P147 a 2008 2007 2006

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Unformatted text preview: h. P14–5 Transaction Effect on Cash 1. in terms of 2. operating 3. asset. Section of Statement Explanation $50,000 Operating (55,000) Operating 100,000 Investing Operations is defined inventory activity. Cash payments for expenses. Sale of a nonoperating Note: If the company uses the indirect method to prepare its statement of cash flows, the $15,000 loss on sale of fixed assets would be included in the operating activities section as an adjustment to net income to arrive at net cash flow from operating activities. 4. 5. 6. associated with assets. 7. 8. investment (70,000) (500,000) (100,000) No effect (500,000) 9. financing company. 10. lower but Financing Financing Operating N/A No effect on cash. Investing Cash payment for an in equity securities, a nonoperating asset. Financing Issuing debt provides to the $202,000 No effect Operating Dividend payment. Stock repurchase. Cash payment operating Net income would be would be offset by an increase in rent payable. The net of these two is a zero effect on cash. P14–6 2012 a. Cash from operating activities 2011 2010 $ X X $ Cash from investing activities (2 0 2 ) 160 X (1 5 0 ) $ 280 (5 0 0 ) Cash from financing activities Increase (decrease) in cash 900 $ 110 Cash balance at beginning of year Cash balance at end of year Missing values 90 110 $ 86 0 $ X $ (2 9 0 ) 110 X (2 4 ) $ X 176 $ 86 $ 80 $ (1 0 2 ) $ b. Ruttman Enterprises began operations during 2010. As part of its start­up phase, the company appears to have issued large amounts of stock and/or debt to finance the acquisition of nonoperating assets, to cover the cash used by operating activities during the start­up phase, and to provide a cash surplus for future years. During 2011, the company once again issued large amounts of stock and/or debt to finance the acquisition of nonoperating assets and to cover the cash used by operating activities. However, the company acquired only enough additional financing to meet these needs; it did not acquire an excessive amount of capital through financing activities. By 2012 the company was generating cash from its operating activities and was able to dispose...
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