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Chapter 5 Exercises

Chapter 5 Exercises - E513 Correct(...

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E5-13
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Correct.     (Statement of Cash Flows–Classifications)   The major classifications of activities reported in the statement of cash flows are operating, investing, and financing. Classify  each of the transactions listed below as:  1. Operating activity–add to net income.  2. Operating activity–deduct from net income.  3. Investing activity.  4. Financing activity.  5. Reported as significant noncash activity. The transactions are as follows.  (a) Issuance of capital stock. 4 (b) Purchase of land and building. 3 (c) Redemption of bonds. 4 (d) Sale of equipment. 3 (e) Depreciation of machinery.  1 (f) Amortization of patent. 1 (g) Issuance of bonds for plant assets.  5 (h) Payment of cash dividends.  4 (i) Exchange of furniture for office equipment. 5 (j) Purchase of treasury stock.  4 (k) Loss on sale of equipment. 1 (l) Increase in accounts receivable during the year. 2 (m) Decrease in accounts payable during the year. 2 BE5-12 Correct.     Keyser Beverage Company reported the following items in the most recent year.    Net income $40,000   Dividends paid 5,000
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  Increase in accounts receivable  10,000   Increase in accounts payable 7,000   Purchase of equipment (capital expenditure) 8,000   Depreciation expense 4,000   Issue of notes payable 20,000 Compute net cash flow provided by operating activities and the net change in cash during the year.  (List amounts from  largest positive to smallest positive followed by most negative to least negative, e.g. 15, 14, 10, -17, -5, -1. For  negative numbers use either a negative sign preceding the number e.g. -45 or parenthesis e.g. (45).)   Cash Flow Statement Operating Activities     Net income $ 40000    Increase in Accounts Payable 7000    Depreciation Expense 4000    Increase in Accounts Receivable (10000)          Net cash from operating activities 41000        Investing Activities     Purchase of Equipment (8000)        Financing Activities     Issue Notes Payable 20000    Dividends (5000)   
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      Net cash flow from financing activities 15000  Net change in cash $ 48000  Compute free cash flow.  Free cash flow $ 28000  BE5-14 Correct.     Martinez Corporation engaged in the following cash transactions during 2010.    Sale of land and building $191,000   Purchase of treasury stock 40,000   Purchase of land 37,000   Payment of cash dividend 95,000   Purchase of equipment 53,000   Issuance of common stock 147,000   Retirement of bonds 100,000 Compute the net cash provided (used) by investing activities.  (List multiple entries from the largest positive to the  smallest positive amount followed by the most negative to the least negative amount, e.g. 15, 14, 10, -17, -5, -1. For  negative numbers use either a negative sign preceding the number, e.g. -45 or parenthesis, e.g. (45).)   Sale of land and building $ 191000 
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