Required Place an X in the appropriate columns for each of the following

Required place an x in the appropriate columns for

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4. Required: Place an X in the appropriate columns for each of the following situations. Situation Operating Investing Financing Effect on Cash Non- Activity Activity Activity + - cash Trans- action a. Paying off accounts payable b. Issuance of bonds for cash c. Sale of land for cash d. Retirement of common stock with cash e. Acquired land for common stock ANS: Situation Operating Investing Financing Effect on Cash Non- Activity Activity Activity + - cash Trans- action a. Paying off accounts payable X X b. Issuance of bonds for cash X X c. Sale of land for cash X X d. Retirement of common stock with cash X X e. Acquired land for common stock X X
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5. Jones Clothing Store presented the following statement of cash flows for the year ended December 31, 2010. Jones Clothing Store Statement of Cash Flows For the Year Ended December 31, 2010 Cash received: a. From sales to customers $200,000 b. Interest income 10,000 c. Loans from banks 50,000 d. From sale of property, plant, and equipment 100,000 e. From issuance of common stock 150,000 f. From issuance of bonds 100,000 Total cash received $610,000 Cash payments: g. For dividends $ 20,000 h. For purchase of stock of another company 150,000 i. For purchase of equipment 200,000 j. For acquisition of inventory 80,000 k. To employees 60,000 Total cash payments $510,000 Net increase in cash $100,000 Required: a. Prepare a statement of cash flows in proper form. b. Comment on the major flows of cash. ANS: a. Jones Clothing Store Statement of Cash Flows For the Year Ended December 31, 2010 Cash flows from operating activities: Received from sales to customers $ 200,000 Interest income received 10,000 Payment for inventory (80,000) Payment to employees (60,000 ) Net increase from operating activities $ 70,000 Cash flows from investing activities: Received from sale of property, plant, and equipment $ 100,000 Payment for stock of another company (150,000) Payment for purchase of equipment (200,000 ) Net decrease from investing activities $(250,000)
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Cash flows from financing activities: Received from loans from banks $ 50,000 From issuance of common stock 150,000 From issuance of bonds 100,000 Payment of dividends (20,000 ) Net increase from financing activities $ 280,000 Net increase in cash $ 100,000 b. Jones Clothing Store had a major inflow of funds from financing activities of $280,000 and a major outflow of funds for investing activities of $250,000. Operating activities generated a net increase of $70,000. 6. The balance sheet for December 31, 2010, December 31, 2009, and the income statement for the year ended December 31, 2010, for Rocket Company follows. Rocket Company Balance Sheet December 31, 2010 and 2009 2010 2009 Assets Cash $ 25,000 $20,000 Accounts receivable, net 60,000 70,000 Inventory 80,000 100,000 Land 50,000 50,000 Building and equipment 130,000* 115,000 Accumulated depreciation (85,000 ) (70,000 ) Total assets $ 260,000 $285,000 Liabilities and Stockholders' Equity Accounts payable $ 30,000 $ 35,000 Income taxes payable 4,000 3,000 Wages payable 5,000 3,000 Current notes payable 50,000** 60,000 Common stock 110,000*** 100,000 Retained earnings 61,000 84,000 Total liabilities and stockholders' equity $260,000 $285,000 * During 2010 cash payments for building and equipment $15,000.
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