# CHAPTER23

Statementof CashFlows
ASSIGNMENTCLASSIFICATIONTABLE(BY TOPIC)
Topics

Questions

Brief
Exercises

Exercises

Problems

Conceptsfor
Analysis

1. Format, objectives
purpose, and source
of statement.

1, 2, 7,
8, 12

1, 2, 5, 6

2. Classifying investing,
financing, and operating
activities.

3, 4, 5, 6,
16, 17, 19

1, 2, 3,
6, 7,
8, 12

1, 2, 10, 16

1, 3, 4, 5

3. Direct vs. indirect
methods of preparing
operating activities.

9, 20

4, 5, 9,
10, 11

3, 4

5

4. Statement of cash flows— 11, 13, 14
direct method.

8

4, 5, 7, 9,
12, 13

3, 4, 6,
7, 8

5. Statement of cash flows— 10, 13,
indirect method.
15, 16

8

3, 6, 8, 11,
14, 15, 16,
17, 18

1, 2, 5, 6,
7, 8, 9

2

6. Preparing schedule
of noncash investing
and financing activities.

18

12

5, 7, 8, 9

5

21

13

19, 20, 21

Copyright © 2011 John Wiley & Sons, Inc.   Kieso, Intermediate Accounting, 14/e, Solutions Manual    (For Instructor Use Only)

23-1

ASSIGNMENTCLASSIFICATIONTABLE(BY LEARNINGOBJECTIVE)
Brief Exercises
LearningObjectives

Exercises

Problems

1.

Describe the purpose of the statement
of cash flows.

2.

Identify the major classifications
of cash flows.

3

1, 2, 10, 16

3.

Differentiate between net income and net
cash flows from operating activities.

4, 5, 9, 10, 11

2, 3, 4, 5, 6,
7, 8, 16

6, 7

4.

Contrast the direct and indirect methods
of calculating net cash flow from operating
activities.

4, 5, 6, 7, 9

3, 4, 5,
6, 7, 8

6, 7

5.

Determine net cash flows from investing
and financing activities.

1, 2

16

6.

Prepare a statement of cash flows.

8

9, 11, 12, 13,
14, 15, 17, 18

7.

Identify sources of information
for a statement of cash flows.

8.

Discuss special problems in preparing
a statement of cash flows.

12

10, 18

9.

Explain the use of a worksheet in
preparing a statement of cash flows.

13

19, 20, 21

23-2

1, 2, 3, 4, 5,
6, 7, 8, 9
1, 2, 4,
5, 8, 9
1, 2, 4, 5,
6, 7, 8, 9

Copyright © 2011 John Wiley & Sons, Inc.   Kieso, Intermediate Accounting, 14/e, Solutions Manual    (For Instructor Use Only)

ASSIGNMENTCHARACTERISTICSTABLE

Copyright © 2011 John Wiley & Sons, Inc.   Kieso, Intermediate Accounting, 14/e, Solutions Manual    (For Instructor Use Only)

23-3

Moderate 30–35 E 23 -1 Statement presentation of transactions—indirect method. Simple 10–15 Moderate 20–30 Preparation of operating activities section—indirect method. Simple 15–20 Computation of operating activities—direct method. Solutions Manual    (For Instructor Use Only) . Simple 15–20 Schedule of net cash flow from operating activities— indirect method. Moderate 20–30 SCF—direct method. Simple 15–25 Preparation of operating activities section—direct method. Moderate 20–30 Classification of transactions. Inc. Moderate 25–35 SCF—indirect method. periodic inventory.   Kieso. Simple 20–30 Preparation of operating activities section—indirect method. Simple 20–30 Preparation of operating activities section—direct method. E 23 -2 E 23 -3 E 23 -4 E 23 -5 E 23 -6 E 23 -7 E 23 -8 E 23 -9 E 23 10 E 23 11 23-4 Copyright © 2011 John Wiley & Sons. Intermediate Accounting. 14/e.Ite m Description Level of Difficulty Time (minutes) Classification of transactions.

Moderate 40–45 E 23 12 E 23 13 E 23 14 E 23 15 E 23 16 E 23 17 E 23 18 E 23 19 E 23 20 E 23 21 P 23 -1 Copyright © 2011 John Wiley & Sons. Moderate 30–40 SCF—indirect method. Moderate 20–30 SCF—direct method. Solutions Manual    (For Instructor Use Only) 23-5 . Moderate 20–25 Worksheet analysis of selected transactions. Moderate 45–55 SCF—indirect method. Intermediate Accounting. Moderate 30–40 Partial SCF—indirect method.   Kieso. Moderate 30–40 SCF—indirect method and balance sheet. Moderate 25–35 Cash provided by operating. investing. Moderate 30–40 SCF—indirect method.SCF—direct method. Moderate 25–30 Worksheet analysis of selected accounts. Moderate 20–25 Worksheet preparation. Inc. and financing activities. 14/e.

Moderate 30–40 SCF—direct and indirect methods. Moderate 20–30 P 23 -2 P 23 -3 P 23 -4 P 23 -5 P 23 -6 P 23 -7 P 23 -8 P 23 -9 C A 23 -1 C A 23 -2 C A 23 -3 C A 23 -4 23-6 Copyright © 2011 John Wiley & Sons.SCF—indirect method. Moderate 30–35 SCF theory and analysis of improper SCF. Complex 50–65 SCF—indirect method. Moderate 30–40 Indirect SCF. Intermediate Accounting. Moderate 50–60 SCF—direct method. Moderate 45–60 SCF—indirect method. Moderate 30–35 SCF theory and analysis of transactions. Complex 50–60 SCF—direct method. direct method. 14/e. Moderate 30–35 Analysis of transactions’ effect on SCF. Inc. Moderate 40–50 SCF—direct and indirect methods from comparative financial statements.   Kieso. Moderate 30–40 Analysis of improper SCF. Solutions Manual    (For Instructor Use Only) . and net cash flow from operating activities.

Purpose and elements of SCF.   Kieso. Intermediate Accounting. Solutions Manual    (For Instructor Use Only) 23-7 . 14/e. Moderate 20–30 C A 23 -5 C A 23 -6 Copyright © 2011 John Wiley & Sons. Complex 30–40 Cash flow reporting. Inc. ethics.

and federal funds sold (for an entity with banking operations). Inc.S. borrowing money and repaying amounts borrowed. 14/e. their investment. Operating activities generally involve producing and delivering goods and providing services. mortgages. a Treasury note purchased three years ago does not become a cash equivalent when its remaining maturity is three months. Generally. commercial paper.SOLUTIONSTO CODIFICATIONEXERCISES CE23-1 Master Glossary (a) Cash equivalents are short-term.   Kieso. Examples of items commonly considered to be cash equivalents are Treasury bills. Treasury bill and a three-year Treasury note purchased three months from maturity qualify as cash equivalents. and from other short. or otherwise settling the obligation. notes. assets held for or used in the production of goods or services by the entity (other than materials that are part of the entity’s inventory). money market funds. highly liquid investments that have both of the following characteristics: 1. However. receiving restricted resources that by donor stipulation must be used for long-term purposes. Intermediate Accounting. (b) Proceeds from issuing bonds. that is. Solutions Manual    (For Instructor Use Only) . (c) Investing activities include making and collecting loans and acquiring and disposing of debt or equity instruments and property. CE23-2 According to FASB ASC 230-10-45-14 (Statement of Cash Flow—Other Presentation Matters—Cash Flows from Financing Activities): All of the following are cash inflows from financing activities: (a) Proceeds from issuing equity instruments. both a three-month U. For example. Readily convertible to known amounts of cash So near their maturity that they present insignificant risk of changes in value because of changes in interest rates. only investments with original maturities of three months or less qualify under that definition. Investing activities exclude acquiring and disposing of certain loans or other debt or equity instruments that are acquired specifically for resale. plant. as discussed in paragraphs 230-10-45-12 and 230-10-45-21. 2. (d) Operating activities include all transactions and other events that are not defined as investing or financing activities (see paragraphs 230-10-45-12 through 45-15). 23-8 Copyright © 2011 John Wiley & Sons. and a return of.or long-term borrowing. Cash flows from operating activities are generally the cash effects of transactions and other events that enter into the determination of net income. (b) Financing activities include obtaining resources from owners and providing them with a return on. and equipment and other productive assets. Original maturity means original maturity to the entity holding the investment. and obtaining and paying for other resources obtained from creditors on long-term credit.

Copyright © 2011 John Wiley & Sons. constructing. and they shall clearly relate the cash and noncash aspects of transactions involving similar items. sales. excess tax benefits shall be determined on an individual award (or portion thereof) basis. CE23-3 According to FASB ASC 230-10-45-11 (Statement of Cash Flows—Other Presentation Matters—Cash Flows from Investing Activities): Cash flows from purchases. CE23-4 According to FASB ASC 230-10-50-3 (Statement of Cash Flows—Disclosure—Noncash Investing and Financing Activities): Information about all investing and financing activities of an entity during a period that affect recognized assets or liabilities but that do not result in cash receipts or cash payments in the period shall be disclosed. or other long-lived assets or establishing or increasing a permanent endowment or term endowment. Those disclosures may be either narrative or summarized in a schedule.CE23-2 (Continued) (c) Receipts from contributions and investment income that by donor stipulation are restricted for the purposes of acquiring.   Kieso. plant. equipment. For this purpose. other than a financing element inherently included in an at-the-market derivative instrument with no prepayments. and maturities of available-for-sale securities shall be classified as cash flows from investing activities and reported gross in the statement of cash flows. Intermediate Accounting. (e) Cash retained as a result of the tax deductibility of increases in the value of equity instruments issued under share-based payment arrangements that are not included in the cost of goods or services that is recognizable for financial reporting purposes. Inc. Solutions Manual    (For Instructor Use Only) 23-9 . or improving property. whether the proceeds were received at inception or over the term of the derivative instrument. 14/e. (d) Proceeds received from derivative instruments that include financing elements at inception.

Providing information on financing and investing activities: Cash flows are classified by their effect on balance sheet items. Cash sales—operating. financing. estimates and valuations. purchase of investments. (3) Determine cash flows from investing and financing activities. Investing activities generally involve noncurrent assets and include (1) lending money and collecting on those loans and (2) acquiring and disposing of investments and productive long-lived assets. 2. investing activities affect assets while financing activities affect liabilities and stockholders’ equity. This involves analyzing the current year’s income statement. Preparing the statement of cash flows involves three major steps: (1) Determine the change in cash. (2) Determine the net cash flow from operating activities. comparative balance sheets and selected transaction data. and the purchase of property. The main purpose of the statement of cash flows is to show the change in cash of a company from one period to the next. payment of cash dividends. Comparative balance sheets indicate how assets. issuance of debt. 14/e. plant. A current income statement provides information about the amount of cash provided from operating activities. issuance of capital stock. and equipment. paying dividends. or meeting other recurring costs. Operating activities include all transactions and events that are not investing and financing activities. on the other hand. Assessing operating capability: Whether an enterprise is able to maintain its operating capability. 7. Examplesof uses of cash include cash used in operating activities. Examples of sources of cash in a statement of cash flows include cash from operating activities. Financing activities. Assessingfinancial flexibility and liquidity: Cash flow data indicate whether a company should be able to survive adverse operating problems and whether a company might have difficulty in meeting obligations as they become due. Assessing quality of income: Some believe that cash flow information is more reliable than income information because income involves a number of assumptions. sale of investments.ANSWERSTO QUESTIONS 1. Solutions Manual    (For Instructor Use Only) . More precisely. 5. 6. Some uses of this statement are: Assessingfuturecashflows: Income data when augmented with current cash flow data provide a better basis for assessing future cash flows. The statement of cash flows provides information about a company’s operating. and certain transaction data all provide information necessary for preparation of the statement of cash flows. 3. 4. and the sale of property. Comparative balance sheets.   Kieso. involve liability and owners’ equity items and include (1) obtaining cash from creditors and repaying the amounts borrowed and (2) obtaining capital from owners and providing them with a return on their investment. a current income statement. and investing activities. Intermediate Accounting. Inc. provide for future growth. liabilities. Certain 23-10 Copyright © 2011 John Wiley & Sons. Payment of dividends—financing. it provides information about the company’s cash inflows and outflows for the period. redemption of debt. and distribute dividends to the owners depends on whether adequate cash is being or will be generated. and equipment. redemption of capital stock. This is simply the difference between the beginning and ending cash balances. and equities have changed during the period. All other changes in balance sheet accounts are analyzed to determine their effect on cash. Operating activities involve the cash effects of transactions that enter into the determination of net income. plant. Purchase of treasury stock—financing. Purchase of land—investing.

Solutions Manual    (For Instructor Use Only) 23-11 . Intermediate Accounting. Inc. Copyright © 2011 John Wiley & Sons. 14/e.   Kieso.transactions provide additional detailed information needed to determine whether cash was provided or used during the period.

.000 Copyright © 2011 John Wiley & Sons.... \$505. Intermediate Accounting.   Kieso..............Net cash provided by operating activities.... Inc..... 14/e.... Solutions Manual    (For Instructor Use Only) 23-13 .

..................................... 23-14 Copyright © 2011 John Wiley & Sons............................... Gain on sale of available-for-sale securities.......... Cash flows from financing activities Redemption of bonds payable.. Adjustments to reconcile net income to net cash   provided by operating activities: Gain on redemption of bonds payable... Financing activity................................... Intermediate Accounting............. Adjustments to reconcile net income to net cash provided by operating activities: Loss on sale of plant assets [(\$18............ Cash flows from investing activities Sale of available-for-sale securities........... not shown in the statement of cash flows or in any related schedules or notes. XXXX \$ (120. Operating activity........ (a) (b) (c) (d) (e) (f) Operating activity... (i) Significant noncash investing and financing activities................... Investing activity.......... Significant noncash investing and financing activities..000 (9................. XXXX (b) Cash flows from financing activities Issuance of common stock........... Financing activity.. (d) Cash flows from operating activities Net loss.......... plant......... 14/e........................000) \$(1....... (h) Financing activity......................... 18....... Adjustments to reconcile net loss to net cash   provided by operating activities: Depreciation expense. Inc. and equipment.......... Solutions Manual    (For Instructor Use Only) ... the differences are highlighted.000 No effect on cash.........QuestionsChapter23 (Continued) 16...000) \$ 38.........300 \$ 4...... 19... (2) issuance of stock to liquidate debt.. (a) Cash flows from operating activities Net income...000 \$410............... (k) Investing activity.....880.... Arguments for the indirect or reconciliation method are: (a) By providing a reconciliation between net income and cash provided by operations...........................000 ÷ 10) x 31/2 ] – \$4....000 (g) Operating activity..... (j) Financing activity................. (b) The direct method is nothing more than a cash basis income statement which will confuse and create uncertainty for financial statement users who are familiar with the accrual-based income statements........ (c) \$ 2............................... (3) issuance of bonds or notes for noncash assets............. Note to instructor: The change in net accounts receivable is an adjustment to net income under the indirect method......000............ 17.....000) \$22.............................................. Examples of noncash transactions are: (1) issuance of stock for noncash assets.............000) 20..................................... Cash flows from operating activities Net income........ Cash flows from investing activities Sale of plant assets......... \$(50.................... (l) Operating activity.......................   Kieso.................... and (4) noncash exchanges of property.

Intermediate Accounting. It is an optional but efficient device that aids in the preparation of the statement of cash flows. 14/e. 21. Solutions Manual    (For Instructor Use Only) 23-15 . A worksheet is desirable because it allows the orderly accumulation and classification of data that will appear on the statement of cash flows.QuestionsChapter23 (Continued) (c) There is some question as to whether the direct method is cost/benefit-justified as this method would probably lead to additional preparation cost because the financial records are not maintained on a cash basis. Inc.   Kieso. Copyright © 2011 John Wiley & Sons.

................000 147......................................000– \$12.......000 \$118......................................................000+ \$11........................ Issuanceof bondspayable............ \$ 180....................000) BRIEFEXERCISE23-2 Cashflowfromfinancingactivities Issuanceof commonstock................. Net cashusedby investingactivities................................000 (415....   Kieso........ Net cashprovidedby financingactivities......... Cashpayments: To suppliers (\$120........... Paymentof dividends......... Intermediate Accounting......000– \$21...................000 29..........................000 510........000 Copyright © 2011 John Wiley & Sons................ Purchaseof available-for-sale securities.....000) \$(294..000).................000)............. A P-F BRIEFEXERCISE23-4 Cashflowsfromoperatingactivities Cashreceivedfromcustomers (\$200.........000 BRIEFEXERCISE23-3 (a) (b) (c) (d) (e) (f) P-I A R-F A R-I R-I................. Solutions Manual    (For Instructor Use Only) .................. Inc.......... D (g) (h) (i) (j) (k) (l) P-F D P-I A D R-F (m) (n) (o) (p) (q) (r) N D R-F P-F R-I.............000) \$ 364. 14/e...................... \$ 250... Purchaseof treasurystock........000– \$13...000 (350.........SOLUTIONSTO BRIEFEXERCISES BRIEFEXERCISE23-1 Cashflowfrominvestingactivities Saleof land.......................................... 23-16 \$188.......000) (59.......... Purchaseof equipment.......................000) (46............. For operatingexpenses (\$50.000)............

.....000– \$95.................000 153.. Net cashprovidedby financingactivities......................... Increasein inventory.......... Cashpaymentsto suppliers....... Inc.................. \$531....................000 18.... Increasein accountsreceivable......000 \$510............................................................................... Net increasein cash....... 14/e............000)... Cash.000 (963................000 BRIEFEXERCISE23-6 Sales Add: Decreasein accountsreceivable (\$72.....000 \$41................... \$420....................000 \$21... Solutions Manual    (For Instructor Use Only) 23-17 ... Purchases.................................... Net cashusedby investingactivities.................. \$500...............000) 11.................000 8........ Cashreceiptsfromcustomers....... Deduct: Increasein accountspayable (\$69......................................... \$ 41.................................000 518...................................000 \$30.............000 (12..............000 Copyright © 2011 John Wiley & Sons.......000 BRIEFEXERCISE23-8 Net cashprovidedby operatingactivities.........................000) 585............000– \$61... Intermediate Accounting........................ Add: Increasein inventory(\$113................................................12/31/12............. BRIEFEXERCISE23-5 Cashflowsfromoperatingactivities Net income...000 BRIEFEXERCISE23-7 Cost of goodssold......................000).....000 333.................. Increasein accountspayable..000 13...............000 \$438..........000 \$486.........1/1/12............. Adjustmentsto reconcilenet income to net cashprovidedby operating activities: Depreciationexpense..........................................................   Kieso........000)........ Cash.....................000 18.............000– \$54..............Net cashprovidedby operatingactivities........................000) (11.......... Net cashprovidedby operatingactivities......

...................900 \$60...............840 b (\$20.....840).........900 BRIEFEXERCISE23-11 Cashflowsfromoperatingactivities: Net loss..000) 81................200) BRIEFEXERCISE23-10 Cashflowsfromoperatingactivities Net income.......BRIEFEXERCISE23-9 (a) (b) a Cashflowsfromoperatingactivities Cashreceivedfromcustomers................................................... Net cashprovidedby operating activities............ Increasein inventory........000– \$2.. Net cashprovidedby operatingactivities........... \$90....... \$50...... Cashpaid for expenses(\$60.....000 (8......... Adjustmentsto reconcilenet income(loss) to net cashprovidedby operatingactivities Depreciationexpense....... Net cashprovidedby operating activities........................900 \$ 2...................000) (7................................400) 10........... (\$29....... 14/e..... Inc..............................000– \$1.......................300) (11......................................160) \$31........000– \$1..........000) 12.............................................. 23-18 (\$70...................800b)...................... Increasein accountsreceivable..........000) (8................... Net cashprovidedby operatingactivities...................... Increasein accountsreceivable...040) \$40............... Adjustmentsto reconcilenet incometo net cash providedby operatingactivities Depreciationexpense...000 17.......... Increasein accountspayable...................900 Copyright © 2011 John Wiley & Sons............000 58............ Solutions Manual    (For Instructor Use Only) .........   Kieso..840 Cashflowsfromoperatingactivities Net income..............960a – \$18.... Intermediate Accounting............................................ Increasein net accountsreceivable (\$26.100) 72..160 \$31.....................................

....... Solutions Manual    (For Instructor Use Only) 23-19 ..000 Investing—Saleof Equipment.................000 Equipment........ 14/e......000 10..........000 30..BRIEFEXERCISE23-12 (a) Land.... Inc..........................................000 \$40................... Investing—Purchaseof Equipment..000– \$32..............................000* *\$10................000 317.............................................................. CommonStock............................... 317..000 BRIEFEXERCISE23-13 (a) (b) (c) (d) Operating—NetIncome..................................................000 114..................................... Financing—CashDividends... RetainedEarnings......... .........000 40......000 2.................. Operating—Gainon Sale of Equipment..........................000) Copyright © 2011 John Wiley & Sons..........000 RetainedEarnings................. 120....................................... Equipment. (b) No effect (c) Noncashinvestingandfinancingactivities: Purchaseof landthroughissuanceof commonstock................... Intermediate Accounting..............................................................................   Kieso............... 114........ AccumulatedDepreciation—Equipment.... 40...............000 32..........................................000 120.000– (\$40........ Paid-in Capital in Excessof Par— CommonStock....................... 10.........................................

...............000÷ 10] X 6)............... Operating—addto net income... Investingactivity...........000) 10............... The sale proceeds of \$5.. 14/e........ Saleproceeds........000 Copyright © 2011 John Wiley & Sons... Accumulateddepreciation([\$25....... Financingactivity............................000) (5..300) \$ 4...... Significantnoncashinvestingandfinancingactivity.... Inc............................................ Financingactivity........SOLUTIONSTO EXERCISES EXERCISE23-1 (10–15minutes) (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) Operating—addto net income. Operating—addto net income............700) The loss on sale of plant assets is reported in the operating activities section of the statement of cash flows....... 23-20 \$ 5............ Investingactivity.. (b) Shownin the financingactivitiessectionof a statementof cashflowsas follows: Saleof commonstock........... Financingactivity..   Kieso. Significantnoncashinvestingandfinancingactivity.. Bookvalueat date of sale.......................300 are reported in the investing activities section of the statementof cashflowsas follows: Saleof plant assets......................................................... It is added to net incometo arrive at net cash provided by operatingactivities... EXERCISE23-2 (20–30minutes) (a) Plant assets(cost).......... Losson sale................... Financingactivity............... \$25.............. Solutions Manual    (For Instructor Use Only) . Intermediate Accounting.............300 \$330....................................................000) 15.............. Operating—deductfromnet income...

.000 (e) The purchaseof the U. This instrument is considered a cash equivalent and therefore cash and cash equivalentshavenot changedas a result of this transaction.. Depreciation of \$22.................000 (9.......... Inc...... Thesefour itemsmight be reportedas follows: Cashflowsfromoperatingactivities Net loss........... 14/e. Intermediate Accounting...........S..............000 should be reported in the operating activities section of the statement of cash flows.. Solutions Manual    (For Instructor Use Only) 23-21 ....It doesnot affect cashflows........ It is addedto net incomein arrivingat net cash providedby operatingactivities.... Adjustmentsto reconcilenet income to net cashusedin operatingactivities*: Depreciation...........000) 22...... Cashflowsfrominvestingactivities Saleof land. The write-off reduces the Allowance for Doubtful AccountsbalanceandtheAccountsReceivablebalance. The gain on sale of land also appears in the operating activities section of the statement of cash flows.000 is reported in the operating activities section of the statementof cash flows........... Note to instructor: The change in net accounts receivable is some-times used to computean adjustmentto net incomeunderthe indirectmethod........EXERCISE23-2 (Continued) (c) The write-off of the uncollectible accounts receivable of \$27....... \$39..Givenonly the adjustmentsin (d)... The proceeds from the sale of land of \$39....................... (f) Patent amortization of \$20.......000) *Either net cash usedor provideddependinguponother adjustments.000 is reported in the operating activities section of the statement of cash flows...................... Gainon sale of land.............. the “net cashused”shouldbe employed.....000 are reported in the investing activities section of the statementof cash flows....... Treasurybill is not reportedin the statementof cash flows......   Kieso... (d) The net loss of \$50.... Copyright © 2011 John Wiley & Sons.000 is not reported on the statement of cash flows.... \$(50...

... Decreasein accountsreceivable..000) (120............. Solutions Manual    (For Instructor Use Only) .. Decreasein accountspayable...........155......... EXERCISE23-3 (15–25minutes) RODRIQUEZCOMPANY Partial Statementof CashFlows For the Year EndedDecember31............... 2012 Cashflowsfromoperatingactivities Net income.....”It is shownas follows: Noncashinvestingandfinancingactivities Purchaseof investmentby issuance of commonstock.........000 310............ 14/e.. Inc..........................................000 The purchase of treasury stock is reported as a cash payment in the financing activitiessectionof the statementof cashflows....... (h) \$900.................................. Adjustmentsto reconcilenet income to net cashprovidedby operatingactivities: Depreciationexpense.............000 300.. Decreasein accruedexpensespayable..................000) (275..........000 \$ 60.000 (170. Decreasein inventory....................000 \$1...................   Kieso......................000 Copyright © 2011 John Wiley & Sons.... Increasein prepaidexpenses.....................................EXERCISE23-2 (Continued) (g) The exchange of common stock for an investment in Plumlee is reported as a “noncashinvestingand financingactivity.......050... 23-22 \$1...............000) 105.......... Net cashprovidedby operatingactivities.. Intermediate Accounting......

........ (b) (c) \$6.... Net cashprovidedby operating activities.......000 (b) 1............... Intermediate Accounting.... Inc.......400.......... Purchases..........380..000 Cashpaymentsto suppliers Cost of goodssold.................................000 310..000) Copyright © 2011 John Wiley & Sons..... Cashpaymentsfor operating expenses..000 120....000 275...........   Kieso. Cashpayments: To suppliers..000 \$4..... Add: Increasein prepaid expenses................................... 6................700..........000+ (\$700...........................155.000 290............000 *\$450. \$7...EXERCISE23-4 (20–30minutes) RODRIQUEZCOMPANY Partial Statementof CashFlows For the Year EndedDecember31................................ Cashpaymentsto suppliers...........210..210.......exclusive of depreciation..675....000– \$60...000 (a) \$4........000 300..........900.............. Solutions Manual    (For Instructor Use Only) 23-23 .. Add: Decreasein accounts receivable...... Add: Decreasein accounts payable..............................................000 (c) \$1.090.............380. Cashreceiptsfromcustomers..............000* \$170.......... 14/e.... Add: Decreasein accrued Add: expensespayable......... 2012 Cashflowsfromoperatingactivities Cashreceiptsfromcustomers......................000 \$4.. Deduct: Decreasein inventories........000 Computations: (a) Cashreceiptsfromcustomers Sales......000 \$1..........000 4.......000 \$7........... Cashpaymentsfor operating expenses Operatingexpenses... For operatingexpenses.............055..................675..........000 \$1.

...................000– \$31...... Solutions Manual    (For Instructor Use Only) .................................. 14/e..   Kieso....500 \$840........000– \$37.. Add: Decreasein incometaxespayable Add (\$8.000 22......... Add: Decreasein accountsreceivable Ad (\$59.......000 \$ 40..500 (c) Computationof cashreceiptsfromcustomers: Servicerevenue......................500 Copyright © 2011 John Wiley & Sons............... Intermediate Accounting...........000 4...... Deduct: Increasein accountspayable Deduct (\$46..................000 \$609..............................EXERCISE23-5 (20–30minutes) NORMANCOMPANY Partial Statementof CashFlows For the Year EndedDecember31. Cashpaymentsfor operatingexpenses... Cashpaymentsfor incometaxes.......................000 15.............. Net cashprovidedby operating activities.....500– \$4..............500 \$208.....................000 \$624..........000)............... Cashpayments: For operatingexpenses. For incometaxes...000).......000 (a) \$609...000 \$862..500 \$ 44..000)..... 2012 Cashflowsfromoperatingactivities Cashreceiptsfromcustomers.. (a) (b) (c) 23-24 \$862......... Inc.. 653......... Computationof cashpayments: Operatingexpensesper incomestatement................. Incometax expenseper incomestatement.......................... Cashreceiptsfromcustomers.............000 (b) 44..............

Decreasein accountsreceivable......000 (4.................... Losson sale of equipment. Adjustmentsto reconcilenet income to net cashprovidedby operatingactivities: Depreciationexpense................................................. 14/e.................. Inc.................. Increasein accruedexpenses payable..EXERCISE23-6 (15–20minutes) NORMANCOMPANY Partial Statementof CashFlows For the Year EndedDecember31....000 \$310... \$129...000 \$230........ Cashpaymentsto suppliers.....000– \$71....000 21........000).........000)........................   Kieso..................500 \$208...000 \$ 58.......000 15................ \$90.........000 \$348. Decreasein accountspayable....................... Net cashprovidedby operatingactivities...... Decreasein incometaxespayable................................ (a) Computationof cashpaymentsto suppliers Cost of goodssold........... Increasein accountspayable.....000 17.... Cashpaymentsfor operatingexpenses (\$110..........000 71.......000– \$39.... 2012 Cashflowsfromoperatingactivities Net income.................000 11.........000 Copyright © 2011 John Wiley & Sons.....000 22................................................................ Deduct: Decreasein prepaidexpenses...000 8.........................................500 EXERCISE23-7 (15–20minutes) SituationA: SituationB: Cashflowsfromoperatingactivities Cashreceiptsfromcustomers (\$200............................. Solutions Manual    (For Instructor Use Only) 23-25 .. Net cashprovidedby operatingactivities........ (b) Computationof cashpaymentsfor operatingexpenses Operatingexpenses................. Intermediate Accounting............ Plus: Increasein inventory.........................000 26...............500) 118............ Cashpaymentsfor operating expenses...........................................................000 \$211.........000 \$60.

....30)............... 23-26 Copyright © 2011 John Wiley & Sons..... 7 (dividends received) is added to net income...... The net income amount must be deducted from net cash flow from operatingactivities.... No...... Bad debt expense is not handled separately when using the indirect method.. No........000 \$185....... Intermediate Accounting.....500is deductedfromnet incomein theoperatingactivitiessection..... 2 is shownas a cash inflowfrominvestingactivitiesof \$20..... Gainon sale of investment [(\$200– \$165)X 100]......... Decreasein accountsreceivable... Net cashprovidedby operatingactivities. 6 is an increase in the investment account related to net income which does not increase cash flow.000 (3....EXERCISE23-8 (20–30minutes) Cashflowsfromoperatingactivities Net income Adjustmentsto reconcilenet income to net cashprovidedby operating activities: Depreciationexpense.. 8 is not shownon a statementof cashflows.......30)...... Dividendsfromequitymethod investment(\$2.. 14/e......000 (8... Incomefromequitymethodinvestment (\$27........ No. It is part of the change in net accountsreceivable.. \$145...... No....100) 600 40................. No.... 1 is shown as a cash inflow from the issuance of treasury stock and cash outflow for the purchaseof treasurystock... Solutions Manual    (For Instructor Use Only) ...000 Othercomments: No.......................000and the gain of \$3..000 \$39..... 3 is a noncashexpense(Bad Debt Expense)in the incomestatement...........000X ....500) 12.bothfinancingactivities.........000X ............. 4 is a significantnoncashinvestingand financingactivity.. Another alternative is to net the Company’spro-rata shareof the dividendagainstthe incomefromequity method investmentamountreportedin the cashflowsfromoperatingactivities... Inc. No....   Kieso.

..................................... Deduct: Decreasein inventory(\$47........ \$141...000 5.....800)]......000)........................................................................ Cashpaid for interest............100– \$21.......... Deduct: Decreasein unamortizedbonddiscount (\$5.... \$538...................300– \$4.........................000 6. Purchases..800 700 \$ 27.. Cashpaid for sellingexpenses......600)..300 Incometax expense.......800 \$532.   Kieso...............000 \$226...............000)...... Deduct: Increasein accountspayable (\$25.......500 6.....................000 500 \$ 3.........................000 234...000*X 1/3)...................000– (\$30..................500 *(\$16............. \$ 4......................................................................000)........ Deduct: Depreciation(\$3...........................000 16. Add: Decreasein incometaxespayable (\$29............. Cashpaid for incometaxes.. \$ 20................EXERCISE23-9 (20–30minutes) (a) (b) (c) (d) (e) Sales Deduct: Increasein accountsreceivable................... Solutions Manual    (For Instructor Use Only) 23-27 ...... Cashcollectedfromcustomers.................400 8..............500).. Inc. Baddebtsexpense.................... Intermediate Accounting.....500) Copyright © 2011 John Wiley & Sons.........000– \$31.................................................000– \$17.......000 \$135..................................000– \$3................................. net of write-offs [\$33..800 Cost of goodssold.........500– \$13..........000 8................000– \$4...............................................100 Sellingexpenses.........000 Interestexpense...............800 \$1.................. Deduct: Increasein deferredincometaxes (\$5.................................................. 14/e.............. \$250........... Cashpaymentsto suppliers............

AccumulatedDepreciation 167.000 GAAPstates that investingactivities include the acquisition and dispositionof longterm productiveassets.000 12/31/12 Accumulated depreciation on equipment sold = \$167.000 Equipmentsold 12/31/11 Depreciationexpense ? 178.EXERCISE23-10 (25–35minutes) (a) The solution can be determined through use of a T-account for property.000 25. and equipmentin exchange for bonds payable would be disclosed as a noncash investing and financingactivity.   Kieso. and equipment is an investing activity.Plant& Equipment 12/31/11 Equipmentfromexchangeof B/P Paymentsfor purchaseof PP&E 247. Solutions Manual    (For Instructor Use Only) .000 + \$38.000+ \$14. plant.000 ? 12/31/12 277.000– \$247.000– \$25. Inc. 14/e.000 – \$178.500– \$27.000) AccumulatedDepreciation Property.Plant. and Equipment Gainon Sale of Equipment 23-28 32.000 45. Intermediate Accounting.000 38.500 (given) (given) Copyright © 2011 John Wiley & Sons. Note that the acquisition of property. and equipment.000 45.000 = \$27. Accordingly. Property. (b) The solution can be determined through use of a T-account for accumulated depreciation. the purchaseof property.000+ \$45.000 Equipmentsold Payments = \$277. plant.500 27.000 14.000 Theentryto reflectthe sale of equipmentis: Cash(proceedsfromsale of equipment) (\$45.000 = \$50. plant.

000 12/31/11 Issuanceof B/P for PP&E 12/31/12 The problem states that there was no amortization of bond premium or discount.   Kieso.000– \$104. thus.000 ? 31.the redemptionof bondspayableis the onlychangenot accountedfor. Investing activities include the acquisition and disposition of long-term productiveassets.000 12/31/11 Net income 12/31/12 = \$91.000 DividendsPayable 5.000 25. (c) The cash dividends paid can be determined by analyzing T-accounts for Retained Earningsand DividendsPayable. Redemptionof B/P BondsPayable 46. Intermediate Accounting.000 Financingactivitiesincludeall cash flowsinvolvingliabilities and stock-holders’ equity otherthanoperatingitems. Inc. (d) The redemptionof bondspayableamountis determinedby settingup a T-accountfor BondsPayable.000 104.000 18.000 12/31/11 Dividendsdeclared 12/31/12 Cashdividendspaid = \$5.000+ \$31.000 ? 49. 14/e. Dividendsdeclared Dividendsdeclared Cashdividendspaid RetainedEarnings 91.000 = \$15.000– \$8.Paymentof cashdividendsis thusa financingactivity.EXERCISE23-10 (Continued) The proceeds from the sale of equipment of \$32. Copyright © 2011 John Wiley & Sons.000 ? 8.500 are considered an investing activity.000 = \$18. Solutions Manual    (For Instructor Use Only) 23-29 .000+ \$18.

..... \$ 810 \$ 30 (80) 300 400 (450) (50) Cashflowsfrominvestingactivities Saleof held-to-maturityinvestments [(\$1....000 = \$22.............................................EXERCISE23-10 (Continued) Redemptionof bondspayable= \$46..........700)– \$70]....900– \$1..................................... Solutions Manual    (For Instructor Use Only) .................................. Increasein accountspayable..300)+ \$80]................................................ 14/e.. Therefore...................................  250 (130) Cashflowsfromfinancingactivities Issuanceof capital stock[(\$1........ Net cashprovidedby investingactivities...000+ \$25...000 Financing activities include all cash flows involving liabilities and stockholders’ equity other than operating items.... Purchaseof plant assets[(\$1... Adjustmentsto reconcilenet incometo net cash  providedby operatingactivities: Depreciationexpense(\$1............................................... Decreasein inventory........... Net cashusedby financingactivities...............700)– \$70]...000– \$49..........................................900– \$1............... Paymentof cashdividends......................................... Inc.......................................... Intermediate Accounting............... Decreasein accruedliabilities.. Net cashprovidedby operatingactivities........... EXERCISE23-11 (30–35minutes) FAIRCHILDCOMPANY Statementof CashFlows For the Year EndedDecember31..... Retirementof bondspayable........ 130 (250) (260) 23-30 150 960 120 (380) Copyright © 2011 John Wiley & Sons....... 2012 (IndirectMethod) Cashflowsfromoperatingactivities Net income.................   Kieso........470– \$1................... Gainon sale of investments.......................................200– \$1........... Increasein receivables.................... redemption of bonds payable is considereda financingactivity.....170)............................

............................................ 700 1...... 2012............................ Net cashusedby financingactivities..........................................................................000** 950*** 540 5.....................................................800 Noncashinvestingandfinancingactivities Issuanceof commonstockfor plant assets. 2012............EXERCISE23-11 (Continued) Net increasein cash.........490 960 250 (130) 120 130 (250) (260) Net increasein cash.......................   Kieso...............900– \$1.....300)+ \$80].............January1.......January1..... Inc. Cashpaid for incometaxes..... Cash................................................................................................ Cash.......... 14/e...December31.. Net cashprovidedby investingactivities............. Retirementof bondspayable...... Purchaseof plant assets[(\$1.............................. Cashflowsfrominvestingactivities Saleof held-to-maturityinvestments [(\$1......700)– \$70].. Cash.................. Cash..........................................100 \$1..................700)– \$70]................ Intermediate Accounting............. Solutions Manual    (For Instructor Use Only) (380) 700 1.........900– \$1.......................... \$ 70 EXERCISE23-12 (20–30minutes) FAIRCHILDCOMPANY Statementof CashFlows For the Year EndedDecember31....................... 2012... 2012 (DirectMethod) Cashflowsfromoperatingactivities Cashcollectionsfromcustomers........................ Net cashprovidedby operatingactivities..........................................................................................................100 \$1.... Cashflowsfromfinancingactivities Issuanceof capital stock[(\$1....... Cashpaid for merchandise.................................470– \$1........ Copyright © 2011 John Wiley & Sons..450* \$4........ \$6........December31.......... Cashpaid for selling/administrative expenses..... 2012.............................. Paymentof cashdividends..800 23-31 ....................

......... 14/e.............. Cashflowsfrominvestingactivities Saleof equipment [\$30.....000 \$ 6......... Net cashusedby investingactivities................ Net cashusedby financingactivities............... Purchaseof equipment [\$154...............000) (7......... Net decreasein cash...........................................7)] + \$2..900– \$1....400c 8.. 2012.......... Solutions Manual    (For Instructor Use Only) .......150a 72.....000) (3.......... \$ 70 *\$6............000– (\$130............000) (60..........200– \$800) ***(\$930– \$30) + (\$250– \$200) EXERCISE23-13 (30–40minutes) ANDREWSINC..........EXERCISE23-12 (Continued) Noncashinvestingandfinancingactivities Issuanceof commonstockfor plant assets.........000 (54.000) (6..... Cash.........750– \$1........000– \$30.......... Net cashprovidedby operatingactivities....600)– (\$1..... Cashpaid for operatingexpenses...............December31..................000a 11..... 23-32 \$325.......000 Copyright © 2011 John Wiley & Sons...... 2012 Cashflowsfromoperatingactivities Cashreceivedfromcustomers.......000) 9... Intermediate Accounting...................January1.....000X ........900– (\$1............................................................ Inc...150a \$151. 2012.. Cash......000c 11...........000b 82........300) **\$4............... Cashpaid to suppliers.....750d 253........................000– (\$30............. Purchaseof available-for-sale investments..... Statementof CashFlows For the Year EndedDecember31....................000) (17... Cashpaid for interest................................   Kieso.......... Cashpaid for incometaxes..000......................................000) (15..................000)]... Dividendpayments... Cashflowsfromfinancingactivities Principalpaymenton short-termloan.700– (\$1... Principalpaymenton long-termloan........000) (2................

. \$175................................000) \$325............ \$120..................... + Increasein prepaidrent......................000) (4..000) (20.................................. – Increasein accountspayable.750 Incometax expense.................................. – Increasein accountsreceivable............. Solutions Manual    (For Instructor Use Only) 23-33 ... – Depreciationexpense \$35............................................. Cashpaid to suppliers..................70)]......................000 \$ 8..............................................................000) \$151...................000) (4........000 1....................................................................................... – Amortizationof copyright......750 2...........000 d \$ 6.............000) \$ 82..................000X .......... Inc........... Cashreceivedfromcustomers...................................... Cashpaid for incometaxes. \$338........................ Intermediate Accounting...............000 (4....................EXERCISE23-13 (Continued) a Sales ...................   Kieso.... + Decreasein incometaxespayable............... Cashpaid for operatingexpenses................ – Decreasein inventories........ 14/e.150 (13..............000– [\$25......................000 c Operatingexpenses.............................................................. – Increasein salariesand wagespayable..................................150 b Cost of goodssold...................000 Copyright © 2011 John Wiley & Sons... (31....000– (\$30..

........................000) Net decreasein cash...................000)]...January1............ \$27.....000 (1....750** *\$35....................... Gainon sale of equipment........ Solutions Manual    (For Instructor Use Only) ....................000– \$30.000 4............400 \$ 8...........000) (2..............000 (2............... Decreasein inventories.. Intermediate Accounting................ Cash..........000– (\$30.. Cash......000 \$11....000 72............. Purchaseof equipment [\$154.........000]............. Adjustmentsto reconcilenet incometo net cashprovidedby operatingactivities: Depreciationexpense............ 14/e.....000 (3.......................... Inc. 2012 Cashflowsfromoperatingactivities Net income.......................................................000* 4.............. Dividendpayments.......000) (17..... Decreasein incometaxespayable.... Increasein accountsreceivable..000 \$ 6. Principalpaymenton long-termloan.................000) (13........... Net cashusedby financingactivities.............................................000 4.............000) (6....................... Increasein salariesandwagespayable............000X 70%)] 23-34 Copyright © 2011 John Wiley & Sons..000) 9...... 2012...........................................................................000 (54...000) 11.............................000) (60..000– [\$25.....   Kieso... Purchaseof available-for-sale investments.. Cashflowsfromfinancingactivities Principalpaymenton short-termloan.............. Statementof CashFlows For the Year EndedDecember31..... Cashflowsfrominvestingactivities Saleof equipment[(\$30... Supplementaldisclosuresof cashflowinformation: Cashpaid duringthe year for: Interest Incometaxes 45............ Net cashusedby investingactivities.. Increasein accountspayable.................000) (2.......................EXERCISE23-14 (30–40minutes) ANDREWSINC............... Net cashprovidedby operatingactivities...000) 20........000X 30%)+ \$2........................December31............000 \$31....000) (15.......000– (\$130......................... Amortizationof copyright..................................... 2012.........................000) (7..... Increasein prepaidrent..........

750+ (\$6. Intermediate Accounting.   Kieso. Solutions Manual    (For Instructor Use Only) 23-35 .**\$6.000) Copyright © 2011 John Wiley & Sons. Inc.000– \$4. 14/e.

000 10................. 2011....... Net cashusedby investingactivities................... Net increasein cash...................... Solutions Manual    (For Instructor Use Only) ............ Saleof held-to-maturityinvestments......000 Copyright © 2011 John Wiley & Sons. 2012 Cashflowsfromoperatingactivities Net income..000 (27..........000) 155..000– \$4.......................000) 18..000 \$ 15............... Losson sale of investments..........000 9. Plant assets................................000 (180.000 34............................................... 23-36 \$ 46.......................... Losson sale of plant assets [(\$60.................... Cashflowsfromfinancingactivities Issuanceof bondspayable......December31......000 335..............   Kieso..000 32.............................. Cashbalance............. Paymentof dividends.... Cashbalance..... 2012...................000 (60......................000 5.................000 4.........................000 78.......000 \$180... 2012......EXERCISE23-15 (25–35minutes) MORGANSTERNCOMPANY Statementof CashFlows For the Year EndedDecember31....... Increasein currentliabilities........... Purchaseof plant assets.....000– \$9.......... Inc................ Increasein currentassets otherthancash.............................................................. Intermediate Accounting............000].................. 2012...............................December31. Net cashprovidedby operatingactivities.........................000) 75.......000 8..........December31..000* \$ 28......................000) 65..January1......... Net cashprovidedby financingactivities.................000X ...20) – \$8...000)** (138...................................... 14/e............. Adjustmentsto reconcilenet incometo net cashprovidedby operatingactivities: Depreciationexpense..............000 (10....000= \$46..... Plant assetspurchasedduring2012............... Cashflowsfrominvestingactivities Saleof plant assets.........000 **Supportingcomputation (purchaseof plant assets) Plant assets...................... *Net income\$59...000 \$215......................... Less: Plant assetssold......

...... Decreasein prepaidexpenses (\$25.............000 13..000– \$13........ \$12.............EXERCISE23-16 (30–40minutes) (a) Computationof net cashprovidedby operatingactivities: Net income(\$8......000 \$17.... \$ 3...............000)...................000 \$22.......000) (c) Computationof net cashprovided(used)by financingactivities: Cashdividendspaid........................ Increasein inventory (\$45.......................000+ \$9.............................000 (10........................ Decreasein accruedexpenses (\$15..000 *\$18....... 14/e.............000) \$(25.. Net cashprovidedby operatingactivities.........000)..................000) 10..000– [\$8...... Purchaseof equipment [\$90................... Adjustmentsto reconcilenet incometo net cashprovidedby operatingactivities: Depreciationexpense...........000– \$18...................000– (\$13.......000)– \$5............000)........000 (28...... Losson sale of equipment (\$6.. Intermediate Accounting....... Increasein accountspayable (\$65...000) (23..........................000)......000) Copyright © 2011 John Wiley & Sons..................................000) 10............000)]...........000– \$6. Paymentof notespayable.....................000).........000– (\$75.....000) (20...............000– \$65...............................000* 3................................ Inc..............................   Kieso.000 \$ (2... Increasein accountsreceivable (\$45............000– \$52... Net cashusedby investingactivities.......000) 30...... Solutions Manual    (For Instructor Use Only) 23-37 .................................000....... Net cashusedby financingactivities....000– \$15..000).....000 (3... Issuanceof bondspayable...........000– \$3..............000– \$55..... \$ (9.............000)] (b) Computationof net cashprovided(used)by investingactivities: Saleof equipment...

.......................... Cashflowsfromfinancingactivities Paymentof dividends................ Cash.....   Kieso.......................................... Gainon sale of investment......................000) 10.............500 Copyright © 2011 John Wiley & Sons.....750 \$22........250 8.............................. Retirementof bondspayable.....250 \$13.. Noncashinvestingandfinancingactivities Issuanceof bondsfor land..................................500 \$32.....................000) 12.........December31...................... Intermediate Accounting..............375) (20.............. 2012................375) 24................. Net cashusedby financingactivities...500 41................. Solutions Manual    (For Instructor Use Only) ............ Net cashprovidedby operatingactivities................. Adjustmentsto reconcilenet incometo net cashprovidedby operatingactivities: Depreciationexpense..................................875 (9............................. Cashflowsfrominvestingactivities Purchaseof land....875 1......000 (19..... 2012....................... 14/e..............750 (11..500 (2............ Cash..................................... Net increasein cash. 23-38 \$30......January1............... 2012 Cashflowsfromoperatingactivities Net income.................. Net cashprovidedby investingactivities................................................EXERCISE23-17 (30–40minutes) (a) OCHOAINC.............000) 11.... Saleof available-for-sale investments............. Issuanceof capital stock..................................... Inc.......................... Statementof CashFlows For the Year EndedDecember31.....

000+ \$11.000+ \$22.250– \$ 9.000+ \$22. Solutions Manual    (For Instructor Use Only) 23-39 .750 29.375*** \$198.000 25.000 73.875– \$2.500* \$198. 14/e.500 ***\$24. 2012 Assets Cash Currentassets otherthancash Investments Plant assets(net) Land \$ 32.500** 85.000 45.500 27.500 **\$25. Intermediate Accounting.000– (\$12.375 a \$20.EXERCISE23-17 (Continued) (b) OCHOAINC.   Kieso.000) *\$40.000 9.375 Copyright © 2011 John Wiley & Sons.000– \$20. BalanceSheet December31. Inc.375 Equities Currentliabilities Long-termnotes payable Bondspayable Commonstock Retainedearnings \$ 15.125a 54.500+ \$30.

........................000 Operating—NetIncome..........................................................200)– \$5.......................................................800 5.............................................. Cash.............000) Decreasein cash.... 2012........ Solutions Manual    (For Instructor Use Only) .... (15........800 Copyright © 2011 John Wiley & Sons.................... 14/e......... Losson sale of equipment....... 16........000 16....000) 35..........800]............................... Cashflowsfrominvestingactivities Purchaseof machinery..........................000 50.............400) xxx \$ xxx EXERCISE23-19 (20–25minutes) RetainedEarnings....600 (62......... Financing—CashDividends.......... RetainedEarnings. Cash........ Adjustmentsto reconcilenet incometo net cashprovidedby operatingactivities: Depreciationexpense..................................... AccumulatedDepreciation—Machinery.......................000) (96..000 (21.................... Cost of machineryconstructed..........January1........................000) (48....000) Cashflowsfromfinancingactivities Paymentof cashdividends............. (38............................................... Intermediate Accounting............000– \$25............................ Extraordinaryrepairson machinery... Net cashprovidedby operatingactivities..800 22...............December31....................000 Operating—DepreciationExpense....................................................... 2012......................... 15.EXERCISE23-18 (25–30minutes) POPOVICHCOMPANY Statementof CashFlows(partial) For the Year EndedDecember31............................800 23-40 15................. Saleof machinery [(\$66................... Net cashusedby investingactivities...................... 50............................600 72...000 \$16....................... Inc.. 2012 Cashflowsfromoperatingactivities Net income.   Kieso....................... \$ 50....................................

............................................................ 14/e.........000 300....... 123............000 1............ Machinery. CommonStock...   Kieso................................... RetainedEarnings...000 48..000 360...............................000 34.... 5.................... 90........................................000 5................................................800 25......... Investing—Purchaseof Machinery............. AccumulatedDepreciation—Building........ Investing—ExtraordinaryRepairsto Machinery........................................................................000 Operating—Netincome.......................000 AccumulatedDepreciation—OfficeEquipment......000 Operating—Losson Sale of Equipment...............................EXERCISE23-19 (Continued) Machinery...... 21.000 RetainedEarnings..... 3...... (Noncashfinancingactivity) 300........ Inc.000 90........... 30........................000 Copyright © 2011 John Wiley & Sons..... BondsPayable.. 360.000 Operating—DepreciationExpense................................ Intermediate Accounting................. Investing—Constructionof Machinery................. DividendsPayable....................................................................200 35.........000 123......................................000 EXERCISE23-20 (20–25minutes) 1......000 21.... Solutions Manual    (For Instructor Use Only) 23-41 ................ Investing—Purchaseof Equipment.................. AccumulatedDepreciation—Machinery........... 5................................................... 4..........000 66......................................... 2........000 AccumulatedDepreciation—Machinery.... Investing—Saleof Machinery.... OfficeEquipment............000 62................................... 110............................... Operating—Gainon Disposalof  Plant Assets.

000 45.000 4.500 25.000 (6) \$10.000 (13) (13) 7.000 53.000 39.000 140.500 (9) \$361.000 2.000 6.000 73. Accum.depr.000 43.500 46.000 (4) (5) 1.000 \$361.depr.900 12.000 20.000 39.400 62.000 15.500 200 1.000 4.000 31.—del.000 (2) \$ 6.600 4.500 (16) 102.500 53.500 Balanceat 12/31/11 Debits Cash Short-term investments Accountsreceivable Prepaidexpenses Inventory Land Buildings Equipment Deliveryequipment Patents Total debits Credits Accountspayable Short-termnotes payable(trade) Accruedpayables Allowancefor doubtful accounts Accum.500 57.000 51. Solutions Manual    (For Instructor Use Only) .000 19. Intermediate Accounting. Mortgagepayable Bondspayable Commonstock Paid-in capitalin excess Retainedearnings Total credits 23-42 \$ 24.000 10.000 (7) 4.000 (1) 38.000 6.000 3.000 (12) 15.800 30. equip.200 \$ 26.500 (10) (11) 46.500 7.600 (8) \$ 2.000 \$ 16.000 \$452.200 Copyright © 2011 John Wiley & Sons.   Kieso.500 50. Inc.500 (13) (14) 1.000 50.000 Balanceat 12/31/12 \$ 16.500 22.EXERCISE23-21 (45–55minutes) LOWENSTEINCORPORATION Worksheetfor Preparationof Statementof CashFlows For the Year EndedDecember31.200 81.700 24.000 3.000 19.depr.000 50.000 125. 14/e.000 73.400 \$452.000 (3) 23.000 1.500 19.000 78.000 2.000 15.000 (3) 2.—bldg.600 (15) (15) 10. Accum.—equip. 2012 2012 ReconcilingItems Debit Credit (17) \$ 7.

in accruedpayables (1) (13) 31.EXERCISE23-21 (Continued) Statementof CashFlowsEffects Operatingactivities Net income Depreciation Dec.000 15.000 (3) 1. in inventory Inc.000 46.300 7.500 7.500 253.000 246.600 (2) (10) (11) (12) 6. Inc. in prepaidexpenses Inc.000 (9) 10. in accounts receivable(net) Inc.000 1. Solutions Manual    (For Instructor Use Only) 23-43 . Intermediate Accounting. in accountspayable Dec.000 Investingactivities Purchaseof available-for-sale investments Purchaseof building Purchaseof equipment Purchaseof patents Financingactivities Paymentof cashdividends Issuanceof mortgagepayable Sale of commonstock Retirementof bonds Totals Decreasein cash Totals (4) (5) 19. 14/e.700 24.000 (16) 12.500 (7) (8) 2. in notespayable Dec.500 \$253.   Kieso.900 12.800 10.800 (6) (14) (15) (17) 1.800 \$253.800 Copyright © 2011 John Wiley & Sons.600 44.

and include any supporting schedules or computations. Problem23-5 (Time 50–65 minutes) Purpose—to develop an understanding of the procedures involved in the preparation of a statement of cash flows. The student must also prepare the operating activities section of the statement of cash flows using the indirect method. The student is required to prepare the statement using the direct method. Solutions Manual    (For Instructor Use Only) . The student is required to prepare the statement using the indirect method. Inc. 14/e. investing and financing sections of the statement of cash flows will change under various situations.   Kieso. Problem23-2 (Time 50–60 minutes) Purpose—to develop an understanding of the procedures involved in the preparation of a statement of cash flows. including the treatment accorded unusual and extraordinary items. The student is required to prepare the statement using the indirect method. The student is required to prepare the statement using the indirect method. Problem23-9 (Time 30–40 minutes) Purpose—to develop an understanding of the indirect method. The student is required to prepare the statement using the direct method. The student is first asked to compute net cash provided by operating activities under the direct method. Problem23-8 (Time 30–40 minutes) Purpose—to develop an understanding of both the direct and indirect method. The student is required to prepare the statement using the indirect method. In the second part. including a schedule of noncash investing and financing activities. The student also must calculate the net cash flow from operating activities using the direct method.TIMEANDPURPOSEOF PROBLEMS Problem23-1 (Time 40–45 minutes) Purpose—to develop an understanding of the procedures involved in the preparation of a statement of cash flows. the student is required to prepare the statement of cash flows. and consider the proper treatment of an extraordinary item. Problem23-7 (Time 30–40 minutes) Purpose—Using comparative financial statement data. Problem23-6 (Time 40–50 minutes) Purpose—to develop an understanding of the procedures involved in the preparation of a statement of cash flows. 23-44 Copyright © 2011 John Wiley & Sons. Problem23-4 (Time 45–60 minutes) Purpose—to develop an understanding of the procedures involved in the preparation of a statement of cash flows. using the direct method. In addition a statement of cash flows using the indirect method must be computed. Problem23-3 (Time 50–60 minutes) Purpose—to develop an understanding of the procedures involved in the preparation of a statement of cash flows. Intermediate Accounting. the student is asked to determine how operating. including a reconciliation schedule.

..000 (300............. Intermediate Accounting...........................SOLUTIONSTO PROBLEMS PROBLEM23-1 SULLIVANCORP. Net cashusedby financing activities.........................................000 425.000) (100..... Principalpaymentof loanreceivable................................ Cash.......000 (20....000 700.................000 \$147. Gainon sale of equipment....... Statementof CashFlows For the Year EndedDecember31.........................December31......... Increasein accountspayable..................................... Cashflowsfrominvestingactivities: Proceedsfromsale of equipment........ Cashflowsfromfinancingactivities: Dividendspaid.................................................................000) (100....... Increasein inventories..........................................000) (b) (35. Cash.....................000) 60............000 (135....... 2012......000) (c) 40...............................000) 115.. Inc..000 (a) (2...........................000 40... Net cashusedby investing activities....... 14/e........... Decreasein incometaxespayable..January1.............................   Kieso..............000 Copyright © 2011 John Wiley & Sons......................... 2012.......... Net cashprovidedby operating activities..000) 50............. 2012 Cashflowsfromoperatingactivities Net income......................... Loanto TLCCo... \$370. Net increasein cash....000 (210....... Equityin earningsof MyersCo........................ Solutions Manual    (For Instructor Use Only) 23-45 ................................000 \$815.............................. Adjustmentsto reconcilenet income to net cashprovidedby operating activities: Depreciation.................... Decreasein accountsreceivable...000) 55...

PROBLEM23-1 (Continued)
Scheduleat bottomof statementof cashflows:
Noncashinvestingandfinancingactivities:
Issuanceof leaseobligationfor capital lease.................

\$400,000

Explanationof Amounts
(a) Depreciation
Net increasein accumulated
depreciationfor the year ended
December31, 2012.........................................
Accumulateddepreciationon equipmentsold:
Cost...................................................................
Carryingvalue.....................................................
Depreciationfor 2012..................................................

\$125,000
\$60,000
38,000

22,000
\$147,000

(b) Gainon sale of equipment
Proceeds.............................................................
Carryingvalue.....................................................
Gain.............................................................

\$ 40,000
(38,000)
\$ 2,000

(c) Equityin earningsof MyersCo.
Myers’snet incomefor 2012..................................
Sullivan’sownership............................................
Undistributedearningsof MyersCo.................

\$140,000
X 25%
\$ 35,000

23-46

Copyright © 2011 John Wiley & Sons, Inc.   Kieso, Intermediate Accounting, 14/e, Solutions Manual    (For Instructor Use Only)

PROBLEM23-2

HINCKLEYCORPORATION
Statementof CashFlows
For the Year EndedDecember31, 2012
Cashflowsfromoperatingactivities
Net income...........................................................
to net cashprovidedby operating
activities:
Losson sale of equipment...............................
Gainfromflooddamage..................................
Depreciationexpense.....................................
Patentamortization.........................................
Gainon sale of investments.............................
Increasein accountsreceivable(net)................
Increasein inventory......................................
Increasein accountspayable...........................
Net cashprovidedby operatingactivities.................
Cashflowsfrominvestingactivities
Saleof investments...............................................
Saleof equipment.................................................
Purchaseof equipment..........................................
Proceedsfromflooddamageto building..................
Net cashprovidedby investingactivities.................
Cashflowsfromfinancingactivities
Paymentof dividends............................................
Paymentof short-termnote payable........................
Net cashusedby financingactivities.......................
Increasein cash............................................................
Cash,January1, 2012....................................................
Cash,December31, 2012...............................................

\$14,750(a)

\$ 4,100 (b)
(8,250)*
1,900 (c)
1,250
(1,700)
(3,750)**
(3,000)
2,000

(7,450)
7,300

4,700
2,500
(20,000)(d)
32,000
19,200

(5,000)
(1,000)
(6,000)
20,500
13,000
\$33,500

*(\$30,000+ \$2,000)– (\$29,750– \$6,000)
**(\$12,250– \$3,000)– (\$10,000– \$4,500)
Copyright © 2011 John Wiley & Sons, Inc.   Kieso, Intermediate Accounting, 14/e, Solutions Manual    (For Instructor Use Only)

23-47

PROBLEM23-2 (Continued)
Supplementaldisclosuresof cashflowinformation:
Cashpaid duringthe year for:
Interest
Incometaxes:

\$2,000
\$6,500

Noncashinvestingandfinancingactivities
Retirednotespayableby issuingcommonstock
Purchasedequipmentby issuingnotespayable

\$10,000
16,000
\$26,000

SupportingComputations:
(a) Endingretainedearnings..............................................
Beginningretainedearnings..........................................
Net income..................................................................

\$20,750
(6,000)
\$14,750

(b) Cost...........................................................................

\$11,000

Accumulateddepreciation(40%X \$11,000).....................
Bookvalue..................................................................
Proceedsfromsale......................................................
Losson sale................................................................

(4,400)
\$ 6,600
(2,500)
\$ 4,100

(c) Accumulateddepreciationon equipmentsold.................
Decreasein accumulateddepreciation...........................
Depreciationexpense...................................................

\$ 4,400
(2,500)
\$ 1,900

(d) Beginningequipmentbalance.......................................
Cost of equipmentsold.................................................
Remainingbalance.......................................................
Purchaseof equipmentwith note...................................
Endingequipmentbalance............................................
Purchasedwith cash....................................................

\$20,000
(11,000)
9,000
16,000
25,000
(45,000)
\$20,000

23-48

Copyright © 2011 John Wiley & Sons, Inc.   Kieso, Intermediate Accounting, 14/e, Solutions Manual    (For Instructor Use Only)

. 75 Propertytaxes...... 725 Heat............................................... Cashflowsfrominvestingactivities Saleof available-for-sale investments........................... 10 Incometaxes............................. Net cashusedby investingactivities...................................... Purchaseof land....... 30 Miscellaneous.............................937 583 40 (310) (80) (350) Increasein cash............ (a) \$3......... light............................... \$1....... 19 Interest..800 (780) 3.... Cashpayments: Paymentsfor merchandise.......270 (b) Salariesandbenefits.....520(a) 233 100 \$ 333 \$3................................................................................... 14/e...............PROBLEM23-3 MORTONSONCOMPANY Statementof CashFlows For the Year EndedDecember31... Purchaseof buildingsand equipment......... 2012 (\$000Omitted) Cashflowsfromoperatingactivities Cashreceiptsfromcustomers.. 2012....... Addbeginningaccountsreceivable............................................................................. Intermediate Accounting..........................................   Kieso. Cash...............................December31..... Cashreceipts(collectionsfrom customers)..................................................... Solutions Manual    (For Instructor Use Only) 23-49 ........ Sales Deductendingaccountsreceivable... Cash...................................................... and power...... 2012......... 2.. Inc.January1................ 808 (c) Net cashprovidedby operatingactivities........................................020 500 \$3........520 Copyright © 2011 John Wiley & Sons.......................................

.............   Kieso. Deductendingaccountspayable............ (c) Incometaxes...920 (560) 1....270 \$818 (40) 778 30 \$ 808 Copyright © 2011 John Wiley & Sons................................................................ 23-50 \$1...................................PROBLEM23-3 (Continued) (b) Cost of goodssold.......... Inc..... Incometaxespaid............................................................................ Intermediate Accounting............. Deductbeginninginventory........................................................ Addbeginningaccountspayable.................. Deductendingincometaxespayable..... Addendinginventory.......................... Goodsavailablefor sale.........200 720 1... Cashpurchases(paymentsfor merchandise)................... 14/e.360 (420) 940 330 \$1.. Purchases.................... Addbeginningincometaxespayable...................... Solutions Manual    (For Instructor Use Only) ........

..........................400d 57........... Net cashusedby financingactivities........ + Decreasein AccountsPayable......... Saleof land(\$175........................550) \$1..................... \$1.......450a 2........ Cashpaid to suppliers. Cashreceivedfromcustomers......000) (24.......000 4....... Taxespaid...................000............050 \$ 67....087.............. 2012......................... 2012 (DirectMethod) Cashflowsfromoperatingactivities Cashreceipts: Cashreceivedfromcustomers............................................800) Net increasein cash..December31......................... Cashpayments: Cashpaid to suppliers.............000 a SalesRevenue.......... Cash.................. Cashflowsfrominvestingactivities Saleof short-terminvestments (\$8.....300) (6............................................000 \$ 10....... Cashflowsfromfinancingactivities Proceedsfromissuanceof commonstock.. Net cashusedby investingactivities.... Cashpaid for operatingexpenses..... 14/e................................................. Dividendsreceived.................... + Increasein Inventory. Cash.. – Increasein AccountsReceivable......152.....................000)........300e 1..000 (125...............000 (7.......000b 226.....................152.....................................154........... Intermediate Accounting.................   Kieso........000 \$ 765..........000 Cost of GoodsSold.........450 b \$ 748........................................000 7......800 12............. 1.000– \$125...................................PROBLEM23-4 MICHAELSCOMPANY Statementof CashFlows For the Year EndedDecember31..............000)+ \$8...... Principalpaymenton long-termdebt....................000) (55..............January1...............160............................. Inc........................850 Copyright © 2011 John Wiley & Sons............... Purchaseof equipment................. 2012...000 58...............000 10.......................400 765.....................................350c 38......... \$1... Net cashprovidedby operatingactivities... Dividendspaid.................... 6.....................000+ \$4....................... Solutions Manual    (For Instructor Use Only) 23-51 ... Interestpaid.....500 (10...................................000) 27........................

.......800 Copyright © 2011 John Wiley & Sons...... Increasein officesupplies........... Increasein salariesand wagespayable......................... – Depreciation/Amortizationexpense.......................... Reconciliationof Net Incometo Net Cash Providedby OperatingActivities: Net income Adjustmentsto reconcilenet incometo net cashprovidedby operatingactivities: Depreciation/amortizationexpense.....................500 9........... Taxespaid......400 (1....................... Solutions Manual    (For Instructor Use Only) .....000) (4...000) 1...............200 250 (2................................400 (40..................................750 5.... Increasein accountsreceivable....300 InterestExpense... Gainon sale of land.................... Increasein inventory............................................... \$ 39........................................000) (5................................................................. Decreasein prepaidrent.......000 (7.............. 23-52 \$58.................................... + Increasein prepaidinsurance....................................................................... Intermediate Accounting....... Total adjustments........................................................400 e \$ 51................................. – Decreasein prepaidrent........................200) (250) (10.............................000 2..................000) \$226.............. Interestpaid......... Increasein incometaxespayable....... Amortizationof bondpremium............... Inc........................... Cashpaid for operatingexpenses..850 \$40.PROBLEM23-4 (Continued) c OperatingExpenses........................................... Decreasein accountspayable... – Increasein incometaxespayable.550 \$ 57..550) (7..000) (1...   Kieso.......................... – Increasein wagespayable.......... + Decreasein bondpremium.... Increasein prepaidinsurance...................950 \$67..................................350 d Incometax expense................000 1. + Increasein officesupplies......000) (8....................... 14/e.................... Gainon sale of short-terminvestments...............500) (9......................000) \$ 38....... Net cashprovidedby operatingactivities..........550) 8........ \$276....

....................000) (7) (127..........000 (4) (100. \$115..............................404) Copyright © 2011 John Wiley & Sons... Increasein cashsurrendervalueof life insurance..200 (4) 31....................280 (137...................................PROBLEM23-5 ALEXANDERCORPORATION Statementof CashFlows For the Year EndedDecember31... Intermediate Accounting.......... Extraordinaryrepairsto building....... Net cashusedby investingactivities.................... 2012 (IndirectMethod) Cashflowsfromoperatingactivities Net income.. Depreciationof machinery. Increasein accountsreceivable (net).................... Purchaseof machinery...............................................000) 10........... Amortizationof copyright.........500) (7) (121.200 (8) 10.............................................................................. Net cashusedby operatingactivities......... Investmentin subsidiary......... Amortizationof patents...... Amortizationof bondpremium................................. Gainon retirementof bonds.............200) (8) (33................................................124) (131............ Adjustmentsto reconcilenet income to net cashusedby operating activities: Losson sale of machinery...................000 (3) 10.....207) (22................. Purchaseof patent... 14/e.............................................................   Kieso................ Additionto buildings.... Depreciationof building. Solutions Manual    (For Instructor Use Only) 23-53 . Equityin earningsof subsidiary.......... Amortizationof bonddiscount....650 19......... Cashflowsfrominvestingactivities Saleof machinery............000* \$ 2...... Increasein inventory............. Increasein taxespayable...............000) (3) (504) (274......................700) (4......207) 9........400) (4) (15....................................................................................... Increasein accountspayable.............................................................................200 (4) (1.........425) (5) 48............................................300) (7........ Increasein prepaidexpenses....... Inc..............000 87 (6) (75) (5) (10........

.600shares11/1/12for \$257.....000 with statedvalueof \$5 per share..................................................... 14/e.......200 (2) Saleof 29............................900)(5) 120.........................100) 298...........000) Balance4/1/12.....   Kieso...PROBLEM23-5 (Continued) Cashflowsfromfinancingactivities Redemptionof bonds...................... Cash............028...........000)...................................000+ \$90.......... *Net incomeper retainedearningsstatement (\$25.............. \$10....................................... \$1..........200 Restatementof statedvalueof stock............................... 23-54 148............411 (6) 257....................000 276...............000 \$277. Net cashprovidedby financingactivities.......000 Commentson NumberedItems (1) Write-off of deficit has no effect on cash................... Cash.... 2012..........500 \$34................453........................................... Balance12/31/12................ Inc.......................... (100.. Saleof stock..................511 Decreasein cash........................ Saleof bondslessexpenseof sale.... 1.......................................................... Analysis of the capital stock accountshows the following: Balance12/31/11... Solutions Manual    (For Instructor Use Only) ....... (425. 2012.............200 Copyright © 2011 John Wiley & Sons.................................. Intermediate Accounting........ Noncashinvestingandfinancingactivities Reductionin statedvalueof stockto eliminatedeficit...................... Incometaxes...............December31....000 \$425......January1.......176................900 \$115....000 \$1......000 Supplementaldisclosuresof cashflowinformation: Cashpaid duringthe year for: Interest..... (20............

............. Additionsrequiringcash............... Inc....200) Copyright © 2011 John Wiley & Sons.... \$64.........   Kieso..000 Analysisof accumulateddepreciation— machinery: Balance12/31/11of Accumulated Depreciation.200) 124..... Balance..... \$2.................................. Balance12/31/12........... 79...........200)– \$9..........................................................................................000) \$ (48............ \$190.................................Theaccountactivityis analyzedas follows: Balance12/31/11..................000 Purchase..400) Losson sale: (\$16......................... Total...000cash...PROBLEM23-5 (Continued) (3) A patentwaspurchasedfor \$15.....800 (173.......400) 173................................................................................ \$9................................................. 15...................000 Balance12/31/12.........................200 Cashreceivedfromdisposition................................................................... (69........600 (207.........000) \$10..................... Amounton assetsold.........000) \$ (33.................400– \$5.............................................. Dispositionof machinery...... Amortizationchargedagainstincomewhich did not usecash............................................................... Balance12/31/12...............000 (16........000 (4) Analysisof the Machineryaccountshowsthe following: Balance12/31/11...000........ 14/e..................... Solutions Manual    (For Instructor Use Only) 23-55 ................000 (5........................ Depreciationchargedagainstincome whichdid not use cash..............000 Total... Intermediate Accounting.................. \$130.........

............000 (7......... Chargefor majorrepairswhichusedcash.200) 392..................................................PROBLEM23-5 (Continued) (5) Fundsto redeembonds(\$100.....................500 \$110.. \$100..................... Balanceat date of redemption.800 (424....03).........502 *(\$4... Total.325 \$102....which did not requirecash.. Balance12/31/12........411 (87)* \$4........................................................... Changein discountaccount..................900).........................325– \$100...................................325 \$ (1............. Proceedsof issue.....000÷ 20) X 1/4..............000 (6) Faceamountof bondsissued............ 14/e.................................589/477months(a)) X 9 months= \$87 (a) (40 yearsX 12 months)– 3 (7) Purchaseof stockrequiringcash..... \$100....... Intermediate Accounting....... Discounton \$125.. Solutions Manual    (For Instructor Use Only) .........500 \$400..............................425) \$125.................... Bookvalueof bonds................................000 \$3....... 70%of subsidiary’sincomefor year (\$15..000)............................................................. Balance12/31/12..009)...................................whichdid not provide cashbut wascreditedto income...... Gainon redemption (\$102.......................... Unamortizedpremium12/31/11.............000X ......750 839 (4...... \$2.............. Depreciationchargedagainstincomewhich did not requirecash..........000of bondssold (\$125....................   Kieso...............200) Copyright © 2011 John Wiley & Sons...589) \$120.............. Amortizationfor ninemonths..900 Facevalueof bonds................ (8) Analysisof accumulateddepreciation— Building Balanceof accumulateddepreciation12/31/11..... Expenseof issuance...............................400 75 2. Amortizationto 3/31/12not requiringcash (\$6....................................................... Inc.................000X 1......000 10..........000) (\$ 31..... 23-56 \$100.......................................................................

Kieso... \$ 504 127...............300 10. Intermediate Accounting..............PROBLEM23-5 (Continued) Commentson OtherItems (not required) Increasein cashsurrendervalueof insurancerequiredcash.......... Copyright © 2011 John Wiley & Sons. 14/e. Inc.. Decreasein Copyrightswasa noncashchargeagainstincome.000 Accruedintereston retiredbondsand issuancedoesnot affect the statementof cashflows................Theseitemsare alreadyrecordedin income...............000 70... Solutions Manual    (For Instructor Use Only) 23-57 ..................................................... Increasein Buildingsrequiredcash.... Dividendsdeclareddid not requirecash............................

.425 1 \$540........... Net cashprovidedby operatingactivities. \$524.....500– \$4... (\$1.....650*= \$524..625– \$750**– \$5....   Kieso.......7502 105.............6753 481... Solutions Manual    (For Instructor Use Only) ............000+ \$6..... Cashpayments: Cashpaymentsto suppliers...250) **Increasein accruedpayables 23-58 Copyright © 2011 John Wiley & Sons...750 3 \$120....400– \$2............250= \$375... Intermediate Accounting.675 *Writeoffof accountsreceivable........400= \$105. Inc.......500+ \$5...000– \$10... 14/e..850 2 \$380.425 \$ 43.....450– \$8...... Cashpaymentsfor operatingexpenses.000– \$10.....PROBLEM23-6 (a) Net CashFlowfromOperatingActivities Cashreceivedfromcustomers...8501 \$375.....

.... Increasein accountspayable............425 (8....... \$42....January1......December31................000– (\$18........... Increasein accountsreceivable(net)...050) (10..... Net increasein cash...................... Net cashprovidedby operatingactivities.............................................................................................250 33................................750 2................. Cash..........750)* (6....... Saleof investments................. 2012 Cashflowsfromoperatingactivities Net income............................ Saleof machinery............ Inc....................................000– \$1.500) Copyright © 2011 John Wiley & Sons...................750)......125) (31....750– \$3...........750 \$42..250 750 925 43......000) 10..........................500– \$2.....500– \$25..................   Kieso....000).125) 8........ Increasein accruedpayables...................... Adjustmentsto reconcilenet income to net cashprovidedby operating activities: Depreciationexpense...................750) 800 (9................ Cashflowsfrominvestingactivities Purchaseof investments \$22............ Gainon sale of investments............. 2012........ Purchaseof machinery \$30................200 (4.. Losson sale of machinery...................... 2012..250– (\$38..000) (21.............000) (11......... Cashflowsfromfinancingactivities Reductionin long-termnote payable........................ Intermediate Accounting.......... Additionto buildings............ Solutions Manual    (For Instructor Use Only) 23-59 ...500 \$ 8.. Net cashusedby investingactivities......250)– (\$60.625 (3... 14/e. Cashdividendspaid...............750) (15...250) 28................................ Cash.... Net cashusedby financingactivities.. Statementof CashFlows For the Year EndedDecember31..PROBLEM23-6 (Continued) (b) MARCUSINC. Increasein inventory..........000 *(\$70...................

............................... (b) The Statementof Cash Flows for ChapmanCompany................ however.......for the year ended May 31... 2012................ To retire bondspayable....June1...............000 28..........000) (30.............. To employees........................................... Under the direct method......... 14/e....................... the FASB encourages the use of the direct method......... net income on the accrual basis is adjusted to the cash basis by adding or deducting noncash items included in net income.....238.........250 Cashflowsfrominvestingactivities Purchaseof plant assets.....000 151....... Cashpaid: For dividends......... Net cashusedby financingactivities. CHAPMANCOMPANY Statementof CashFlows For the Year EndedMay31..... 2012.................... Solutions Manual    (For Instructor Use Only) .......... For interest.............May31......000 1.................. Net cashprovidedby operatingactivities..........   Kieso......000 276.... usingthe direct method............... 2012 Cashflowsfromoperatingactivities Cashreceivedfromcustomers...........PROBLEM23-7 (a) Both the direct method and the indirect method for reporting cash flows from operating activities are acceptable in preparing a statement of cashflowsaccordingto GAAP..........150 73....000) (115.087..... Cash.......000) \$ 20...... the statement of cash flows reports the major classes of cash receipts and cash disbursements..............................850 10... For otherexpenses........... Cash... 23-60 (28........... this may be the statement’s principal advantage... Inc.. Cashflowsfromfinancingactivities Cashreceivedfromcommonstockissue........... Cashpayments: To suppliers.....................000 (105... \$1.... and discloses more information......................... 2011..........................250 \$684........... Net increasein cash.................. Intermediate Accounting................. For incometaxes..........000) \$ 8...........250 Copyright © 2011 John Wiley & Sons...........000 43....... Under the indirect method.............. thereby providing a useful link between the statement of cash flows and the incomestatementand balancesheet...................is presentedbelow...250 20...........

......255.........000 10....................   Kieso..... Less: Increasein interestpayable..............850 \$ \$ \$ 8..... Cashpaid to suppliers......... SupportingCalculations: Cashcollectedfromcustomers Sales Less: Increasein accountsreceivable......000 30.000 Cashpaid to employees Salaryexpense..............................000 \$ 43...............150 \$ 75.......................... 14/e... Cashpaid for otherexpenses Otherexpenses... Inc...........000 2.. Cashpaid to employees.. \$ 252............................................. Cashcollectedfromcustomers............000 8..............000 \$1.....000 \$ 684... \$ 722.... Intermediate Accounting........................................................ Cashpaid for incometaxes: Incometax expense(given).PROBLEM23-7 (Continued) Note1: Noncashinvestingandfinancingactivities: Issuanceof commonstockfor plant assets\$70.....250 Cashpaid to suppliers Cost of merchandisesold..........238... Add: Decreasein salariesand wagespayable. Add: Increasein prepaidexpenses............................ Cashpaid for interest Interestexpense....100 24...............................250 17....................000.. Less: Decreasein merchandiseinventory.... \$1........... Increasein accountspayable................................. Cashpaid for otherexpenses..............750 \$ 276......................................000 Copyright © 2011 John Wiley & Sons.... Solutions Manual    (For Instructor Use Only) 23-61 .......000 73........ Cashpaid for interest.........150 2...............

...................... Decreasein salariesand wagespayable................. CHAPMANCOMPANY Statementof CashFlows For the Year EndedMay31.......................PROBLEM23-7 (Continued) (c) The calculation of the cash flow from operating activities for ChapmanCompany. Increasein accountspayable.................. 23-62 \$130.................000 \$25...........250 \$151.... Adjustmentsto reconcilenet incometo net cashprovidedby operatingactivities: Depreciationexpense..................... Inc.. Solutions Manual    (For Instructor Use Only) ........................000 8. 2012...... Decreasein inventory.........   Kieso..............000) (24.000 2.......750) 21........... Increasein interestpayable.250 Copyright © 2011 John Wiley & Sons...... Intermediate Accounting.. Net cashprovidedby operatingactivities..usingthe indirectmethod....... 14/e.......... Increasein prepaidexpenses...................000 (17.000) (2......................... Increasein accountsreceivable............................ 2012 Cashflowsfromoperatingactivities Net income.... for the year endedMay31....is presentedbelow...000 30.

Kieso.000= \$226.000– \$6.000– \$28.000(4) (1) (Sales)less(Increasein AccountsReceivables) \$950.000 (3) (OperatingExpenses)less (DepreciationExpense)less (BadDebtExpense) \$250.000 877.000– \$22.000– \$2.000– [\$14.000 = \$13.000X .000= \$925.000 Equipmentdepreciation = 9.000 (2) (Costof GoodsSold) plus (Increasein Inventory)less (Increasein AccountsPayable) \$600.000 *\$21.000+ \$14.000– \$25.000 (4) (IncomeTaxes)less(Increasein IncomeTaxesPayable) \$45. Inc.000 \$ 48.60)] \$37.000– (\$10.PROBLEM23-8 (a) Net CashProvidedby OperatingActivities Cashreceiptsfromcustomers Cashpayments: Cashpaymentsto suppliers Cashpaymentsfor operatingexpenses Cashpaymentsfor incometaxes Net cashprovidedby operatingactivities \$925. Solutions Manual    (For Instructor Use Only) 23-63 .000(1) \$608.000= \$43.000= \$608.000*– \$2.000 Buildingdepreciation \$22.000 Copyright © 2011 John Wiley & Sons. 14/e.000(3) 43. Intermediate Accounting.000(2) 226.

.... 14/e........ 2012.. Intermediate Accounting.....000) (14..........................\$50.......000 (19........ Increasein incometaxespayable.....000) 3... Net cashusedby financingactivities...............000 \$70...000)...................................000 \$22. Cash........................... Cashdividendspaid  [(\$95.............January1.000– \$260.....000= \$50..........000) (32....000]................000 1. Losson sale of equipment.... Net cashprovidedby operatingactivities....... Increasein inventory..................... Cashflowsfrominvestingactivities Purchaseof investments  [\$55............ \$67.. Net cashprovidedby investingactivities......000) 35.............   Kieso........... Saleof equipment  [\$10.............000* (43.....................000– (\$40........ Purchaseof equipment  [\$70.......000 2......... 2012 Cashflowsfromoperatingactivities Net income.000.................000 (23.... \$15.. 2012.........December31.....000 *\$310... 19....... Adjustmentsto reconcilenet income to net cashprovidedby operating activities: Depreciationexpense............000)= \$35.........000) 50.000– (\$85... Increasein accountspayable.......000X 60%)]– \$3........000– \$25........ Cash......000+ \$15......... Solutions Manual    (For Instructor Use Only) ........ Gainon sale of investments..000 23-64 Copyright © 2011 John Wiley & Sons...............................000..000 Noncashinvestingandfinancingactivities Issuanceof commonstockfor land.......................................... Saleof investments(\$35...000– \$10...............000 (5................. Increasein accountsreceivable(net).........000)].....000) (70....000 (15........000+ \$67. Issuanceof commonstock.. Inc............................... Cashflowsfromfinancingactivities Paymentof long-termnotespayable............000 51............000 (8....000)– \$92....................000) 6........................000) Net increasein cash.PROBLEM23-8 (Continued) (b) SHARPECOMPANY Statementof CashFlows For the Year EndedDecember31...........000– \$35....000) 48......................000– (\$48......000)]...........000 14.000– (\$10.....................................................

.................................... Increasein inventory.............. Cash................... 2012.................. Intermediate Accounting....................... \$2..................000) Paymentof short-termnotespayable............................................750(a) \$ 5.........000) 37..........................   Kieso..000) Increasein cash...... Sale of equipment......... (6............................. Gainon sale of investment.....000) Net cashusedby financingactivities...................000 29.. Gainfromflooddamage.........750) (2.............. Net cashprovidedby investingactivities. 2012 Cashflowsfromoperatingactivities Net income......... Increasein accountsreceivable(net)......... Cashflowsfrominvestingactivities Sale of investments...........PROBLEM23-9 (a) DINGELCORPORATION Statementof CashFlows For the Year EndedDecember31. 25.....500 (15........ Proceedsfromflooddamageto building....................................000 (13............................500 2..........................January1.............. Increasein accountspayable............250)* 800(c) 250 (1.... 2012....... Inc................................000) 1....... Cash.....500) (3.............................000 \$38. \$15......500 4......200(b) (13............................................... Depreciationexpense......500 Supplementaldisclosuresof cashflowinformation: Cashpaid duringthe year for: Interest...........000 Copyright © 2011 John Wiley & Sons........................ Netcashflowprovidedbyoperatingactivities...000 Cashflowsfromfinancingactivities Paymentof dividends................... (5... Solutions Manual    (For Instructor Use Only) 23-65 .250) 2...... (1...... Adjustmentsto reconcilenet incometo net cashprovidedby operatingactivities: Losson sale of equipment................................................... 14/e..December31........................... Copyrightamortization.................................................................500 13................... Purchaseof equipment(cash).....................................

Solutions Manual    (For Instructor Use Only) ....... Inc...000 *[(\$33......   Kieso..000)– (\$29..... Intermediate Accounting...000)] 23-66 Copyright © 2011 John Wiley & Sons......750– \$6.......000+ \$4....Incometaxes. \$5.... 14/e.

................... Solutions Manual    (For Instructor Use Only) 23-67 .........000 \$21.......... Depreciationexpense........................... Bookvalue............................ Net income.. Probablya largecashoutflowas the firmexpands. Beginningretainedearnings............................... Copyright © 2011 John Wiley & Sons......................000 SupportingComputations: (a) Endingretainedearnings..750 (5...... Probablya cashinflowfromdebt financing(borrow-ing funds)as a sourceof cashat highinterestcost...500) \$ 800 For a severelyfinanciallytroubledfirm: Operating: Investing: Financing: (2) \$20.............. Proceedsfromsale........200 \$ 3..........................PROBLEM23-9 (Continued) Noncashinvestingandfinancingactivities: Retirednotepayableby issuingcommonstock....................000 Accumulateddepreciation(30%X \$11........................... Decreasein accumulateddepreciation.300 (2......................300) \$ 7.............................750 Probablya small cashinflowor a cashoutflow........   Kieso........................ Probablya largecashinflowto financeexpansion.... (b) Cost ... (3.000) \$15................... Probably a cash inflow as assets are sold to provide needed cash............. Losson sale.................700 (2.............................. 14/e....... Inc................. \$11.....................................000 16............... Purchasedequipmentby issuingnotespayable................................000). \$ 5... For a recentlyformedfirmwhichis experiencingrapidgrowth: Operating: Investing: Financing: Probablya cashinflow........................................ Intermediate Accounting..............500) \$ 5........................ (c) (b) (1) Accumulateddepreciationon equipmentsold............................................

to identify and describe the two methods of reporting cash flows from operations. financing. The student is required to analyze a statement of sources and application of cash and indicate the proper treatment of various transactions. to identify the categories of activities reported in the statement of cash flows. Inc. 14/e. The student is required to indicate whether a transaction belongs in the investing. and to describe the presentation of noncash transactions. CA 23-6 (Time 20–30 minutes) Purpose—provides the student the opportunity to examine the effects of a securitization on the statement of cash flows. 23-68 Copyright © 2011 John Wiley & Sons. Solutions Manual    (For Instructor Use Only) . The student must also discuss the proper disclosure of the transaction.   Kieso. CA 23-5 (Time 30–40 minutes) Purpose—to identify and explain reasons and purposes for preparing a statement of cash flows. including ethical dimensions. The student is required to prepare the statement using the indirect method. CA 23-2 (Time 30–35 minutes) Purpose—to illustrate the proper form of the statement of cash flows. or operating section of the statement. Intermediate Accounting. and to discuss the rationale behind the statement. CA 23-4 (Time 20–30 minutes) Purpose—to help the student identify the sections of the statement of cash flows. CA 23-3 (Time 30–35 minutes) Purpose—to help a student identify whether a transaction creates a cash inflow or a cash outflow.TIMEANDPURPOSEOF CONCEPTSFORANALYSIS CA 23-1 (Time 30–35 minutes) Purpose—to develop an understanding of the proper composition and presentation of the statement of cash flows. The student is required to indicate whether a cash inflow or a cash outflow results from the transaction.

.000 (25.............000 Copyright © 2011 John Wiley & Sons.... Solutions Manual    (For Instructor Use Only) ..... Cashflowsfromfinancingactivities Saleof capital stock.... CA 23-2 (a) From the information given.. The correct form classifies cash flows from three activities—operating................. Lenny is wrong.. Cashflowsfrominvestingactivities Saleof investment...................... Net cashprovidedby financingactivities.................. Gainfromsale of investment......000 is the correct increase in cash........000) 380.......000) 370............ Inc.............. Adjustmentsto reconcilenet income to net cashprovidedby operating activities: Depreciationexpense..................000 \$3.. 23-70 \$ (11......................000) 55...... The sources and uses format is not an acceptable form............ however........ it appears that from an operating standpoint Pacific Clothing Store did not have a superb first year.. The long-term borrowing of \$620....   Kieso. Net cashusedby investingactivities..CA 23-1 (Continued) 6...000) (95............... investing......... about the actual increase in cash—\$109................000) (305....000 should be shown as cash provided and the retirement of \$441......... (b) PACIFICCLOTHINGSTORE Statementof CashFlows For the Year EndedJanuary31.........000 (10.. Purchaseof treasurystock......000 net loss.....000 44....................000 of debt should be shown as use of cash from financing activities...... Intermediate Accounting...........000 (330.....................000 120.......... 14/e........................ and financing...... Net increasein cash...........000)* \$ 80............... Lenny is correct............ Payments should not be netted against increases in long-term borrowings.............. Supplementaldisclosureof cashflowinformation: Cashpaid for interest................ Net cashprovidedby operatingactivities........... the statement of cash flows is not prepared in correct form..... and it also presents significant noncash investing and financing activities in a separate schedule............... Purchaseof fixturesandequipment................. Purchaseof investment....000 \$109....................... 2012 Cashflowsfromoperatingactivities Net loss........ The details of changes in long-term debt should be shown separately.......................... having suffered an \$11.

CA 23-2 (Continued)
Noncashinvestingandfinancingactivities
Issuanceof notefor truck..............................................
*Computationof net income(loss)
Salesof merchandise....................................................
Interestrevenue............................................................
Gainon saleof investment(\$120,000– \$95,000)..................
Total revenues......................................................
Merchandisepurchases.................................................
Operatingexpenses(\$170,000– \$80,000).........................
Depreciation.................................................................
Interestexpense...........................................................
Total expenses.....................................................
Net loss.......................................................................

\$ 30,000
\$382,000
8,000
25,000
415,000
\$253,000
90,000
80,000
3,000
(426,000)
\$ (11,000)

CA 23-3
1.

The earnings are treated as an inflow of cash and should be reported as part of the net cash
provided by operating activities in the statement of cash flows. There should be \$810,000 of
income before extraordinary items because extraordinary items should be separated from operating
activities.

2.

The \$315,000 depreciation expense is neither an inflow nor an outflow of cash. Because
depreciation is an expense, it was deducted in the computation of net income. Accordingly, the
\$315,000 must be added back to income before extraordinary items in the operating activities
section because it was deducted in determining earnings, but it was not a use of cash.

3.

The write-off of uncollectible accounts receivable against the allowance account has no effect on
cash because the net accounts receivable remain unchanged. An adjustment to income is only
necessary if the net receivable amount increases or decreases. Because the net receivable amount
is the same before and after the write-off, an adjustment to income would not be made.
The \$51,000 of bad debt expense does not affect cash would be added back to income because it
affects the amount of net accounts receivable. The recording of bad debt expense reduces the net
receivable because the allowance account increases. Although bad debt expense is not usually
treated as a separate item to be added back to income from operations, it is accounted for by
analyzing the accounts receivable at the net amount and then making the necessary adjustment to
income based on the change in the net amount of receivables.

4.

The \$6,000 gain realized on the sale of the machine is an ordinary gain, not an extraordinary gain,
for accounting purposes. This \$6,000 gain must be deducted from net income to arrive at net
cash provided by operating activities. The proceeds of \$36,000 (\$30,000 + \$6,000) are shown as a
cash inflow from investing activities.

5.

Generally, extraordinary items are investing or financing activities and the cash inflow or outflow
resulting from such events should be reported in the investing or financing activities section of the
statement of cash flows. In this case, no cash flow resulted from the lightning damage. The net
loss (a noncash event) must be added back to net income (under the indirect method) as one of
the adjustments to reconcile net income to net cash flow provided by operating activities.

Copyright © 2011 John Wiley & Sons, Inc.   Kieso, Intermediate Accounting, 14/e, Solutions Manual    (For Instructor Use Only)

23-71

CA 23-3 (Continued)
6.

The \$75,000 use of cash should be reported as a cash outflow from investing activities. The
\$200,000 issuance of common stock and the \$425,000 issuance of the mortgage note, neither of
which affects cash, should be reported as noncash financing and investing activities.

7.

This conversion is not an inflow or an outflow of cash, but it is a significant noncash financing
activity and should be reported in a separate schedule or note.

CA 23-4
Where to Present

How to Present

1.

Investing and operating

Cash provided by sale of fixed assets, \$4,750 as an investing
activity. In addition, the loss of \$2,250 [(\$20,000 x 3 1/2) ÷ 10] –
\$4,750 on the sale would be added back to net income.

2.

Operating

The impairment reduced earnings from operations but did not
use cash. The amount of \$15,000 is added back to net income.

3.

Financing

Cash provided by the issuance of capital stock of \$16,000.

4.

Operating

The net loss of \$2,100 is presented as loss from operations, and
depreciation of \$2,000 and amortization of \$400 are added
back to the loss from operations. Net cash provided by operating
activities is \$300.

5.

Not reported in statement.

6.

Investing and operating

Cash provided by the sale of the investment, \$10,600 as an
investing activity. The loss of \$1,400 is added back to net
income.

7.

Financing and operating

The retirement is reported as cash used by financing activities of
\$24,240. Additionally, the gain (of \$1,760 = \$26,000 – \$24,240)
is deducted from net income in the operating activities section.

CA 23-5
(a) The primary purpose of the statement of cash flows is to provide information concerning the cash
receipts and cash payments of a company during a period. The information contained in the
statement of cash flows, together with related disclosures in other financial statements, may help
investors and creditors
1. assess the company’s ability to generate future net cash inflows.
2. assess the company’s ability to meet its obligations, e.g., pay dividends and meet needs for
external financing.
3. analyze the differences between net income and the associated cash receipts and payments.
(b) The statement of cash flows classifies cash inflows and outflows as those resulting from operating
activities, investing activities, and financing activities.
Cash inflows from operating activities include receipts from the sale of goods and services,
receipts from returns on loans and equity securities (interest and dividends), and all other receipts
that do not arise from transactions defined as financing and investing activities. Cash outflows for
operating activities include payments to buy goods for manufacture and resale, payments to
employees for services, tax payments, payments to creditors for interest, and all other payments
that do not arise from transactions defined as financing and investing activities.

23-72

Copyright © 2011 John Wiley & Sons, Inc.   Kieso, Intermediate Accounting, 14/e, Solutions Manual    (For Instructor Use Only)

CA 23-5 (Continued)
Cash inflows from investing activities include receipts from collections or sales of debt instruments
of other companies, from the sale of the investments in those stocks, and from sales of various
productive fixed assets. Cash outflows for investing activities include payments for stocks of other
companies, purchase of productive fixed assets, and debt instruments of other companies.
Cash inflows from financing activities include proceeds from the company issuing its own stock or
its own debt. Cash outflows for financing activities include payments to shareholders and
debtholders for dividends or retirement of its own stocks and bonds (i.e., treasury stock).
(c) Cash flows from operating activities may be presented using the direct method or the indirect
method. Under the direct method, the major classes of operating cash receipts and cash payments
are shown separately. The indirect method involves adjusting net income to net cash flow from
operating activities by removing the effects of deferrals of past cash receipts and payments,
accruals of future cash receipts and payments, and noncash items from net income.
(d) Noncash investing and financing transactions are to be reported in the related disclosures, either
in a narrative form or summarized within a schedule. Examples of noncash transactions are the
conversion of debt to equity, acquiring assets by assuming directly related liabilities, and exchanging noncash assets or liabilities for other noncash assets or liabilities. For transactions that
are part cash and part noncash, only the cash portion should be reported in the statement of cash
flows.

CA 23-6
(a) It is true that selling current assets, such as receivables and notes to factors, will generate cash
flows for the company, but this practice does not cure the systemic cash problems for the
organization. In short, it may be a bad business practice to liquidate assets, incurring expenses
and losses, in order to “window dress” the cash flow statement.
The ethical implications are that Brockman creates a short-term cash flow at the longer-term
expense of the company’s operations and financial position. Barbara’s idea creates the deceiving
illusion that the company is successfully generating positive cash flows.
(b) Barbara Brockman should be told that if she executes her plan, the company may not survive.
While the factoring of receivables and the liquidation of inventory will indeed generate cash, the
actual amount of cash the company receives will be less than the carrying value of the receivables
and the raw materials. In addition, the company would still have the future expenditure of
replenishing its raw materials inventories, at a cost higher than the sales price.
As chief accountant for Brockman Guitar, it is your responsibility to work with the company’s chief
financial officer to devise a coherent strategy for improving the company’s cash flow problems.
One strategy may be to downsize the organization by selling excess property, plant, and
equipment to repay long-term debt. In addition, Brockman Guitar may be a good candidate for a
quasi-reorganization discussed on KWW website.

Copyright © 2011 John Wiley & Sons, Inc.   Kieso, Intermediate Accounting, 14/e, Solutions Manual    (For Instructor Use Only)

23-73

(b) The most significant item in the investingactivities section is the \$3.082). 2008. The \$596 million is reportedas an add back to net incomebecauseit is a noncash charge in the income statement. Inc.FINANCIALREPORTINGPROBLEM (a) P&G uses the indirect method to compute and report net cash provided by operating activities. The two items most responsible for the decrease in cash provided by operating activities in 2009are net earnings(\$13.238millionthat P&G spent on “capital expenditures. (c) Deferred taxes are reported in the operating activities section of P&G’s statement of cash flows.370millionthat P&Gpaid to purchasetreasurystock.008 million.919 million. and \$14.436)and depreciationand amortization(\$3. (d) Depreciationand amortizationis reportedin the operatingactivities sectionof P&G’s statementof cashflowsas an add backto net incomebecauseit is a noncashcharge in the incomestatement.The amountsof net cashprovidedby operating activities for 2007. \$15. and 2009 are \$13.” The most significant item in the financing activitiessectionis the \$6. respectively.410 million. Solutions Manual    (For Instructor Use Only) . Intermediate Accounting. 23-74 Copyright © 2011 John Wiley & Sons. 14/e.   Kieso.

Inc.128million Themostsignificantfinancingactivitiesitemsin 2009: Coca-Cola Issuancesof debt PepsiCo Cashdividendspaid \$14. PepsiCo’strendis relativelyflat. 14/e.   Kieso. Intermediate Accounting.236million PepsiCo. Copyright © 2011 John Wiley & Sons.732million (c) The Coca-Cola Companyhas increasednet cash providedby operating activities from 2007 to 2009 by \$1.\$1.152million PepsiCo Capitalspending \$2.COMPARATIVEANALYSISCASE (a) Both Coca-Cola and PepsiCo use the indirect method of computing and reporting net cashprovidedby operatingactivitiesin 2007–2009. Solutions Manual    (For Instructor Use Only) 23-75 .186 \$6. Inc. \$1. (d) Both Coca-Cola and PepsiCo report depreciation and amortization in the operating activitiessection: Coca-Cola.036 million or 14.5%. Only Coca-Cola has a favorabletrendin the generationof internalfundsfromoperations.796 Themostsignificantinvestingactivitiesitemsin 2009: Coca-Cola Purchaseof otherinvestments \$2. PepsiCo.689million \$2.0%. has decreased net cash provided by operating activities by \$138 million or 2. (In millions) Net cashprovidedby operatingactivities (b) Coca-Cola PepsiCo \$8.635million Depreciationand amortizationis reportedin the operatingactivitiessectionbecauseit is a noncashchargein the incomestatement.

796 (\$22.406+ \$23.796 (\$8.657) 2 = 0.186 (\$13.38 vs.30:1 2 = 0.61) than Coca-Cola’s \$0.721+ \$12. The cash debt coverage ratio shows a company’s ability to repay its liabilities from cash generated from operating activities without having to liquidate the assets employed in its operations. 14/e. (f) PepsiCo Currentcash debt coverage \$8.186 (\$23. its ability to repay liabilities with cashflowfromoperationswasgreaterthanPepsioCo’s in 2009. 0.325+ \$19. Inc.   Kieso. 0.988) 2 = 0.77 of cash flow from operations for every dollar of current debt was approximately 26% higher (0.COMPARATIVEANALYSISCASE(Continued) (e) Coca-Cola 1.61 of cash flow from operations per dollar of current debt and indicates PepsiCo was more liquid in 2009 thanCoca-Cola.77 vs.61:1 \$6. 23-76 Copyright © 2011 John Wiley & Sons. Solutions Manual    (For Instructor Use Only) . 2.412) = 0.38:1 \$6. Since Coca-Cola’s cash debt coverage ratio was approximately 27% larger (0. PepsiCo’s ratio of \$0.77:1 The current cash debt coverageratio uses cash generatedfromoperationsduringthe period and providesa better representationof liquidity on an averageday.787) 2 Cashdebt coverage \$8.30) than PepsiCo’s. Intermediate Accounting.756+ \$8.

416 versus \$181.567 in the prior year.480 – (\$700.017.012:1 All of these ratios are very low.600)÷ 2) = .014. the company’s cash position should be monitoredcloselyto ensurethat it doesnot slide into a distressfinancialstate due to cashshortages. (b) Liquidity: current cash debt coverageratio (net cash providedby operatingactivities ÷ averagecurrentliabilities) \$236. This apparent paradox can be explained by evaluating the components of cash from operating activities.955 – \$17. for a company like the Vermont Teddy Bear Company that is in the early stages of its life.465+ \$1.957). Inc.059 in the current year versus a decline of \$284.078:1 Solvency: cash debt coverage ratio (net cash provided by operating activities ÷ averagetotal liabilities) \$236.599.FINANCIALSTATEMENTANALYSISCASE VERMONTTEDDYBEARCO.thus.432 (\$838.].However. An increase in accounts payable causes an increasein cash fromoperations. ACCOUNTING.480÷ ((\$4. becauseof the precariousnature of companies in this stage of their lives.ANALYSIS.560. the current year cash flow from operations exceeded prior year’s cash flow from operationsby \$937.523). Solutions Manual    (For Instructor Use Only) 23-77 . 14/e.070:1 Profitability: cash return on sales ratio (net cash providedby operating activities ÷ net sales) \$236.437 [\$236.995.055. Significant contributors to the positive cash flow figure in the current year were (1) the depreciation and amortization add-back of \$316.566= . When a companyis in the introductoryphaseof its mainproduct. Intermediate Accounting. and (2) accounts payable increase of \$2. however.348 in the prior year.480÷ ((\$4. This is not surprising. the majority of the increasein cash is explainedby the company’sdramatic increasein accounts payable. However.480÷ \$20.   Kieso. (a) Even though prior year income exceeded the current year income by \$821.it shouldbe notedthat inventoriesdid increaseby \$1.085+ \$2.it will not typicallygenerate significant cash flow from operations.620. An investor or creditor would want to investigate this increase to ensure that the company is not delinquenton its payments.ANDPRINCIPLES Copyright © 2011 John Wiley & Sons.386)÷ 2) = .184.

..............000 130.......... Purchaseof machinery... Increasein accountsreceivable..... Decreasein inventory.......................................................................... Cashat end of period..000 (165................ Adjustmentsto reconcilenet incometo net cashprovidedby operatingactivities: Depreciationexpense...................000 200........................................... Net cashusedby investingactivities............. Cashat beginningof period........... Losson sale of machinery.....000 Copyright © 2011 John Wiley & Sons.................000) Net increasein cash.............................................. Freecashflow........... 2012 Cashflowsfromoperatingactivities Net income... 542...............000 (750...............000) (480............000 24.............000 792..................................... 23-78 \$1.........000 \$ 272..... Dividends.............................. Increasein accountspayable..............................................................................................................................000 750............................................... Cashflowsfrominvestingactivities Sale of machinery..000 20............................... Inc.000 \$ 672.....000 \$ 880............. Solutions Manual    (For Instructor Use Only) .......................... Less: Purchaseof machinery.........000 Analysis Laskowski’sfree cashflowis: Net cashprovidedby operatingactivities...........222.000 270.......222...... (200. 14/e.................000 1.............................................000) 33.. \$ 430.. Intermediate Accounting..............   Kieso...............000) Cashflowsfromfinancingactivities Paymentof cashdividends......Accounting LASKOWSKICOMPANY Statementof CashFlows For the Year EndedDecember31.............. Net cashprovidedby operatingactivities....

The prospects for those cash receipts are affected by an enterprise’s ability to generate enoughcash to meet its obligationswhen due and its other cashoperatingneeds. which affect market prices of the enterprise’s securities.and to pay cashdividendsand mayalso be affected by perceptionsof investors and creditors generally about that ability. creditors. “Financial reportingshouldprovideinformationto help present and potential investorsand creditors and other users in assessingthe amounts. Copyright © 2011 John Wiley & Sons. Inc.ANALYSIS.000). 14/e. or maturity of securities or loans. and uncertaintyof prospective cash receipts from dividends or interest and the proceeds from the sale. and the inflows and outflows of cash from investing and financing decisions.ACCOUNTING. Solutions Manual    (For Instructor Use Only) 23-79 . The company might explore reducing the dividend or securing additional funds for the expansionthrougha borrowing. and others assess the amounts. and uncertaintyof prospectivenet cashinflowsto the relatedenterprise. assumingoperationsat roughlythe samelevel in future periods. paragraph 37. financial reporting should provide information to help investors. redemption.000) is less than the amount needed for expansionnext year (\$500. Thus. the statement of cash flows provides information relevantto assessinga company’sfuturecashflows. timing. Laskowski’sfree cash flow will not be sufficient to fund the expansionplan.” By reporting cash provided by operations. timing.to reinvestin operations. Principles According to Statement of Financial Accounting Concepts No. Thus. Intermediate Accounting. 1.ANDPRINCIPLES(Continued) Laskowski’s free cash flow for the current year (\$272.   Kieso.

(b) SeeFASBASC230-10-10 (Statementof CashFlows—Objectives) 10-2 The information provided in a statement of cash flows. Inc.andothers(including donors)to do all of the following: a. 14/e. if used with related disclosures and information in the other financial statements.like workingcapital. Cash also includesother kinds of accounts that have the general characteristics of demand deposits in that the customer may deposit additional funds at any time and also effectively may withdrawfunds at any time without prior notice or penalty. andits needsfor externalfinancing c. Assessthe reasonsfor differencesbetweennet incomeand associatedcash receiptsand payments 23-80 Copyright © 2011 John Wiley & Sons.PROFESSIONALRESEARCH (a) Accordingto FASBASC230-10-10 (Statementof CashFlows/Overall/ Objectives): 10-1 The primary objective of a statement of cash flows is to provide relevant information about the cash receipts and cash payments of an entity during a period. Solutions Manual    (For Instructor Use Only) . As indicated in the glossary at this same section (230-10-20). should help investors.   Kieso. the basis for the statement of cash flows is cash. All charges and credits to thoseaccountsare cash receiptsor paymentsto both the entity owning the account and the bank holding it. Intermediate Accounting. For example. a bank’s granting of a loan by crediting the proceedsto a customer’sdemanddeposit accountis a cash paymentby the bankand a cashreceiptof the customerwhenthe entry is made. not broader measures of liquidity. Assessthe entity’sability to generatepositivefuturenet cashflows b. cash includes not only currencyon hand but demanddeposits with banks or other financial institutions. Thus.creditors. Assessthe entity’s ability to meet its obligations.its ability to pay dividends.

] b. Cash payments to governments for taxes. fines. c. duties. and refundsfromsuppliers. 45-17 All of the followingare cashoutflowsfor operatingactivities: a.as discussedin paragraph230-10-45-21. including principal payments on accounts and both short. other debt instruments of other entities. paragraph 23. as discussed in Topic 320. as discussed in paragraph 230-10-45-21. proceedsof insurancesettlementsexceptsfor thosethat are directly related to investing or financing activities. such as from destruction of a building. 14/e. and other fees or penalties and the cash that would have been paid for income taxes if Copyright © 2011 John Wiley & Sons. Cash receipts from sales of goods or services. Cash payments to other suppliers and employees for other goods or services. sequence 101] [The term goods includes certain loans and other debt and equity instruments of other entities that are acquired specifically for resale. (c) Accordingto FASBASC230-10-45-16 to 17: 45-16 All of the followingare cashinflowsfor operatingactivities: a.PROFESSIONALRESEARCH(Continued) d.andequitysecurities—interestand dividends. including receipts from collection or sale of accounts and both short. Assess the effects on an entity’s financial position of both its cash and noncashinvestingandfinancingtransactionsduringthe period. Intermediate Accounting. and securities that are classified as trading securities. Cash receipts from returns on loans.and long-term notes payable to suppliers for those materials or goods. suchas amountsreceivedto settle lawsuits.   Kieso. b. [FAS 095. Inc. PROFESSIONALRESEARCH(Continued) c. Cash payments to acquire materials for manufacture or goods for resale. The term goods includes certain loans and other debt and equity instruments of other entities that are acquired specifically for resale. Solutions Manual    (For Instructor Use Only) 23-81 . All other cash receipts that do not stem from transactions defined as investingor financingactivities.and long-term notes receivable from customers arising from those sales.

) d. Cashpaymentmadeto settle an assetretirementobligation.andcashrefundsto customers. 23-82 Copyright © 2011 John Wiley & Sons. Inc. such as payments to settle lawsuits. Solutions Manual    (For Instructor Use Only) .   Kieso.increases in the value of equity instruments issued under share-based payment arrangements that are not included in the cost of goods or services recognizable for financial reporting purposes also had not been deductible in determining taxable income. 14/e. (This is the same amount reportedas a financingcashinflowpursuantto paragraph230-10-45-14(e). cash contributionsto charities. e. f. Intermediate Accounting. All other cash payments that do not stem from transactions defined as investing or financing activities. Cashpaymentsto lendersand othercreditorsfor interest.

.................................................... 2013 Cashflowsfromoperatingactivities Net income.. Statementof CashFlows For the Year EndedDecember31.....PROFESSIONALSIMULATION FinancialStatements ELLWOODHOUSE........ Saleof investments(d).............................. Cashflowsfromfinancingactivities Paymentof dividends(e)........................................................000 \$66.... 2013................. \$32. Net cashprovidedby operatingactivities......................................................000 (19............................. 10..............................050 (5...   Kieso.. Issuanceof commonstock(g). Net cashusedby financingactivities...... Cash..............................000) 20.....December31........INC...... Cashflowsfrominvestingactivities Purchaseof land(c)..................... 2013................500) 15..... Intermediate Accounting...... Retirementof bondspayable(f)...... Cash..................... 14/e.......050 10...................................January1.............. Solutions Manual    (For Instructor Use Only) 23-83 ...050 Noncashinvestingandfinancingactivities Issuanceof bondsfor equipment........... Gainon sale of investment(b)................550 (500) 13.................... Adjustmentsto reconcilenet incometo net cashprovidedby operatingactivities: Depreciationexpense(a).....500 Net cashprovidedby investingactivities.... \$42............000) Net increase(decrease)in cash...................050 55.000 \$13...... Inc.......... 56....000) (10....................000 Copyright © 2011 John Wiley & Sons...........000 (9.................................

14/e. Intermediate Accounting. companies choose for the most part to use the indirect method for reporting net cash flows from operatingactivities. companies may present this informationin the cashflowstatement.IAS 7. GAAP.   Kieso. GAAP).S. “Cash Flow Statements. This requirement is interpreted to mean that non-cash investingand financingactivitiesshouldbe disclosedin the notesto the financialstatements instead of in the financial statements.S. Under U. Notable differences are (1) IFRS encourages companies to disclose the aggregate amount of cash flows that are attributable to the increase in operating capacity separately from those cash flows that are required to maintain operating capacity. the cash flow statement can be preparedusing either the indirect or direct methodunder IFRS.S.However. IFRS23-2 As in U. Solutions Manual    (For Instructor Use Only) 23-85 . GAAPclassifiesinterest paid and receivedas an operatingactivity.S. Copyright © 2011 John Wiley & Sons.the content and presentation of an IFRS statement of cash flows is similar to one used for U. GAAP. Under U. GAAP require that the statement of cash flows should have three major sections—operating. U. and international settings. GAAP. investing and financing—along with changes in cash and cash equivalents.S. Inc.S.S. Other similarities include: (1) Companies preparing financial statements under IFRS must prepare a statement of cash flows as an integral part.the disclosurerequirementsrelatedto the statementof cashflowsare more extensiveunderU. bank overdrafts are classified as financing activities. GAAP.IFRSallowsinterestpaidandreceivedto be classified as either operatingor investingactivities.In addition. (2) The definition of cash equivalentsusedin IFRS is not the sameto that usedin U. In both U. Instead. GAAP.” provides the overall IFRS requirements for cash flow information. these non-cash activities should be reported elsewhere. (2) Both IFRS and U.S.S. GAAP.S.A major difference is that in certainsituationsbankoverdraftsare consideredpart of cashand cashequivalents under IFRS (which is not the case in U.the statementof cashflowsis a requiredstatementfor IFRS. GAAP. (3) Similar to U.S. (3) IFRS requires that non-cash investing and financing activities be excluded from the statement of cash flows.

the FASB and the IASB are involved in a joint project on the presentation and organization of information in the financial statements. The FASB favors presentation of operating cash flows using the direct methodonly. Non-cashinvestingandfinancingactivity(presentedin the notes). So the two Boardswill have to resolvetheir differencesin this area in order to issuea converged standard for the statement of cash flows.plant. Financingactivity. IFRS23-5 (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) 23-86 Operating—addto net income. (2) issuanceof shares to liquidate debt. Financingactivity. (4) non-cashexchangesof property. (3) issuanceof bondsor notes for non-cash assets.   Kieso. Operating—addto net income. Investingactivity.IFRS23-3 Presently. Investingactivity. Copyright © 2011 John Wiley & Sons. the majority of IASB members express a preferencefor not requiring use of the direct method of reporting operating cash flows. Operating—deductfromnet income. Operating—addto net income. Inc. GAAP rules related to cash flow reportingare lessflexiblethanIFRS.and(5) refinancingof long-termdebt. U. Intermediate Accounting.andequipment. 14/e.but this is not a majorconcern. IFRS23-4 Examples of non-cash transactions are: (1) issuance of shares for non-cash assets. Solutions Manual    (For Instructor Use Only) . Financingactivity.S. Financingactivity. Non-cashinvestingandfinancingactivity(presentedin the notes). However.

000 45........ plant.... Accordingly...   Kieso.....000 = \$27.......000+ \$45.. AccumulatedDepreciation 167.... Solutions Manual    (For Instructor Use Only) 23-87 .....000 IFRS states that investing activities include the acquisition and disposition of longterm productiveassets...000 14.. Gainon Sale of Equipment.... and equipmentin exchangefor bondspayablewouldbe disclosedin the notes as a non-cash investing and financingactivity....Plant& Equipment 12/31/11 Equipmentfromexchangeof B/P Paymentsfor purchaseof PP&E 247.. 45.000 25.. The solution can be determined through use of a T-account for accumulated depreciation..... and equipment is an investing activity...500 (given) (given) Copyright © 2011 John Wiley & Sons.. plant. 32.......000 + \$38..... 27.. the purchaseof property.. and equipment....Plant.000 Property.. Intermediate Accounting.. The solution can be determined through use of a T-account for property..000– \$25.000 12/31/12 Accumulated depreciation on equipment sold = \$167...... 14/e. plant...000+ \$14...000 = \$50...000 Equipmentsold Payments = \$277.000 – \$178.. Inc..000 Theentryto reflectthe sale of equipmentis: Cash(proceedsfromsale of equipment) (\$45.IFRS23-6 1.......000 38........000 Equipmentsold 12/31/11 Depreciationexpense ? 178. Note that the acquisition of property... 2.. and Equipment....000)..500 AccumulatedDepreciation.500– \$27.000 ? 12/31/12 277.000– \$247. Property..

23-88 Copyright © 2011 John Wiley & Sons. 3.000 12/31/12 Cashdividendspaid = \$5. RetainedEarnings Dividendsdeclared ? 91. thus. The cash dividends paid can be determined by analyzing T-accounts for Retained Earningsand DividendsPayable.   Kieso. Inc.000 Dividendsdeclared 12/31/11 Net income 12/31/12 = \$91.000 104.000– \$8. BondsPayable Redemptionof B/P 46.000 Financing activities include all cash flows involving liabilities and equity other than operatingitems. The redemptionof bondspayableamountis determinedby settingup a T-accountfor BondsPayable.000 Cashdividendspaid 12/31/11 Dividendsdeclared ? 8.000 31.500 are considered an investing activity.000 = \$18.000 DividendsPayable 5.000+ \$31.000 12/31/11 Issuanceof B/P for PP&E 49.000– \$104.the redemptionof bondspayableis the onlychangenot accountedfor. 14/e.Paymentof cashdividendsis thusa financingactivity.000 18.IFRS23-6 (Continued) The proceeds from the sale of equipment of \$32.000 25. Intermediate Accounting. Solutions Manual    (For Instructor Use Only) . 4.000 12/31/12 ? The problem states that there was no amortization of bond premium or discount.000 = \$15.000+ \$18. Investing activities include the acquisition and disposition of long-term productiveassets.

. (7............. Gainon sale of equityinvestment.......000) Net cashusedby financingactivities...000) 32.250)(c) 1...................... 14/e....... Intermediate Accounting.......750) (3................000 4.. Depreciationexpense............ (1...................... Increasein inventory.... Inc..........100(b) (8................. Purchaseof equipment(cash).................... IFRS23-7 DINGELCORPORATION Statementof CashFlows For the Year EndedDecember31...........250 (1........ redemption of bonds payable is considered a financing activity....................000) Paymentof short-termnote payable......................000+ \$25...................750(a) \$ 4..700 2...... Increasein accountsreceivable(net)......   Kieso.............. Sale of equipment. Adjustmentsto reconcilenet incometo net cashprovidedby operatingactivities: Losson sale of equipment..000 = \$22.. Patent amortization.....200 Cashflowsfromfinancingactivities Paymentof dividends..................... Increasein accountspayable..000– \$49....... (5..... Netcashflowprovidedbyoperatingactivities...................... Net cashprovidedby investingactivities..............................................................000 19..450) 7.......300 (6.................. Therefore.....000) 2..700) (3......................... Proceedsfromflooddamageto building.......... Solutions Manual    (For Instructor Use Only) 23-89 .000) Copyright © 2011 John Wiley & Sons...................................................... Cashflowsfrominvestingactivities Sale of equityinvestments..................................................................500 (20. Gainfromflooddamage...................900(d) 1..............IFRS23-6 (Continued) Redemptionof bondspayable= \$46......................000 Financing activities include all cash flows involving liabilities and equity other than operating items... \$14......... 2012 Cashflowsfromoperatingactivities Net income.................

.............500) \$ 4.......... Depreciationexpense... Bookvalue....750 (b) Cost........................................... Bookvalue................. \$11............. \$20. 2012................................................750 (32......... 2012.......... Intermediate Accounting............... Accumulateddepreciation(40%X \$11.......................................................................500 13............................................................. Proceedsfrominsurance....... Gainon flooddamage.....................................600 (2...........000 (4.. Cash........... Beginningretainedearnings........ Net income........900 Copyright © 2011 John Wiley & Sons..... Decreasein accumulateddepreciation...... Losson sale.............000) (\$ 8...... Solutions Manual    (For Instructor Use Only) .......... Purchasedequipmentby issuingnote payable........................................ Inc..000 \$33..............   Kieso......................................................... IFRS23-7 (Continued) Supplementaldisclosuresof cashflowinformation: Cashpaid duringthe year for: Interest...........................................................................100 (c) Cost.............................750 (6............500 \$10...000 *Presentedin the notesto the financialstatements.....................................................000 \$ 6.................400 (2..........000) \$14........................................... Incometaxes....................... 14/e................January1................................. Cash....................................000) 23........................................................ SupportingComputations: 23-90 (a) Endingretainedearnings............ \$29...250) (d) Accumulateddepreciationon equipmentsold........................................................000)........ 20..... \$ 4............. Non-cashinvestingand financingactivities:* Retirednotepayableby issuingordinaryshares......000 \$21....................................................................... Proceedsfromsale....Increasein cash...........................500 \$ 2.......................400) 6.. Accumulateddepreciation.750 (6.............................000 16.....................December31...........500) \$ 1.................................

investing and financing activities in a manner which is most appropriate to its business.annuitiesand otherpolicybenefits.” IAS 7 doesnot mentionanythingaboutworkingcapital. cashpaymentsto and on behalf of employees. paragraph11 states “An entity presents its cash flows from operating.The objectiveof this Standardis to require the provision of information about the historical changes in cash and cash equivalents of an entity by meansof a statementof cash flowswhichclassifiescash flowsduring the periodfromoperating. cash receipts and cash payments of an insurance entity for premiums and claims. 14/e. (f) cash payments or refunds of income taxes unless they can be specifically identifiedwith financingand investingactivities.” (c) According to paragraph 14.commissionsandotherrevenue. “The statement of cash flows shall report cash flows during the period classified by operating.IFRS23-8 (a) According to IAS 7.” Further. cashreceiptsfromroyalties.investingandfinancingactivities. they generally result from the transactions and other events that enter into the determinationof profitor loss. (b) According to paragraph 10. The economicdecisions that are taken by users require an evaluation of the ability of an entity to generate cash and cash equivalents and the timing and certaintyof their generation. “Cash flows from operating activities are primarily derived from the principal revenue-producing activities of the entity.Examplesof cashflowsfromoperatingactivitiesare: (a) (b) (c) (d) (e) cashreceiptsfromthesaleof goodsandtherenderingof services.” Copyright © 2011 John Wiley & Sons. Solutions Manual    (For Instructor Use Only) 23-91 . “Information about the cash flows of an entity is useful in providingusers of financial statementswith a basis to assessthe ability of the entity to generate cash and cash equivalents and the needs of the entity to utilise those cash flows. Inc. cashpaymentsto suppliersfor goodsand services.fees. Therefore.and (g) cash receipts and payments from contracts held for dealing or trading purposes.This informationmayalso be usedto evaluatethe relationships amongthoseactivities. Classificationby activity providesinformationthat allows users to assessthe impact of those activities on the financial position of the entity and the amount of its cash and cashequivalents. Intermediate Accounting. investingand financingactivities.   Kieso.

Inc. respectively.290.0 millionthat M&S spent on “property.6 million. (b) The most significant item in the investingactivities section is the £352. plant and equipment. It does report income tax expense as an add back to net income in the operating activities section. (c) M&S does not report deferred income taxes on its statement of cash flows.   Kieso. The amountsof net cash providedby operatingactivities for 2010 and 2009 are £1. 23-92 Copyright © 2011 John Wiley & Sons. (d) Depreciationand amortizationis reportedin the operatingactivities sectionof M&S’s statementof cashflowsas an addbackto net incomebecauseit is a non-cashcharge in the incomestatement. 14/e. The two items most responsible for the decreasein cash providedby operating activities in 2010 comparedto 2009 are theloweroperatingprofitandthesmallerincreasein payables. Intermediate Accounting.229.IFRS23-9 (a) M&S uses the indirect method to compute and report net cash provided by operating activities.0 million and £1. Solutions Manual    (For Instructor Use Only) .” The most significant item in the financingactivitiessectionis repaymentof syndicatedbankfacility (SeeNote28).