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Example 1 1. Worksheet for Cash Flow Debits: Cash Accounts receivable Inventory Prepaid operating expenses Prop.

plant & equip.

Beg. Bal.

12/31/2005 Analysis of Changes in Account Balances Entry No. Entry - Dr. Entry No. Entry - Cr. 300 100 200 80 1,000

12/31/2006 Ending Bal 420 150 140 60 1,380

Total Debits Credits: Accumulated depreciation Account payable Accrued operating exp. payable Income taxes payable Common stock Retained earnings Total Credits Cash Flow-Operations

1,680

2,150

100 300 300 100 580 300 1,680

180 400 210 130 580 650 2,150

Cash Flow - Investing

Cash Flow - Financing

Non-Cash Invest./Financing Increase/Decrease in Cash 2. A cash flow statement using the direct method together with a

Reconciliation of net income to cash flows from operating activities

3. Computations showing cash provided by operations under the direct method

Ex 2 - Worksheet Worksheet for Cash Flow Debits: Cash Accounts receivable Inventory Prepaid operating expenses Property plant equipment

Analysis of Changes in Account Balances Beg. Bal. Entry No. Entry - Dr. Entry No. Entry - Cr. Ending Bal 300 420 110 165 200 140 80 60 1,000 1,380

Total Debits Credits: Allowance for doubtful Acct. Accumulated depreciation Accounts payable Accrued Operating exp. Payable Income taxes payable Common stock Retained earnings

10 100 300 300 100 580 300

15 180 400 210 130 580 650

Total Credits Cash Flow-Operations

Cash Flow - Investing

Cash Flow - Financing

Non-Cash Invest./Financing

Increase/Decrease in Cash

Ex 2 - Malmgren Worksheet for Cash Flow Debits: Cash Accounts receivable Inventory Prepaid operating expenses Property plant equipment

Example 2 - Solutions 2005 Analysis of Changes in Account Balances Beg. Bal. Entry No. Entry - Dr. Entry No. 300 11 120 110 2 55 200 3 80 4 1,000

Total Debits Credits: Allowance for doubtful Acct. Accumulated depreciation Accounts payable Accrued Operating exp. Payable Income taxes payable Common stock Retained earnings

1,690 10 100 300 300 100 580 300 2 30 2 5 6 8 10 50 1

90

Total Credits Cash Flow-Operations Net income Increase in accounts rec. (net) Decrease in inventory Decrease in prepaid operating expense Depreciation expense Increase in accounts payable Decrease in accrued operating exp. payable Increase in income taxes payable Net cash flow from operations Cash Flow - Investing Purchase of fixed assets Net cash flow from investing

1,680

1 3 4 5 6 8

400 2 60 20 80 100 7 30 690

Cash Flow - Financing Payment of dividends Net cash flow from financing Non-Cash Invest./Financing

10

Increase/Decrease in Cash 2. A cash flow statement using the direct method together with a

11

Reconciliation of net income to cash flows from operating activities


Ontario Company Cash Flow Statement - Direct Method For the Year Ended Dec. 31 2006 Cash Flows from Operating Activities: Cash Collections From Customers Cash Payments For Merchandise Cash Payments For Operating Expenses Cash Payments For Income Taxes Net Cash Flows From Operating Activities Net Cash Flows From Investing Activities Acquisition Of Fixed Assets Net Cash Flows From Financing Activities Payment Of Dividends Net Increase In Cash Cash Beginning Cash Ending Reconciliation of net income to cash flows from operating activities Net Income Add (Deduct) Items Not Affecting Cash Increase In Accounts Receivable Net Decrease In Inventory Decrease In Prepaid Operating Expenses Depreciation Expense Increase In Accounts Payable Decrease In Accrued Expenses Payable Increase In Income Taxes Payable Net Cash Flows From Operating Activities

Computations: Cash flows from operations:

Cash Collections From Customers: Sales Less: increase in accounts receivable Accts receivable - 1/1 Less: write-off of accts rec.(net) Adj. accounts rec. 1/1 Accts receivable - 12/31 Cash Collections From Customers: Cash Payments For Merchandise Cost of sales Less: decrease in inventory (200-140) Purchases Less: increase in accounts payable (400-300) Cash Payments For Merchandise Cash Payments For Operating Expenses Operating expenses Less: Depreciation expense Bad debt expense Other operating expenses Less: decrease in prepaid expenses (80-60) Add: decrease in operating exp payable (300-210) Cash Payments For Operating Expenses Cash Payments For Income Taxes Income tax expense Less: increase in income taxes payable (130-100) Cash Payments For Income Taxes

count Balances Entry - Cr.

2006 Ending Bal 420 165 60 140 20 60 1,380

2,165 35 80 100 30 400 15 180 400 210 130 580 650

2,165 Notes

50

100 (110-10) - 150 (165-15)

90

140

550

380 (380)

50 (50)

120

120

$4,923 (2,840) (1,363) (170) 550

(380)

(50) 120 300 $420

ows from operating activities $400 $(50) 60 20 80 100 (90) 30

150 $550

5,000 110 22 88 165 Customers:

nts receivable

(77) 4,923

tory (200-140)

nts payable (400-300)

3,000 (60) 2,940 (100) 2,840

aid expenses (80-60) ting exp payable (300-210) erating Expenses

1,400 (80) (27) 1,293 (20) 90 1,363

200 (30) 170

e taxes payable

ome Taxes

Problem 23-8 Requirements: 1. Complete the worksheet below. 2. Prepare a Statement of Cash Flow using the indirect method 3 Compute net cash provided by operating activities under the direct method Hint: Use P23-6 (sol) as a guide) Prob. 23-8 1. Worksheet for Cash Flow Debits: Cash Accounts receivable Mdse inventory Investment --Avail for sale Equipment Buildings Land

2011 Analysis of Changes in Account Balances Beg. Bal. Entry No. Entry - Dr. Entry No. Entry - Cr. 51,000 130,000 61,000 85,000 48,000 145,000 25,000

Total Debits Credits: Allowance for doubtful accts Accumulated depr.-equip Accumulated depr.-building Accounts payable Income taxes payable L-term notes payable Common stock Retained earnings

545,000 8,000 14,000 28,000 60,000 10,000 70,000 260,000 95,000

Total Credits Cash Flow-Operations Net income Increase in accts. Rec.(net) Inc. in inventory Gain on sale of investments Depreciation expense Loss on sale of equipment Increase in accts payable Increase in taxes payable Net cash flow from operations Cash Flow - Investing

545,000

Net cash flow provided from investing Cash Flow - Financing

Net cash used by financing activities

Increase/Decrease in Cash

2012 Ending Bal 70,000 155,000 75,000 55,000 70,000 145,000 40,000

610,000 10,000 21,000 37,000 66,000 12,000 62,000 310,000 92,000

610,000

Problem 23-8 Requirements: 1. Complete the worksheet below. 2. Prepare a Statement of Cash Flow using the indirect method 3 Compute net cash provided by operating activities under the direct method Hint: Use P23-6 (sol) as a guide) Prob. 23-8 1. Worksheet for Cash Flow Debits: Cash Accounts receivable Mdse inventory Investment --Avail for sale Equipment Buildings Land

2011 Analysis of Changes in Account Balances Beg. Bal. Entry No. Entry - Dr. Entry No. Entry - Cr. 51,000 14 19,000 130,000 2 25,000 61,000 3 14,000 85,000 9 5,000 4 48,000 5 32,000 5 145,000 25,000 12 15,000

2012 Ending Bal Notes 70,000 155,000 75,000 35,000 55,000 10,000 70,000 145,000 40,000

Total Debits Credits: Allowance for doubtful accts Accumulated depr.-equip Accumulated depr.-building Accounts payable Income taxes payable L-term notes payable Common stock Retained earnings

545,000 8,000 14,000 28,000 60,000 10,000 70,000 260,000 95,000 2 6 6 7 8 13 12 1 2,000 13,000 9,000 6,000 2,000 35,000 15,000 67,000

610,000 10,000 21,000 37,000 66,000 12,000 62,000 310,000 92,000

6,000

10

8,000

11

70,000

Total Credits Cash Flow-Operations Net income Increase in accts. Rec.(net) Inc. in inventory Gain on sale of investments Depreciation expense Loss on sale of equipment Increase in accts payable Increase in taxes payable Net cash flow from operations

545,000

610,000 Notes 1 67,000 2 3 4 6 5 7 8 22,000 3,000 6,000 2,000 100,000 52,000 48,000 23,000 14,000 15,000 2

Cash Flow - Investing Sale of investments Sale of equipment Purchase of equipment Purchase of investments Net cash flow provided from investing Cash Flow - Financing Payment on L-T notes Payment of dividends Issuance of common stock Net cash used by financing activities Non-Cash Invest./Financing Issuance of common stock for land Increase/Decrease in Cash Notes

4 5

50,000 1,000 5 9 51,000 10 11 32,000 5,000 37,000 8,000 70,000 78,000 12 14 15,000 19,000 (43,000)

4 5

14,000

13

35,000 35,000 15,000

12

19,000

2 Increase in accounts receivable (net) Accts rec. less allow for doubtful accounts, 1/1(130,000-8,000) Accts rec. less allow for doubtful accounts, 12/31(155,000-10,000) Increase in accounts receivable (net) 4 Proceeds on sale of investments Cost Add: Gain Proceeds 5 Proceeds on sale of equipment Cost of equipment Accumulated depr. Book value Loss on sale Proceeds

122,000 145,000 23,000

35,000 15,000 50,000

10,000 6,000 4,000 3,000 1,000

6 Depreciation expense Accum. Depr. Equip. 1/1 14,000 Less Accum depr. On equip sold 6,000 Adj. bal. 8,000 Accum. Depr. Equip. 12/31 21,000 Depr. Expense - equip. 13,000 Depr. Expense - bldg (37,000-28,000) 9,000 Total depr. Expense 22,000 P23-8 Sharpe Company Statement of Cash Flows For the Year Ended December 31, 2010 2 Cash flows provided from operating activities Net income Ajustments to reconcile net income to net cash provided by operating activities: Increase in accts. Rec.(net) Inc. in inventory Gain on sale of investments Depreciation expense Loss on sale of equipment Increase in accts payable Increase in taxes payable Net cash provided by operating act. Cash flows provided from investing activities Sale of investments Sale of equipment Purchase of equipment Purchase of investments Net cash flow provided from investing Cash flows used by financing activities Payment on L-T notes Payment of dividends Issuance of common stock Net cash used by financing activities Net increase in cash Cash, January 1, 2012 Cash, December 31, 2012 Noncash Investing and Financing activity Issuance of common stock for land P23-8 3 Net cash provided by operating activities under the direct method Cash receipts from customers Cash payments Cash payments to suppliers Cash payments for operating expenses Cash payments for income taxes Net cash provided by operating activities Cash receipts from customers Sales Less: Increase in accounts receivable Accts. Receivable, 1/1 Less: write-offs of accts rec. Adjusted balance, 1/1 Accts. Receivable, 12/31 Cash receipts from customers Cash payments to suppliers Cost of goods sold Add: increase in inventory (61,000-75,000) Purchases Less: increase in accounts payable (66,000-60,000) Cash payments to suppliers Cash payments for operating expenses Operating expense Less: Bad debt expense Allow for doubtful accounts, 1/1 Less: write-off of accts. Rec. Total Less: Allow for doubtful accts, 12/31 Depreciation expense Cash payments for operating expenses Cash payments for income taxes Income tax expense Less: Increase in income taxes payable ( 12,000-10,000) Cash payments for income taxes 925,000 608,000 226,000 43,000

$67,000

(23,000) (14,000) (15,000) 22,000 3,000 6,000 2,000

-19,000 48,000

50000 1000 (32000) (5000) 14,000

(8,000) (70,000) 35,000 (43,000) 19,000 51,000 $70,000

$15,000

877,000 48,000

950,000 130,000 0 130,000 155,000

(25,000) 925,000

600,000 14,000 614,000 (6,000) 608,000

250,000 8,000 0 8,000 10,000

(2,000) (22,000) 226,000

45,000 2,000 43,000

Problem 23-6 Worksheet for Cash Flow Debits: Cash Accounts receivable Mdse inventory Investment --Avail for sale Equipment Buildings Land

2011 Analysis of Changes in Account Balances Beg. Bal. Entry No. Entry - Dr. Entry No. Entry - Cr. 33,750 60,000 24,000 38,500 18,575 56,250 7,500

2012 Ending Bal 42,000 70,500 30,000 22,250 30,000 67,500 7,500

Total Debits Credits: Allowance for doubtful accts Accumulated depr.-equip Accumulated depr.-building Accounts payable Income taxes payable L-term notes payable Common stock Retained earnings

238,575 1,500 2,250 9,000 24,750 2,625 31,000 125,000 42,625

269,750 2,250 5,625 13,500 35,000 3,375 21,000 150,000 39,000

Total Credits Cash Flow-Operations

238,750

269,750

Cash Flow - Investing

Cash Flow - Financing

Non-Cash Invest./Financing Increase/Decrease in Cash

Problem 23-6 Worksheet for Cash Flow Debits: Cash Accounts receivable Mdse inventory Investment --Avail for sale Equipment Buildings Land

2011 Analysis of Changes in Account Balances 2012 Beg. Bal. Entry No. Entry - Dr. Entry No. Entry - Cr. Ending Bal 33,750 15 8,250 42,000 60,000 3 10,500 70,500 24,000 7 6,000 30,000 38,500 10 8,750 9 25,000 22,250 18,575 12 15,000 4 3,750 30,000 56,250 13 11,250 67,500 7,500 7,500

Total Debits Credits: Allowance for doubtful accts Accumulated depr.-equip Accumulated depr.-building Accounts payable Income taxes payable L-term notes payable Common stock Retained earnings

238,575 1,500 2,250 9,000 24,750 2,625 31,000 125,000 42,625 3 4 4,650 750 3 5 5 6 8 14 1 5,400 4,125 4,500 10,250 750 25,000 42,500

269,750 2,250 5,625 13,500 35,000 3,375 21,000 150,000 39,000

11 2 14

10,000 21,125 25,000

Total Credits Cash Flow-Operations Net income Increase in accts rec (net) Gain on sale of mach. Depreciation expense Increase in accts payable Increase in inventory Increase in accrued payable Gain on sale of investments Net cash flow from operations Cash Flow - Investing Sale of machine Sale of investments Purchase of investments Purchase of machine Addition to building Net cash flow from investing Cash Flow - Financing Payment of dividends Payment on L-T note Net cash flow from financing Non-Cash Invest./Financing Increase/Decrease in Cash P-23-6 Part b

238,750

269,750

1 4 5 6 8

42,500 3 800 8,625 10,250 7 750 9 62,925 3,750 19,500 43,425 6,000 9,750

4 9

2,200 28,750 10 12 13 30,950 2 11 8,750 15,000 11,250 35,000 21,125 10,000 31,125 (31,125)

(4,050)

15

8,250

8,250

Marcus Inc Statement of Cash Flows For the year ended December 31, 2012 Cash flows provided from operating activities Net income Ajustments to reconcile net income to net cash provided by operating activities: Increase in accts rec (net) (9,750) Gain on sale of mach. 800 Depreciation expense 8,625 Increase in accts payable 10,250 Increase in inventory (6,000) Increase in accrued payable 750 Gain on sale of investments (3,750) Net cash provided by operating act. Cash flows used by investing activities Sale of machine 2,200 Sale of investments 28,750 Purchase of investments (8,750) Purchase of machine (15,000) Addition to building (11,250) Net cash used by investing act. Cash flows from financing activities Payment of dividends (21,125) Payment on L-T note (10,000) Net cash used by financing act. Net increase in cash Cash, January 1, 2012 Cash, December 31, 2012 P23-6 Part a. Cash provided by operations - Direct Method Cash receipts from customers Cash payments: Cash payments to suppliers Cash payments for operating expenses Net cash provided by operating activities $524,850 375,750 105,675

$42,500

925 43,425

(4,050)

(31,125) 8250 33,750 $42,000

481,425 $43,425

Computations: Cash receipts from customers: Sales Less increase in accounts receivable (adj. for write-off of A/R) Accts. Receivable, 1/1 60,000 Write-off of accts rec. (4,650) Total 55,350 Less: Accts. Receivable, 12/31 70,500 Cash receipts from customers: Cash payments to suppliers Cost of goods sold Add: increase in inventory (30,000-24,000) Purchases Less: increase in accts payable (35,000-24,750) Cash payments to suppliers Cash payments for operating expenses Operating expenses Less: depreciation expense bad debt expense Cash payments for operating expenses

$540,000

15,150 $524,850

380,000 6,000 386,000 (10,250) 375,750

120,450 (8,625) (5,400) 105,675

E23-11 Worksheet for Cash Flow 2011 Analysis of Changes in Account Balances 2012 Debits: Beg. Bal. Entry No. Entry - Dr. Entry No. Entry - Cr. Ending Bal Cash 1,100 13 700 1,800 Receivables 1,300 2 450 1,750 Inventory 1,900 3 300 1,600 Plant asset 1,700 8 70 1,900 9 130 L-T investments 1,470 7 170 1,300

Total Debits Credits: Accumulated deprec. Accounts payable Accrued liabilities Bonds payable Capital stock Retained earnings

7,470 1,170 800 250 1,650 1,700 1,900 4 5 6 10 50 250 11 8 1 130 70 810 30 400

8,350 1,200 1,200 200 1,400 1,900 2,450

12

260

Total Credits Cash Flow-Operations Net income Increase in accounts rec (net) Decrease in inventory Depreciation expense Increase in accounts payable Decrease in accrued liab. Gain on sale of investments Net cash provided by operations

7,470

8,350

1 3 4 5

810 2 300 30 400 6 7 1540 50 80 580 960 450

Cash Flow - Investing Sale of investments Purchase of plant assets Net cash provided by investing activities Cash Flow - Financing Retirement of bonds payable Issuance of capital stock Payment of cash dividends Net cash used by financing activities Non-Cash Invest./Financing Common stock for plant assets Increase/Decrease in Cash E23-11

250 9 250 130 130 120

10 11 130 12 130 8 70 8 13

250 260 510 70 700

(380)

700

Fairchild Company Statement of Cash Flows For the Year Ended December 31, 2012 (Indirect Method) Cash flows from operating activities Net income Adjustment to reconcile net income to net cash provided by operating activities: Increase in accounts rec (net) (450) Decrease in inventory 300 Depreciation expense 30 Increase in accounts payable 400 Decrease in accrued liab. (50) Gain on sale of investments (250) Net cash provided by operations Cash flows from investing activities Sale of investments 250 Purchase of plant assets -130 Net cash provided by investing activities Cash flows from investing activities Retirement of bonds payable (250) Issuance of capital stock 130 Payment of cash dividends (260) Net cash used by financing activities Net increase in cash Cash, January 1, 2012 Cash, December 31, 2012 Noncash Investing and financing activities Issuance of common stock for plant assets

$810

150 960

120

(380) 700 1,100 $1,800

$70

E23-11 Worksheet for Cash Flow 2011 Analysis of Changes in Account Balances Debits: Beg. Bal. Entry No. Entry - Dr. Entry No. Entry - Cr. Cash 1,100 Receivables 1,300 Inventory 1,900 Plant asset 1,700 L-T investments 1,470

2012 Ending Bal 1,800 1,750 1,600 1,900 1,300

Total Debits Credits: Accumulated deprec. Accounts payable Accrued liabilities Bonds payable Capital stock Retained earnings

7,470 1,170 800 250 1,650 1,700 1,900

8,350 1,200 1,200 200 1,400 1,900 2,450

Total Credits Cash Flow-Operations

7,470

8,350

Cash Flow - Investing

Cash Flow - Financing

Non-Cash Invest./Financing Increase/Decrease in Cash

E23-12

Direct Method Cash flows from operating activities Cash collected from customers Less: Cash paid for merchandise Cash paid for selling & administrative expenses Cash paid for income taxes Net cash provided by operating activities Cash collected from customers Less increase in accounts receivable (adj. for write-off of A/R) Accts. Receivable, 1/1 Less: Write-off of accts rec. Total Less: Accts. Receivable, 12/31 Cash collected from customers: Cash paid for merchandise Cost of goods sold Less: Decrease in inventory (1,900-1,600) Purchases Less: Increase in accounts payable (1,200-800) Cash paid for merchandise Cash paid for selling/administrative expenses Selling and adminstrative expense Less: depreciation expense Add: decrease in accrued liabilities (250-200) Cash paid for selling/administrative expenses Cash paid for income taxes Income tax expense Increase or decrease in income taxes payable Cash paid for income taxes

6,450 4,000 950 540

5,490 960

6,900 1,300 0 1,300 1,750

(450) 6,450

4,700 (300) 4,400 ### 4,000

930 30 50 20 950

540 0 540

E23-12

Fairchild Company Statement of Cash Flows For the Year Ended December 31, 2012 (Direct Method) Cash flows from operating activities Cash collected from customers Less: Cash paid for merchandise Cash paid for selling & administrative expenses Cash paid for income taxes Net cash provided by operating activities Cash flows from investing activities Sale of investments Purchase of plant assets Net cash provided by investing activities Cash flows from investing activities Retirement of bonds payable Issuance of capital stock Payment of cash dividends Net cash used by financing activities Net increase in cash Cash, January 1, 2012 Cash, December 31, 2012 Noncash Investing and financing activities Issuance of common stock for plant assets

$6,450 4,000 950 540

5,490 960

250 (130) 120

(250) 130 (260) (380) 700 1,100 $1,800

$70

Worksheet for Cash Flow Debits:

Analysis of Changes in Account Balances Beg. Bal. Entry No. Entry - Dr. Entry No. Entry - Cr.

Ending Bal

Total Debits Credits:

Total Credits Cash Flow-Operations

Cash Flow - Investing

Cash Flow - Financing

Non-Cash Invest./Financing

Increase/Decrease in Cash