Chapter 12 – Exercise 1

The following information is available for Oscar Corporation for the year ended
December 31, 2017.
Beginning cash balance $ 45,000
Accounts payable decrease 3,700
Depreciation expense 162,000
Accounts receivable increase 8,200
Inventory increase 11,000
Net income 284,100
Cash received for sale of land at book value 35,000
Cash dividends paid 12,000
Income taxes payable increase 4,700
Cash used to purchase building 289,000
Cash used to purchase treasury stock 26,000
Cash received from issuing bonds 200,000
Requirements:
Prepare a statement of cash flows using the indirect method.

Note:
if the Asset increase, the cash will decrease
If the liability increase, the cash will increase
 STAMOS CORPORATION
Statement of Cash Flows—Indirect Method
For the Year Ended December 31, 2017

Cash flows from operating activities

Net income ........................................................................... $284,100
Adjustments to reconcile net income to net cash
Depreciation expense ................................................... $162,000
Decrease in accounts payable ....................................... (3,700)
Increase in accounts receivable .................................... (8,200)
Increase in inventory .................................................... (11,000)
Increase in income taxes payable ................................. 4,700
143,800
Net cash provided by operating activities ............................. 427,900

Cash flows from investing activities

Sale of land ................................................................... 35,000
Purchase of building ..................................................... (289,000)
Net cash used by investing activities ...................... (254,000)

Cash flows from financing activities

Issuance of bonds ......................................................... 200,000
Payment of dividend ..................................................... (12,000)
Purchase of treasury stock ............................................ (26,000)
Net cash provided by financing activities ............... 162,000

427,900-254,000+162,000=
Net increase in cash .............................................................. 335,900
Opening cash balance .......................................................... 45,000
Ending cash balance..................................................... $380,900
 Chapter 12 – Exercise 2

The current sections of Zamani.’s balance sheets at December 31, 2016

and 2017, are presented here. Zamani’s net income for 2017 was
$153,000. Depreciation expense for 2017 was $27,000

Current assets 2017 2016

Cash $ 105,000 $ 99,000
Accounts receivable 80,000 89,000
Inventory 168,000 172,000
Prepaid expenses 27,000 22,000
Total current assets $ 380,000 $ 382,000
Current liabilities
Accrued expenses payable $ 15,000 $ 5,000
Accounts payable 85,000 92,000
Total current liabilities $ 100,000 $ 97,000

Requirements:
Prepare the net cash provided by operating activities section of the
company’s statement of cash flows for the year ended on Dec 31, 2017
using the indirect method.
 Current assets 2017 2016 Different
Cash $ 105,000 $ 99,000
Accounts receivable 80,000 89,000 9,000
Inventory 168,000 172,000 4,000
Prepaid expenses 27,000 22,000 (5,000)

Current liabilities
Accrued expenses payable $ 15,000 $ 5,000 10,000
Accounts payable 85,000 92,000 (7,000)

ZAMANI.
Partial Statement of Cash Flows
For the Year Ended December 31, 2017

Net income ................................................................ $153,000

Operating activities:
Depreciation expense ................................... $27,000
Decrease in accounts receivable ...................... 9,000
Decrease in inventory ..................................... 4,000
Increase in prepaid expenses ..................... (5,000)
Increase in accrued expenses payable ......... 10,000
Decrease in accounts payable ...................... (7,000) 38,000
Net cash provided by operating activities ................... $191,000