Copy of Chap021solutions2011

Copy of Chap021solutions2011 - Chapter 21 - Statement of...

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Chapter 21 - Statement of Cash Flows Revisited BRIEF EXERCISES Summary Entry ($ in millions) Cash (received from customers) 38 Accounts receivable 5 Sales revenue 33 Summary Entry ($ in millions) Cash (received from customers) 39 Accounts receivable 4 Bad debt expense 2 Allowance for uncollectible accounts 1 Sales revenue 44 Summary Entry ($ in millions) Cost of goods sold 25 Inventory 6 Accounts payable 5 Cash (paid to suppliers of goods) 26 Summary Entry ($ in millions) Salaries expense 17 Salaries payable 3 Cash (paid to employees) 14 21-1 Chapter 21 Statement of Cash Flows Revisited Brief Exercise 21-1 Brief Exercise 21-2 Brief Exercise 21-3 Brief Exercise 21-4
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Chapter 21 - Statement of Cash Flows Revisited ($ in millions) Interest expense (10% x 1 / 2 x $380) 19 Discount on bonds payable 1 Cash (paid to bondholders) (9% x 1 / 2 x $400) 18 Agee would report the cash inflow of $380 million from the sale of the bonds as a cash inflow from financing activities in its statement of cash flows. The $18 million cash interest paid is cash outflow from operating activities because interest is an income statement (operating) item. ($ in millions) Interest expense (10% x 1 / 2 x $380) 19 Discount on bonds payable 1 Cash (paid to bondholders) (9% x 1 / 2 x $400) 18 Agee would report the cash inflow of $380 million from the sale of the bonds as a cash inflow from financing activities in its statement of cash flows. The $1 million amortization of the discount would be added back to net income as a noncash adjustment because the interest expense ($19 million) was subtracted in calculating net income and yet the cash interest paid was only $18 million. 21-2 Brief Exercise 21-5 Brief Exercise 21-6 Brief Exercise 21-7
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Chapter 21 - Statement of Cash Flows Revisited Merit would report the cash inflow of $41 million from the borrowing as a cash inflow from financing activities in its statement of cash flows. Each installment payment includes both an amount that represents interest and an amount that represents a reduction of principal. In its statement of cash flows, then, Merit reports the interest portion ($ 2,870,000 *) as a cash outflow from operating activities and the principal portion ($ 7,130,000 *) as a cash outflow from financing activities. *December 31, 2011 Interest expense (7% x outstanding balance) ... 2,870,000 Note payable (difference) ........................... 7,130,000 Cash (given) .......................................... 10,000,000 ($ in millions) Cash. ........................................................ 35 Gain on sale of land (difference) ............ 13 Land (cost) ........................................... 22 Morgan would report the cash inflow of $35 million from the sale as a cash inflow from investing activities in its statement of cash flows. The $13 million gain is not a cash flow and would not be reported when using the
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This note was uploaded on 03/29/2011 for the course ACC 311 taught by Professor Debruine during the Winter '08 term at Grand Valley State University.

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Copy of Chap021solutions2011 - Chapter 21 - Statement of...

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