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ACC1002X Financial Accounting

Semester 2 of Academic Year 2015-2016
SOLUTIONS to Optional Questions
CHAPTER 5: 5-47, 5-57, 5-61, 5-66

5-47
BRITISH AIRWAYS PLC
Statement of Cash Flows from Investing Activities
For the 2009 Fiscal Year
(In Millions)
Cash from Interest received*
Cash from Dividends received*
Purchase of property, plant and equipment
Purchase of subsidiary (net of cash received)
Proceeds from sale of property, plant, and equipment
Purchase of intangible assets
Proceeds from sale of other investments
Proceeds from other investing activities
Net cash used for investing activities

£ 105
17
(547)
(34)
5
(24)
7
214
£(257)

* British Airways classifies dividends and interest received as investing activities for the net cash
used for investing activities to total £(257). This is allowed under IFRS but not under U.S.
GAAP. Under U.S. GAAP, interest and dividends received would be omitted from the investing
activities section, and classified in the operating activities section instead.
5-57
CLOROX COMPANY
Statement of Cash Flows from Operating Activities
For the Nine Months Ended March 31, 2009
Net Earnings
Add expenses not requiring cash:
Depreciation and amortization
Other noncash revenue and expense, net
Adjust for changes in operating current
assets and current liabilities:
Decrease in accounts receivable
Increase in inventories
Increase in other current assets
Decrease in accounts payable and
accrued liabilities
Decrease in income taxes payable
Net cash provided by operating activities

$ 367
$ 142
65

207

$ 21
(42)
(20)
(101)
(9)

(151)
$ 423

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20X1 (In Millions) Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Increase in receivables Increase in inventories Increase in current liabilities Net cash provided by operating activities Cash flows from investing activities: Purchase of fixed assets Cash flows from financing activities: Issue of long-term debt Dividends paid Cash provided by financing activities Net decrease in cash Cash balance. Page 2 of 4 . December 31. $ 60 40 (38) (44) 75 $ 93 (240) $150 (12) 138 (9) 21 $ 12 $ Dear Mr. 20X0 Cash balance. 20X1 2. inventories.5-61 CHAVEZ COMPANY Statement of Cash Flows For the Year Ended December 31. In your case. the substantial increase in the fixed asset levels above the amount financed by debt was perhaps the dominant factor in consuming cash generated by operations. But the insatiable demand for cash to expand receivables. December 31. Chavez: Severe shortages of cash often accompany rapid corporate growth. and fixed assets may deplete the cash on hand despite profitable operations. Profitable operations usually produce heavy supplies of cash.

593) $ 1. 20X1 (In Thousands) Cash flows from operating activities: Cash collections from customers ($9.986) (3. Proceeds from sale of property Net cash used by investing activities Cash flows from financing activities: Issue common stock Cash received on exercise of stock options Issue long-term debt Retire long-term debt Buy treasury stock Cash dividends paid Net cash provided by financing activities Net increase in cash and cash equivalents $ 9. Page 3 of 4 .300 170 1. ANCHORAGE TOYS.5-66 This problem includes the complication of gains and losses on asset sales and debt retirement. it merely rearranges the composition of the total cash holdings.367 $ (1. The noncash purchase of new equipment in (d) would be shown in an accompanying schedule.906 (850) (249) (240) 4. plant.074) (129) (390) (8.808 152 $ 9. INC. similarly for transactions (f) and (j).037 $ 70 Note that (h) regarding the money market fund is irrelevant.334) $ 3.848) 500 (5. Statement of Cash Flows For the Year Ended December 31.839 – $31) Dividends received Cash payments: To suppliers and employees For interest ($144 – $15) For taxes Cash disbursed for operating activities Net cash provided by operating activities Cash flows from investing activities: Purchase property.960 $ (8. and equipment Purchase stock in Missoula Toy Co.

Reconciliation of Net Income to Net Cash Provided by Operating Activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Add: Depreciation and amortization Deduct: Increase in inventories Deduct: Increase in accounts receivable Add: Increase in accounts and wages payable Add: Increase in interest payable Add: Increase in taxes payable Net cash provided by operating activities $ 798 615 (72) (31) 7 15 35 $1.367 Schedule of Noncash Investment and Financing Activities Issue note payable for purchase of equipment $ 516 Issue common stock for conversion of long-term debt $ 960 Issue common stock to acquire Bellingham Musical Instruments Co. $ 305 Page 4 of 4 .