accounts payable 15 Decrease in accrued liabilities (6) Increase in interest payable 1 Decrease in income taxes payable Total 102 (4) Total 102 Chapter 12 – Page 14 of 33 Equipment Beg bal. 150 Purchases 225 End bal. Marketable securities Beg bal. 275 100 Sales (at cost) Purchases 30 End bal. 15 Accumulated depreciation Beg bal. 17 Dep. exp. 25 27 22 Sales (at cost) Notes receivable 35 Sales 7 End bal. Beg bal. New issues End bal. 85 0 6 79 Equipment Mkt. Sec. 68 24 Less book value (73) (22) Gain (Loss) (5) 2 Cost of equipment 100 Less acc. dep. (27) Net book value 73 Cash received Investing Activities Cash paid to purchase marketable securities (30) Cash received from selling marketable securities 24 Cash received from collection of notes receivable 6 Cash paid to purchase of equipment (225) Cash received from sale of equipment 68 Total (157) Chapter 12 – Page 15 of 33 Collections Notes payable Common stock 98 24 77 Beg bal. 4 New borrowing 102 Issued 78 Payments Beg bal. 179 End bal. End bal. Retained earnings 110 Dividends 11 Beg bal. 71 170 Financing Activities Cash received from issuing new debt 4 Cash paid on principal of debt (24) Cash received from issuing common stock 102 Cash paid for dividends (11) Total 71 Summary of Cash Flows Net cash flows from operating activity 102 Net cash flows from investing activity (157) Net cash flows from financing activity 71 Net increase (decrease) in cash 16 Cash, beginning of the year 3 Cash, end of year 19 Chapter 12 – Page 16 of 33 Net income End bal. Question 5 Madrid Corporation – Income Statement – For the year ended December 31, 2009 Sales.......................................................................................................$800 Cost of goods sold ...................................................................................500 Selling expenses........................................................................................ 92 General and administrative expenses........................................................ 32 Depreciation expense ................................................................................12 Interest revenue......................................................................................... 21 Interest expense ........................................................................................ 19 Gain on sale of equipment .......................................................................... 7 Loss on sale of marketable securities........................................................ 15 Income tax expense ..................................................................................30 Net income..........................................................................................$128 Madrid Corporation – Comparative Balance Sheet – As of December 31 2009 2008 Cash .................................................................................................................$21 $34 Accounts receivable.........................................................................................252 131 Interest receivable................................................................................................5 9 Inventory............................................................................................................13 25 Prepaid expenses ...............................................................................................12 8 Total current assets .......................................................................................303 207 Investment in marketable securities (long term)................................................45 68 Notes receivable (long term) ...........................................................................186 145 Equipment........................................................................................................362 421 Less accumulated depreciation ........................................................................126 184 Total assets .................................................................................................$770 $657 Accounts payable.............................................................................................$45 Accrued liabilities..............................................................................................76 Interest payable....................................................................................................2 Income taxes payable.........................................................................................36 Total current liabilities..................................................................................159 Notes payable (long term) .................................................................................98 Common stock...................................................................................................73 Retained earnings ............................................................................................440 Total liabilities and stockholders' equity ....................................................$770 $70 52 9 24 155 57 25 420 $657 Additional information needed to analyze investing and financing cash flows: 1. Marketable securities with a cost of $43 were sold during the year. Additional marketable securities were purchased during the year. 2. New equipment was purchased during the year at a cost of $26. Equipment was sold during the year. 3. During the year $8 of principal was repaid on the long term notes payable. New notes payable were created during the year. 4. The only activity in the retained earnings account involved net income and cash dividends. 5. All other transactions involved only cash. Chapter 12 – Page 17 of 33 Operating Activities (Direct Method) Cash received from customers Interest and dividends received Cash paid to suppliers and employees Chapter 12 – Page 18 of 33 Interest paid Income taxes paid Operating Activities Direct method Indirect method Cash received from customers Net income Interest and dividends received Cash paid to suppliers and employees Interest paid Income taxes paid Net cash flow from operating Net cash flow from operating Chapter 12 – Page 19 of 33 Equipment Marketable securities Accumulated depreciation Notes receivable Equipment Cash received Less book value Gain (Loss) Cost of equipment Less acc. dep. Net book value Investing Activities Net cash flow from investing activities Chapter 12 – Page 20 of 33 Mkt. Sec. Notes payable Common stock Retained earnings Financing Activities Net cash flow from financing activities Summary of Cash Flows Net cash flows from operating activity Net cash flows from investing activity Net cash flows from financing activity Net increase (decrease) in cash Cash, beginning of the year Cash, end of year Chapter 12 – Page 21 of 33 Question 6 Cascade Corporation – Income Statement – For the year ended December 31, 2009 Sales................................................................................................. $1,450 Cost of goods sold ................................................................................ 925 Selling expenses.................................................................................... 114 General and administrative expenses.................................................... 103 Depreciation expense.............................................................................. 62 Interest revenue....................................................................................... 84 Interest expense ...................................................................................... 62 Gain on sale of marketable securities ..................................................... 17 Loss on sale of equipment....................................................................... 21 Income taxes ........................................................................................... 72 Net income....................................................................................... $192 Cascade Corporation – Comparative Balance Sheet – As of December 31 2009 2008 Cash ...............................................................................................................$114 $95 Accounts receivable.........................................................................................172 194 Interest receivable..............................................................................................12 15 Inventory..........................................................................................................264 201 Prepaid expenses ...............................................................................................19 17 Total current assets .......................................................................................581 522 Investment in marketable securities (long term)..............................................105 78 Notes receivable (long term) .............................................................................46 86 Equipment........................................................................................................462 401 Less accumulated depreciation ........................................................................286 307 Total assets .................................................................................................$908 $780 Accounts payable...........................................................................................$162 Accrued liabilities..............................................................................................19 Interest payable..................................................................................................17 Income taxes payable...........................................................................................1 Total current liabilities..................................................................................199 Notes payable (long term) .................................................................................14 Common stock.................................................................................................110 Retained earnings ............................................................................................585 Total liabilities and stockholders' equity ....................................................$908 $105 22 14 11 152 21 105 502 $780 Additional information needed to analyze investing and financing cash flows: 1. Marketable securities worth $65 were purchased during the year. Some marketable securities were sold during the year. 2. Equipment with a cost of $165 was sold during the year. New equipment was purchased during the year. 3. During the year $12 of principal was repaid on the long term notes payable. New notes payable were created during the year. 4. The only activity in the retained earnings account involved net income and cash dividends. 5. All other transactions involved only cash. Chapter 12 – Page 22 of 33 Operating Activities (Direct Method) Cash received from customers Interest and dividends received Cash paid to suppliers and employees Chapter 12 – Page 23 of 33 Interest paid Income taxes paid Operating Activities Direct method Indirect method Cash received from customers Net income Interest and dividends received Cash paid to suppliers and employees Interest paid Income taxes paid Net cash flow from operating Net cash flow from operating Chapter 12 – Page 24 of 33 Equipment Marketable securities Accumulated depreciation Notes receivable Equipment Cash received Less book value Gain (Loss) Cost of equipment Less acc. dep. Net book value Investing Activities Net cash flow from investing activities Chapter 12 – Page 25 of 33 Mkt. Sec. Notes payable Common stock Retained earnings Financing Activities Net cash flow from financing activities Summary of Cash Flows Net cash flows from operating activity Net cash flows from investing activity Net cash flows from financing activity Net increase (decrease) in cash Cash, beginning of the year Cash, end of year Chapter 12 – Page 26 of 33 Question 7 Butterfield Corporation – Income Statement – For the year ended December 31, 2009 Sales ..................................................................................................... $2,605 Cost of goods sold.................................................................................. 1,942 Selling expenses ........................................................................................ 314 General and administrative expenses ........................................................ 107 Depreciation expense .................................................................................. 92 Interest revenue ........................................................................................... 15 Interest expense........................................................................................... 96 Gain on sale of equipment........................................................................... 47 Loss on sale of marketable securities .......................................................... 61 Income tax expense ..................................................................................... 30 Net income ............................................................................................. $25 Butterfield Corporation – Comparative Balance Sheet – As of December 31 2009 2008 Cash ...............................................................................................................$176 $201 Accounts receivable.........................................................................................184 105 Interest receivable..............................................................................................65 69 Inventory..........................................................................................................371 194 Prepaid expenses ...............................................................................................71 83 Total current assets .......................................................................................867 652 Investment in marketable securities (long term)................................................21 146 Notes receivable (long term) .............................................................................86 72 Equipment........................................................................................................694 847 Less accumulated depreciation ........................................................................222 331 Total assets ..............................................................................................$1,446 $1,386 Accounts payable...........................................................................................$107 Accrued liabilities..............................................................................................98 Interest payable....................................................................................................6 Income taxes payable.........................................................................................14 Total current liabilities..................................................................................225 Notes payable (long term) ...............................................................................105 Common stock.................................................................................................571 Retained earnings ............................................................................................545 Total liabilities and stockholders' equity .................................................$1,446 $161 81 14 9 265 98 463 560 $1,386 Additional information needed to analyze investing and financing cash flows: 1. Marketable securities with a cost of $140 were sold during the year. Additional marketable securities were purchased during the year. 2. New equipment was purchased during the year at a cost of $112. Equipment was sold during the year. 3. During the year $14 of principal was repaid on the long term notes payable. New notes payable were created during the year. 4. The only activity in the retained earnings account involved net income and cash dividends. 5. All other transactions involved only cash. Chapter 12 – Page 27 of 33 Operating Activities (Direct Method) Cash received from customers Interest and dividends received Cash paid to suppliers and employees Chapter 12 – Page 28 of 33 Interest paid Income taxes paid Operating Activities Direct method Indirect method Cash received from customers Net income Interest and dividends received Cash paid to suppliers and employees Interest paid Income taxes paid Net cash flow from operating Net cash flow from operating Chapter 12 – Page 29 of 33 Equipment Marketable securities Accumulated depreciation Notes receivable Equipment Cash received Less book value Gain (Loss) Cost of equipment Less acc. dep. Net book value Investing Activities Net cash flow from investing activities Chapter 12 – Page 30 of 33 Mkt. Sec. Notes payable Common stock Retained earnings Financing Activities Net cash flow from financing activities Summary of Cash Flows Net cash flows from operating activity Net cash flows from investing activity Net cash flows from financing activity Net increase (decrease) in cash Cash, beginning of the year Cash, end of year Chapter 12 – Page 31 of 33 Question 8 Intel Net income Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Net change in cash Four largest reconciling items in (account name, amount) In operating activities In investing activities In financing activities Relative size calculations Cash flow from operating activities / net income Investing cash flow / operating cash flow Financing cash flow / operating cash flow What did you learn? Chapter 12 – Page 32 of 33 Question 9 Use annual report PDF files on my web site Amgen Net income Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Net change in cash Four largest reconciling items in (account name, amount) In operating activities In investing activities In financing activities Relative size calculations Cash flow from operating activities / net income Investing cash flow / operating cash flow Financing cash flow / operating cash flow What did you learn? Chapter 12 – Page 33 of 33 Costco ...
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