Professional Documents
Culture Documents
DISCUSSION QUESTIONS
1. It is costly to accumulate the data needed and to prepare the statement of cash flows.
2. It focuses on the differences between net income and cash flows from operating
activities, and the data needed are generally more readily available and less costly to
obtain than is the case for the direct method.
3. In a separate schedule of noncash investing and financing activities accompanying
the statement of cash flows.
4. The $30,000 increase must be added to income from operations because the amount of
cash paid to merchandise creditors was $30,000 less than the amount of purchases
included in the cost of merchandise sold.
5. The $25,000 decrease in salaries payable should be deducted from income to determine
the amount of cash flows from operating activities. The effect of the decrease in the
amount of salaries owed was to pay $25,000 more cash during the year than had been
recorded as an expense.
6. a. $100,000 gain
b. Cash inflow of $600,000
13-1 13-1
© 2016 Cengage
© 2016
Learning.
CengageAllLearning.
Rights Reserved.
All Rights
May
Reserved.
not be scanned,
May not copied
be scanned,
or duplicated,
copied ororduplicated,
posted to aorpublicly
posted to
accessible
a publiclywebsite,
accessible
in whole
website,
or ininpart.
whole or in part.
c. The gain of $100,000 would be deducted from net income in determining net cash
flow from operating activities; $600,000 would be reported as cash flows from
investing activities.
7. Cash flows from financing activities—issuance of bonds, $1,960,000 ($2,000,000 × 98%)
8. a. Cash flows from investing activities—Cash received from the disposal of fixed assets,
$15,000
The $15,000 gain on asset disposal should be deducted from net income in
determining net cash flow from operating activities under the indirect method.
b. No effect
9. The same. The total amount reported as the net cash flow from operating activities is not
affected by the use of the direct or indirect method.
10. Cash received from customers, cash payments for merchandise, cash payments for
operating expenses, cash payments for interest, cash payments for income taxes.
13-2 13-2
© 2016 Cengage
© 2016
Learning.
CengageAllLearning.
Rights Reserved.
All Rights
May
Reserved.
not be scanned,
May not copied
be scanned,
or duplicated,
copied ororduplicated,
posted to aorpublicly
posted to
accessible
a publiclywebsite,
accessible
in whole
website,
or ininpart.
whole or in part.
CHAPTER
CHAPTERStatement
Statement
of Cash of Cash
13 13 Flows Flows
PRACTICE EXERCISES
PE 13–1A (MAN)
a. Financing d. Financing
b. Operating e. Investing
c. Operating f. Operating
PE 13–1B (MAN)
a. Investing d. Operating
b. Investing e. Operating
c. Operating f. Financing
PE 13–2A (MAN)
Net income………………………………………………………………………………… $120,400
Adjustments to reconcile net income to net cash flow
from operating activities:
Depreciation……………………………………...………………………………… 8,400
Amortization of patents………………………………...…………………………… 3,080
Loss from sale of land…………………………..………………………………… 4,480
Net cash flow from operating activities………………………..………………………$136,360
PE 13–2B (MAN)
Net income……………………………………………………………………...………… $175,000
Adjustments to reconcile net income to net cash flow
from operating activities:
Depreciation……………………………………………………..………………… 8,750
Amortization of 3,250
patents…………………………………..…………………………
Gain from sale of (18,750)
investments…………………………….………………………
Net cash flow from operating activities……………………..……………………… $168,250
13-3 13-3
© 2016 Cengage
© 2016
Learning.
CengageAllLearning.
Rights Reserved.
All Rights
May
Reserved.
not be scanned,
May not copied
be scanned,
or duplicated,
copied ororduplicated,
posted to aorpublicly
posted to
accessible
a publiclywebsite,
accessible
in whole
website,
or ininpart.
whole or in part.
CHAPTER
CHAPTERStatement
Statement
of Cash of Cash
13 13 Flows Flows
PE 13–3A (MAN)
Net income…………………………….……………………………………………………
$207,000
Adjustments to reconcile net income to net cash flow
from operating activities:
Changes in current operating assets and liabilities:
Decrease in accounts 5,400
receivable………………………………...……………
Increase in (2,520)
inventory…………………………………..…………………………
Increase in accounts 1,980
Net cashpayable……………………………….…………………
flow from operating $211,860
activities…………………………..…………………
Note: The change in dividends payable impacts the cash paid for
dividends,
which is disclosed under financing activities.
PE 13–3B (MAN)
Net income…………………………………..………………………………………………
$160,000
Adjustments to reconcile net income to net cash flow
from operating activities:
Changes in current operating assets and liabilities:
Increase in accounts (3,600)
receivable………………………………...……………
Increase in (5,100)
inventory…………………………….………………………………
Increase in accounts 6,900
Net cashpayable………………………….………………………
flow from operating $158,200
activities………………….……………………………
Note: The change in dividends payable impacts the cash paid for
dividends,
which is disclosed under financing activities.
PE 13–4A (MAN)
Cash flows from operating activities:
Net income……………………………………….…………………… $405,000
Adjustments to reconcile net income to net cash
flow from operating activities:
Depreciation…………………………………………...……… 45,000
…
Gain on disposal of (36,900)
equipment………………………………
Changes in current operating assets and liabilities:
Decrease in accounts receivable……………………..… 25,200
Decrease in accounts (6,480)
payable……………………………
Net cash flow from operating activities……………………..… $431,820
13-4 13-4
© 2016 Cengage
© 2016
Learning.
CengageAllLearning.
Rights Reserved.
All Rights
May
Reserved.
not be scanned,
May not copied
be scanned,
or duplicated,
copied ororduplicated,
posted to aorpublicly
posted to
accessible
a publiclywebsite,
accessible
in whole
website,
or ininpart.
whole or in part.
CHAPTER
CHAPTERStatement
Statement
of Cash of Cash
13 13 Flows Flows
PE 13–4B (MAN)
Cash flows from operating activities:
Net income…………………………………….………………………… $280,000
Adjustments to reconcile net income to net cash
flow from operating activities:
Depreciation………………………………...…………………… 48,000
Loss on disposal of equipment……………………………..… 19,520
Changes in current operating assets and liabilities:
Increase in accounts receivable……………………………
(17,280) Increase in accounts payable……………………….………
8,960
Net cash flow from operating activities……………………...……
$339,200
PE 13–5A (MAN)
The loss on the sale of land is added to net income in the Operating Activities section.
Loss on sale of land……………………………………….…………………………… $
90,000
The purchase and sale of land is reported as part of cash flows from
investing activities as shown below.
Cash received from sale of land…………………...………………………………
180,000
Cash paid for purchase of land……………………………...………………………
(540,000)
PE 13–5B (MAN)
The gain on the sale of land is subtracted from net income in the Operating
Activities section.
Gain on sale of land………………………….……………………………………… $
(40,000)
The purchase and sale of land is reported as part of cash flows from
investing activities as shown below.
Cash received from sale of land…………………..…………………………………
240,000
Cash paid for purchase of land………………………..……………………………
(400,000)
13-5 13-5
© 2016 Cengage
© 2016
Learning.
CengageAllLearning.
Rights Reserved.
All Rights
May
Reserved.
not be scanned,
May not copied
be scanned,
or duplicated,
copied ororduplicated,
posted to aorpublicly
posted to
accessible
a publiclywebsite,
accessible
in whole
website,
or ininpart.
whole or in part.
Another document from Scribd.com that is
random and unrelated content:
alternate format must include the full Project Gutenberg™ License
as specified in paragraph 1.E.1.
• You pay a royalty fee of 20% of the gross profits you derive from
the use of Project Gutenberg™ works calculated using the method
you already use to calculate your applicable taxes. The fee is owed
to the owner of the Project Gutenberg™ trademark, but he has
agreed to donate royalties under this paragraph to the Project
Gutenberg Literary Archive Foundation. Royalty payments must be
paid within 60 days following each date on which you prepare (or
are legally required to prepare) your periodic tax returns. Royalty
payments should be clearly marked as such and sent to the Project
Gutenberg Literary Archive Foundation at the address specified in
Section 4, “Information about donations to the Project Gutenberg
Literary Archive Foundation.”
• You provide a full refund of any money paid by a user who notifies
you in writing (or by e-mail) within 30 days of receipt that s/he does
not agree to the terms of the full Project Gutenberg™ License. You
must require such a user to return or destroy all copies of the works
possessed in a physical medium and discontinue all use of and all
access to other copies of Project Gutenberg™ works.
• You comply with all other terms of this agreement for free
distribution of Project Gutenberg™ works.
1.F.
1.F.4. Except for the limited right of replacement or refund set forth
in paragraph 1.F.3, this work is provided to you ‘AS-IS’, WITH NO
OTHER WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR ANY PURPOSE.
Please check the Project Gutenberg web pages for current donation
methods and addresses. Donations are accepted in a number of
other ways including checks, online payments and credit card
donations. To donate, please visit: www.gutenberg.org/donate.
Most people start at our website which has the main PG search
facility: www.gutenberg.org.