E145 a s s e ts liabilities ownersequity

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Unformatted text preview: rate cash from operations and used that cash to reinvest in long­term assets and to repay debt, pay dividends, and/or repurchase equity. General Mills– Cash from Operations $1,650: the company was able to generate a significant amount of cash from operations and used that cash to reinvest in long­term assets and to repay debt, pay dividends, and/or repurchase equity. E14–5 A s s e ts Liabilities + Owners’ Equity 1. Depreciation expense –170,000 = –170,000 = 2. Issue of common stock +180,000 +180,000 3. Purchase IBM stock = 375,000 (securities) –375,000 (cash) 4. Purchase insurance +27,000 (ppd insurance) –27,000 (cash) 5. Purchase of building +200,000 (building) – 40,000 (cash) = +160,000 (mortgage) 1. Under the direct method, depreciation expense is not included on the statement of cash flows because it does not affect cash. However, under the indirect method, depreciation expense is included under operating activities as an adjustment to net income to arrive at net cash flows from operating activities. 2. Issuance of common stock, $180,000, increases cash. financing activities section. 3. Purchase of marketable securities, $375,000, decreases cash. Marketable securities are nonoperating assets for most businesses. Consequently, the purchase of these securities for cash would be disclosed in the investing activities section. 4. Prepaid insurance, $27,000, decreases cash. activities section. 5. Down payment on building, $40,000, decreases cash. The $40,000 would be included under investing activities. (The mortgage would be disclosed in the footnotes to the financial statements or in a supplemental schedule to the statement of cash flows.) The $180,000 would be included in the The $27,000 would be included in the operating E14–6 a. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. E14–6 b. Merchandise Inventory and Accounts Payable Prepaid Insurance Unearned Sales Revenue, Accounts Receivable and Allowance for Doubtful Accounts Rent Payable and Prepaid Rent Dividends Receivable Wages Payable Suppl...
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This homework help was uploaded on 03/03/2014 for the course ACCT 5053 taught by Professor Staff during the Fall '08 term at Oklahoma State.

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