F7_T4_lecture - F7 T4 TURE F? : Financial Instruments,...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: F7 T4 TURE F? : Financial Instruments, Stockholders' Equity. and Cash Flows (Topic 4 My”. fi iration 10. TBS-00012 The following financial statement and supplemental information is available for Carolyn 3. Company as of December 31. Year 3. 12231.09 mam/2 Cash and cash equivalents $316300 5131.000 Accounts receivable. net 244.000 200.000 Inventory 32.000 45.000 Marketable securities 172000 - Land 23?.000 13?.000 Plant and equipment 40.000 T5000 Less: Accumulated depreciation {53.500} {43.000} Total Assets $832300 3505.000 Accounts payable $101000 3110.000 04.45 Bonds payable 110.000 60.000 01.21 Common stock {$10 per) 230.000 210.000 0.3.4.3 Additional paid-in capital 130.000 115.000 Retained earnings 165.?00 100.000 Total Liabilities and Equity $832300 3595.000 Net sales 3500.000 Cost of goods sold 400.000 Gross profit $200,000 SGSLA expenses (60.000) Time Depreciation {23.000} 39.52 Operating income $111000 imalnlng ’— Ansfler El Explain Continue I'l PM S'l'lll Frlifinn Ir'.-=..1‘I TURE F? : Financial Instruments, Stockholders' Equity, and Cash Flows (Topic 4 an Time 39:52 :maining Cl PM Depreciation £3,000:- Operating inoome $111000 Interest expense {15,000} Gain on sale of equipment ?,500 Income before taxes $109,500 Income tax expense {43,300} Net income $ 65,?00 Additional lnfonnation: - Carolyn 3: Company uses U.S. GAAP. :- On March 1st, the company sold a forklift with a book value of $22,500 for $30,000. The forklift was purchased for $35,000. - On June 5th, the company issued 1,000 shares of common stock for $35r‘share. o $50,000 in bonds were issued at par value on September 15th. - On October 1st, land was purchased for a new distribution center for $50,000. - On December 30th, the company purchased the stock of Carson Cola for $1?,000. The investment is classified as available for sale. Using the facts from the prior page, prepare the statement of cash flows for Carolyn a?» Company forthe year ended December 31, Year 3. Enterthe appropriate amount in the shaded cells below. Carolyn 8|. Company Etatement of Cash Flows For the lt'ear Ended December 31, ‘(ear 3 w Answer I _ .‘zl—IK. Ev} Explain ICE) Continue S'l'l11 Frlifinn Ira-RH TURE F? : Financial Instruments, Stockholders' Equity, and Cash Flows (Topic 4 5‘1 I-wwu a—___r Q Etatement of Cash Flows Nation For the ‘fear Ended December 31, ‘fear 3 n 1 I I H3 Cash flows from operating activities: — Adjustments to reconciie net income to net cash provided by operating activities: Net cash provided hv operating activities — Cash flows from investing activities: — 39:52 llTlEIil'lil'lEI AIIEEEI' Explain Eh) Continue I'l PM S'l'li 1 Friifinn {HRH TURE F? : Financial Instruments, Stockholders' Equity, and Cash Flows ( Topic 4 kl r-ww: -:____._r Total adjustments W Net cash provided hv aperatmg activities — see —— ea: — EE—e—l—E ea: —— Be —— w —— eeee as: —— H —— 9e —— EI-l—ew'E % — 18:05 . . . . — 04:45 Net cash provided by financing activities — Increase in cash and cash equivalents — Beginning cash and cash equivalents — Time ‘ ‘ Ending cash and cash equwaients — 39:52 llTlEIll'lll'lEI AIIEEEI' Explain (1*) Continue I'l PM S'I'lll Frlil'inn I'uFuJi Time 39:52 Emaining 1 PM 1? CLASS QUESTION ANSWER 1D. TBS-00012 ltiarolvn E: liZompan'iir Statement of Cash Flows For the Year Ended December 31, Year 3 Cash flows from operating activitiEs: Adjustments to reconcile net income to net cash provided by operating activities: Depreciation {ESDI'J} {44,DDD] lid-DD Gain on sale of equipment Increase in accounts receivable Decrease in inventory Increase in accounts payable Total adjustments Net cash provided lav operating activities Cash flows from investing activities: Purchase of available for sale securities Purchase of land Sale of equipment Net cash used in investing activities —_ m —— so: Cash flows from financing activities: Time 39:52 :rnaining 13' PM 2? CLASS QUESTION ANSWER Cash flows from financing activities: I Net cash provided bv financing activities Increase in cash and cash equrvalents — Beginning cash and cash eqmvalents — 131 000 Ending cash and cash equivalents 35000 135,200 Expianation Because we are using the indirect method. the operating section starts with the Year 3 net income of $65.?00. We then adjust net income to net cash provided by operating activities by doing the following: Add back the depreciation expense of $23,000. This number was given on the income statement. Subtractthe $?.500 gain on the sale of the forklift. The cash flows from the forklift sale will be shown in the investing section. Subtractthe $44,000 increase in accounts receivable. We subtract this amount because the increase represents sales on the income statement forwhioh cash has not yet been received. Add the $13,000 decrease in inventory. which represents sales of inventoryr that increased cash. Add the $8?,000 increase in accounts pavable to reverse out expenses included in net income that have not yet been paid in cash. These adjustments total $?1.500. When these adjustments are added to the net income of $65300, we get cash provided by operating activities of $13?,200. The investing section is shorter. The companyr had three main cash flows from investing activities {non- current asset transactions] during the period. all of which are detailed in the additional information provided in the facts: 2? CLASS QUESTION ANSWER flu: or Add the $3?,000 increase in accounts payable to reverse out expenses included in net income I that have not yet been paid in cash. These adjustments total $1,500. When these adjustments are added to the net income of $65,?00, we get cash provided by operating activities of $1 37,200. The investing section is shorter. The company had three main cash flows from investing activities {non- current asset transactions] during the period, all of which are detailed in the additional information provided in the facts: - Purchased available for sale securities for $171,000. t Purchased land for $50,000. o Sold a forklift for $30,000. Cash used in investing activities totaled $371,000. The company had cash flows from two financing {debt and equity} activities: I Issued $50,000 bonds at par value. 1- Issued stock for $35,000. Cash provided by financing activities totaled $85,000. The totai increase in cash and cash equivalents forthe period was $120,200 — $31000 + $35,000 = $135,200. The ending cash and cash equivalents of $310,200 is the total of the beginning cash and cash equivalents of $131,000 plus the $185,200 increase in cash and cash equivalents during the period. Time 39:52 :maining 3 PM ...
View Full Document

This note was uploaded on 05/31/2011 for the course ACCT 593 taught by Professor Karylfriedman during the Spring '11 term at Keller Graduate School of Management.

Ask a homework question - tutors are online