Intermediate Accounting 19th Edition

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CHAPTER 5

QUESTIONS
1. Cash flow from operations can offer a 3. Operating activities include those transac-
clearer picture of a company’s performance tions and events that enter into the deter-
than does net income when: mination of net income. Cash receipts from
• A company reports large noncash ex- selling goods or from providing services are
penses, such as write-offs, deprecia- the major cash inflow for most businesses.
tion, and provisions for future obliga- Major cash outflows include payments to
tions. Earnings may give an overly purchase inventory and to pay wages,
pessimistic view of the firm. taxes, interest, utilities, rent, and similar
• A company is growing rapidly. Report- expenses.
ed earnings may be positive, but opera- Investing activities are the purchase and
tions are actually consuming rather sale of land, buildings, and equipment and
than generating cash. the purchase and sale of financial instru-
• A company badly needs to report fa- ments not intended for trading purposes.
vorable earnings, as is the case before
a major loan application or before a
stock offering. In these cases, cash
flow from operations provides an excel-
lent reality check for reported earnings.
2. To qualify as a cash equivalent when pre-
paring a statement of cash flows, an item
must be
(a) readily convertible to cash, and
(b) so near its maturity that there is insig-
nificant risk of changes in value due to
changes in interest rates.
As a general rule, only investments with
original maturities of three months or less
qualify. The original maturity is determined
from the date of acquisition of the invest-
ment by the entity, not the date of original
issuance of the security.
 Financing activities include transactions
and events whereby cash is obtained from or
repaid to owners (equity financing) and
creditors (debt financing).
4. The normal pattern of cash flow is
• Operating—positive
• Investing—negative
• Financing—either positive or negative
5. The direct method reports all operating
cash receipts and cash payments. The dif-
ference between cash receipts and pay-
ments is the net cash flow from operations.
The indirect method begins with net income
as reported on the income statement, ad-
justs for any noncash items (such as de-
preciation), and converts the accrual
amounts to a cash basis. The result of this
reconciliation process is net cash flow from
operations, which will be exactly the same
amount as derived using the direct method.
6. Many users favor the direct method be-
cause it is a straightforward approach that
is easy to understand. Most accountants
prefer the indirect method because it is
easy to apply and because it helps explain or
reconcile the differences between net cash
flow from operations and net income.
Because accountants already have to re-
port net income, it is easier for them to start
with that number and convert it to net cash
flow from operations rather than use the di-
rect method.
7. When the direct method is used, deprecia-
tion expense is omitted from the calculation
of cash from operating activities because it is
a noncash expense. When the indirect
method is used, depreciation expense is
added back to net income because depre-
ciation was subtracted in the original com-
putation of net income.
8. The statement, “Cash flow is equal to net
income plus depreciation” is wrong be-
cause it ignores the impact on cash from
operating activities of all the changes in
current operating assets and current oper-
ating liabilities.

145
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146 Chapter 5
9. The FASB treats interest payments as an
operating activity in order to be consistent
with the income statement presentation.
The FASB defines interest payments as
operating activities because interest ex-
pense enters into the calculation of net in-
come. The FASB considered classifying in-
terest payments as financing activities but
ultimately decided on the operating activity
classification.
10. The “target number” is the net change in
the cash balance, as shown in the balance
sheet. The sum of cash flows from operat-
ing, investing, and financing activities
should equal the net change in cash.
11. Cost of goods sold, combined with the change
in the inventory balance, reveals how much
inventory was purchased during the year.
Inventory purchases, coupled with the
change in the accounts payable bal- ance
for the year, are used to calculate the
amount of cash paid for inventory pur-
chases.
12. A loss on the sale of a long-term asset is
omitted from the calculation of cash from
operating activities when using the direct
method. When the indirect method is used,
the loss is added back to net income be-
cause the loss was subtracted in the origi-
nal computation of net income. In both
cases, any effects of the sale of the long-
term asset are removed from the computa-
tion of operating cash flow; cash received
from the sale of long-term assets is report-
ed as an investing activity.
13. The FASB has defined all transactions
involving available-for-sale and held-to-
maturity securities as investing activities.
Transactions involving trading securities
are usually included in the Operating Activi-
ties section.
14. If the direct method is used, a separate
schedule must be presented to reconcile
net income to net cash provided by (used
in) operating activities. If a company elects to
use the indirect method, the amounts paid
during the period for interest and in- come
taxes should be disclosed. Regard- less of
the method used for reporting oper- ating
cash flows, companies must disclose any
significant noncash investing and fi- nancing
transactions. The supplemental disclosures
required by FASB ASC Topic
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Chapter 5 146
230 can be provided in the notes to the fi-
nancial statements or in separate sched-
ules accompanying the statement of cash
flows.
15. Significant noncash investing and financing
transactions (e.g., the purchase of land by
issuing capital stock) are to be reported in
the notes to the financial statements or in a
separate schedule accompanying the cash
flow statement. Because these transactions
do not affect cash, they should not be re-
ported on the statement of cash flows itself.
16. Under FASB ASC Topic 230, interest paid
is classified as an operating activity.
17. Cash from operations is usually larger than
net income. This is because of the large
number of noncash expenses included in the
income statement, such as depreciation,
write-downs, and restructuring charges.
18. When the value of a company’s cash flow
adequacy ratio is less than 1.0, that com-
pany is not generating enough cash from
operations to pay for all new plant and
equipment purchases. Accordingly, the
company has no cash left over to repay
loans or to distribute to investors.
19. The income statement details the transac-
tions that occurred in temporary accounts
that are summarized in the retained earn-
ings account. The statement of cash flows
provides information relating to transactions
that occurred in the cash account for the
period.
20. A forecasted statement of cash flows al-
lows management to see the relationship
between forecasted operating cash flow
and the cash needed for investing activi- ties.
If there is an expected shortfall in available
cash, a company can either use the
forecasted information in obtaining ad-
ditional financing or the company can scale
back its expansion plans in order to reduce
the drain on cash.
21. Lenders can use a forecasted statement of
cash flows to see whether it seems likely that
a company can continue to meet its ex- isting
debt obligations. An investor can use the
projected cash flow statement to evalu- ate
the likelihood that a company will be able to
continue making dividend pay- ments.
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147 Chapter 5 Chapter 5 147

PRACTICE EXERCISES

PRACTICE 5–1 CLASSIFYING CASH FLOWS

1. Cash flows from operating activities:

Cash receipts from:
Customers ($50,000 cash sales + $38,000 collections) ......... $ 88,000
Cash payments for:
Inventory..................................................................................... (39,000)
Interest........................................................................................ (16,000)
Operating lease.......................................................................... (19,000)
Rent............................................................................................. (11,000)
Net cash flows provided by operating activities .................... $ 3,000

2. Cash flows from investing activities:

Cash paid to purchase equipment........................................... $ (84,000)
Cash receipt from sale of machine .......................................... 12,000
Net cash flows used in investing activities............................. $ (72,000)

3. Cash flows from financing activities:

Cash receipt from sale of stock ............................................... $240,000
Cash payment for dividends .................................................... (15,000)
Net cash flows provided by financing activities..................... $225,000

PRACTICE 5–2 CASH AND CASH EQUIVALENTS

(a) Not cash equivalent because it is an equity investment; no maturity date.

(b) Cash equivalent of $5,700 because time to maturity at date of purchase was less
than three months.
(c) Cash of $3,400.
(d) Not cash equivalent because time to maturity at date of purchase was greater
than three months.
$5,700 + $3,400 = $9,100

PRACTICE 5–3 THREE CATEGORIES OF CASH FLOWS

Cash Inflow
Operating (Outflow)
(d) Cash collected from customers .................................................. $13,400
(b) Cash paid for interest................................................................... (600)
(f) Cash paid for income taxes......................................................... (1,850)
Total........................................................................................................ $10,950

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148 Chapter 5 Chapter 5 148

PRACTICE 5–3 (Concluded)

Investing
(a) Cash received from sale of a building ........................................ $ 4,200

Financing
(c) Cash paid to repurchase shares of stock (treasury stock) ...... $ (1,100)
(e) Cash paid for dividends ............................................................... (930)
Total ........................................................................................................ $ (2,030)

PRACTICE 5–4 CASH FLOW PATTERNS

Company A start up, high-growth

Company B cash cow
Company C steady-state

PRACTICE 5–5 NONCASH INVESTING AND FINANCING ACTIVITIES

Noncash
Investing Financing (Disclose only)
(a) $(40,000) $ 0 $ 80,000
(b) 0 0 67,000
(c) 0 0 100,000
(d) 0 56,000
(30,000)
Total $(40,000) $ 26,000

PRACTICE 5–6 GENERAL FORMAT FOR A STATEMENT OF CASH FLOWS

Cash flow from operating activities ........................................ $ 6,200

Cash flow from investing activities ......................................... (9,400)
Cash flow from financing activities......................................... 5,000
Net increase in cash.................................................................. $ 1,800
Cash balance, beginning of year ............................................. 2,800
Cash balance, end of year ........................................................ $ 4,600

PRACTICE 5–7 CASH COLLECTED FROM CUSTOMERS

Accounts receivable, beginning .............................................. $ 1,375

Plus: Sales ................................................................................. 10,000
Cash available for collection.................................................... $11,375
Less: Accounts receivable, ending ......................................... (1,400)
Cash collected from customers............................................... $ 9,975

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149 Chapter 5 Chapter 5 149

PRACTICE 5–8 CASH PAID FOR INVENTORY PURCHASES

Inventory, ending ....................................................................... $ 2,500

Plus: Cost of goods sold........................................................... 5,300
Required inventory .................................................................... $ 7,800
Less: Beginning inventory........................................................ (2,100)
Inventory purchased this year.................................................. $ 5,700

Accounts payable, beginning ................................................... $ 1,200

Plus: Inventory purchased this year ........................................ 5,700
Accounts to be paid................................................................... $ 6,900
Less: Accounts payable, ending .............................................. (1,350)
Cash paid for inventory purchases.......................................... $ 5,550

PRACTICE 5–9 CASH PAID FOR OPERATING EXPENSES

Prepaid operating expenses, ending ....................................... $1,000

Plus: Operating expenses......................................................... 3,800
Required cash outlay for operating expenses........................ $4,800
Less: Prepaid operating expenses, beginning ....................... (700)
Cash paid for operating expenses this year ........................... $ 4,100

PRACTICE 5–10 DIRECT METHOD

Statement of
Income Statement Adjustments Cash Flows

Sales $7,800 + 320 $8,120

Cost of goods sold (3,100) + 180 (3,130)
– 210
Interest expense (450) + 80 (370)
Depreciation expense (600) + 600 0
Net income $ 3,650 $ 4,620

Direct Method:
Cash collected from customers ............................................... $ 8,120
Cash paid for inventory purchases.......................................... (3,130)
Cash paid for interest ................................................................ (370)
Net cash flow from operating activities ................................... $ 4,620

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150 Chapter 5 Chapter 5 150

PRACTICE 5–11 INDIRECT METHOD

Statement of
Income Statement Adjustments Cash Flows

Sales $7,800 + 320 $8,120

Cost of goods sold (3,100) + 180 (3,130)
– 210
Interest expense (450) + 80 (370)
Depreciation expense (600) + 600 0
Net income $ 3,650 $ 4,620

Indirect Method:
Net income ................................................................................. $3,650
Plus: Depreciation.................................................................... 600
Plus: Decrease in accounts receivable.................................. 320
Plus: Decrease in inventory .................................................... 180
Less: Decrease in accounts payable ...................................... (210)
Plus: Increase in interest payable .......................................... 80
Net cash flow from operating activities .................................. $4,620

PRACTICE 5–12 COMPLETE STATEMENT OF CASH FLOWS FROM DETAILED

DATA

Operating activities:
(f) Cash collected from customers ....................................................... $10,000
(b) Cash paid to purchase inventory ..................................................... (7,800)
(d) Cash paid for interest ........................................................................ (450)
(j) Cash paid for income taxes .............................................................. (1,320)
Net cash flow from operating activities ................................................... $ 430
Investing activities:
(c) Cash received from sale of a building ............................................. $ 5,600
(k) Cash paid to purchase machinery ................................................... (1,950)
Net cash flow from investing activities.................................................... $ 3,650
Financing activities:
(e) Cash paid to repay a loan ................................................................. $ (1,000)
(h) Cash received from issuance of new shares of common stock ... 1,200
(i) Cash paid for dividends .................................................................... (780)
Net cash flow from financing activities.................................................... $ (580)
Net increase in cash................................................................................... $ 3,500
Cash balance, beginning of year .............................................................. 1,500
Cash balance, end of year ......................................................................... $ 5,000

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151 Chapter 5 Chapter 5 151

PRACTICE 5–13 OPERATING CASH FLOW: GAINS AND LOSSES

Net income.................................................................................. $ 250

Plus: Depreciation ..................................................................... 1,000
Less: Gain on sale of equipment.............................................. (440)
Plus: Loss on sale of building .................................................. 210
Less: Increase in accounts receivable .................................... (300)
Less: Decrease in income taxes payable ................................ (170)
Net cash flow from operating activities ................................... $ 550

PRACTICE 5–14 OPERATING CASH FLOW: RESTRUCTURING CHARGES

Net income.................................................................................. $ 500

Plus: Depreciation ..................................................................... 1,000
Plus: Restructuring charge....................................................... 2,300
Plus: Decrease in inventory...................................................... 300
Plus: Increase in wages payable .............................................. 170
Net cash flow from operating activities ................................... $4,270

PRACTICE 5–15 OPERATING CASH FLOW: DEFERRED INCOME TAXES

Reported income tax expense ................................................................... $32,000

Less: Increase in deferred tax liability...................................................... (3,500)
Taxes owed for current year operations................................................... $28,500
Less: Increase in income taxes payable .................................................. (390)
Cash paid for income taxes ....................................................................... $28,110

PRACTICE 5–16 OPERATING CASH FLOW: DEFERRED, OR UNEARNED, SALES

REVENUE

Sales............................................................................................................. $10,000
Plus: Accounts receivable, beginning ...................................................... 1,430
Less: Deferred sales revenue, beginning (cash already collected)....... (750)
Cash available for collection this year ..................................................... $10,680
Less: Accounts receivable, ending........................................................... (1,250)
Plus: Deferred sales revenue, ending (collected for future years) ........ 1,000
Total cash collections from customers .................................................... $10,430

PRACTICE 5–17 OPERATING CASH FLOW: PREPAID OPERATING EXPENSES

Cash paid for depreciation......................................................................... $ 0

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152 Chapter 5 Chapter 5 152

PRACTICE 5–17 (Concluded)

Cash paid for insurance:

Prepaid insurance, ending................................................................ $ 1,500
Plus: Insurance expense................................................................... 7,500
Required cash outlay for insurance................................................. $ 9,000
Less: Prepaid insurance, beginning ................................................ (1,430)
Cash paid for insurance this year .................................................... $ 7,570

Cash paid for wages:

Wages payable, beginning................................................................ $ 750
Plus: Wage expense this year .......................................................... 14,600
Wages to be paid ............................................................................... $15,350
Less: Wages payable, ending........................................................... (600)
Cash paid for wages this year .......................................................... $14,750

Cash paid for operating expenses: $0 + $7,570 + $14,750 = $22,320

PRACTICE 5–18 COMPUTING CASH PAID TO PURCHASE PROPERTY, PLANT,

AND EQUIPMENT

PPE, beginning ......................................................................... $124,000

Less: PPE sold during the year .............................................. 28,000
Ending PPE without purchase of new PPE ........................... $ 96,000

PPE, ending .............................................................................. $134,000

Less: Ending PPE without purchase of new PPE ................. 96,000
Cash paid to purchase new PPE ............................................ $ 38,000

This assumes that all PPE purchases were for cash.

PRACTICE 5–19 COMPUTING CASH RECEIVED FROM THE SALE OF PROPERTY,

PLANT, AND EQUIPMENT

Accumulated depreciation, beginning ................................... $41,000

Plus: Depreciation expense .................................................... 13,000
Ending accumulated depreciation without PPE sale............ $54,000
Less: Actual ending accumulated depreciation.................... 32,000
Accumulated depreciation associated with PPE sold.......... $22,000

Original cost of PPE sold ........................................................ $28,000

Accumulated depreciation associated with PPE sold.......... 22,000
Book value of PPE sold ........................................................... $ 6,000

Book value of PPE sold ........................................................... $ 6,000

Plus: Gain on sale of PPE........................................................ 6,500

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153 Chapter 5 Chapter 5 153

Cash received from sale of PPE ............................................. $12,500

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154 Chapter 5 Chapter 5 154

PRACTICE 5–20 COMPUTING CASH PAID FOR DIVIDENDS

Retained earnings, beginning................................................. $106,000

Plus: Net income ...................................................................... 10,000
Ending retained earnings without dividend declarations.... $116,000
Less: Actual ending retained earnings.................................. 112,000
Dividends declared during the year ....................................... $ 4,000

Dividends declared during the year ....................................... $ 4,000

Plus: Decrease in dividends payable..................................... 250
Cash paid for dividends this year .......................................... $ 4,250

PR CTICE 5–21 COMPUTING CASH FLOW RATIOS

1. Cash-flow-to-net-income
Cash flow from operating activities............................... $ 21,000
Net income ....................................................................... ÷ $18,000
Cash-flow-to-net-income ratio ....................................... 1.17

2. Cash flow adequacy

Cash paid for capital expenditures................................ $ 23,500
Cash paid for acquisitions.............................................. 11,000
Cash required for investing activities ........................... $ 34,500
Cash flow from operating activities............................... $ 21,000
Cash required for investing activities ........................... ÷ $34,500
Cash flow adequacy ratio ............................................... 0.61

3. Cash times interest earned

Cash flow from operating activities............................... $ 21,000
Cash paid for interest...................................................... 3,800
Cash paid for income taxes............................................ 6,700
Operating cash flow before interest and taxes ............ $ 31,500
Cash paid for interest...................................................... ÷ $3,800
Cash times interest earned ratio.................................... 8.29

PRACTICE 5–22 ARTICULATION

a. Cash increased by $9,000 during the year ($21,000 – $12,000)

Cash from operating activities ....................................... $ ?
Cash from investing activities ....................................... (25,000)
Cash from financing activities ....................................... (8,000)
Increase in cash............................................................... $ 9,000
Cash from operating activities = $42,000

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155 Chapter 5 Chapter 5 155

PRACTICE 5–22 (Concluded)

b. At the beginning of the year: Assets = Liabilities + Owners’ equity

$239,000 = $117,000 + ?
Owners’ equity at the start of the year = $122,000 of which $21,000 represents
common stock and $101,000 represents retained earnings.
Dec. 31 Retained earnings = Jan. 1 Retained earnings + Net income – Dividends
$105,000 = $101,000 + Net income – $8,000
Net income = $12,000

PRACTICE 5–23 PREPARING A FORECASTED STATEMENT OF CASH FLOWS

Operating activities:
Net income........................................................................ $ 2,275
Plus: Depreciation.......................................................... 1,200
Less: Increase in accounts receivable ......................... (180)
Less: Increase in inventory ........................................... (390)
Plus: Increase in accounts payable ............................. 150
Net cash flow from operating activities ................................. $3,055
Investing activities:
Cash paid for PPE purchases
($1,300 PPE increase
+ $1,200 depreciation replacement)............................... (2,500)
Financing activities:
New long-term debt ......................................................... $ 1,000
New paid-in capital .......................................................... 400
Cash paid for dividends
($1,500 + $2,275 − $1,850 = $1,925) ................................ (1,925)
Net cash flow from financing activities.................................. (525)
Net increase in cash................................................................. $ 30
Cash, beginning ....................................................................... 100
Cash, ending............................................................................. $ 130

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156 Chapter 5 Chapter 5 156

EXERCISES
5–24. (a) Operating activity
(b) Operating activity
(c) Operating activity
(d) Financing activity
(e) Financing activity
(f) Financing activity
(g) Operating activity
(h) Financing activity
(i) Investing activity
(j) Investing activity
(k) Operating activity
(l) Operating activity
(m) Operating activity
(n) Operating activity
(o) Noncash transaction; report separately
(p) Noncash item; ignore under direct method; add back to net income un-
der indirect method
(q) Investing activity
(r) Investing activity

5–25. (a) The purchase of securities classified as available-for-sale is reported as

cash used to acquire those securities, an investing activity.
(b) The acquisition of buildings for $60,000 should be reported as a use of
cash from investing activities. The balance ($150,000) is a significant
noncash transaction that should be reported separately in the notes or
an accompanying schedule to the statement of cash flows.
(c) The purchase of business assets is reported as an investing activity as
follows:
Cash was used to:
Purchase inventory .............................................. $16,700
Purchase furniture and fixtures .......................... 8,400
Purchase land and buildings............................... 20,100
Purchase goodwill................................................ 9,000 $54,200
Note that the entire amount of the business purchase is reported as a
cash outflow from investing activities even though some of the assets
($16,700 in inventory) are operating assets.
(d) The declaration of dividends is not reported as a use of cash because
this had no effect on cash. When the dividend payable is paid, the cash
outflow will be shown as a financing activity.
(e) The decrease in Accounts Payable is reported as an item to be deduct- ed
in computing net cash flow provided by (used in) operations. Cash
payments for purchases includes payment for purchases of the previ- ous
period.

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157 Chapter 5 Chapter 5 157

5–26. (a) $14,000 of cash used to purchase equipment; $16,000 of cash provided
from sale of equipment. Both are investing activities. (Note: The $2,000
loss on sale would be added to net income when using the indirect
method.)

Equipment
Beginning balance 62,000 Sale of equipment 21,000
Purchase of equipment 14,000
Ending balance 55,000

(b) No cash is provided or used by depreciation; however, $4,100 is added

to net income for yearly depreciation in showing net cash flow provided
by operations when using the indirect method.

Accumulated Depreciation
Sale of equipment 3,000 Beginning balance 12,800
Depreciation for year 4,100
Ending balance 13,900

(c) $5,000 ($25,000 – $20,000) of cash used to pay off a portion of long-term
debt, a financing activity.

(d) $4,000 ($16,000 – $12,000) of cash provided from issuance of common

stock, a financing activity.

5–27.

Statement of
Income Statement Adjustments Cash Flows
Sales $ 278,700 – 3,200 $ 275,500
Cost of goods sold (197,000) + 1,760 (195,990)
– 750
Depreciation expense (16,700) + 16,700 0
Salaries expense (35,200) + 150 (35,050)
Other expenses (24,300) No adjustment (24,300)
Net income $ 5,500 $ 20,160

(a) Operating activities:

Cash collected from customers $275,500
Cash paid for inventory $195,990
Cash paid for salaries 35,050
Cash paid for other expenses 24,300 255,340
Net cash provided by operating activities $ 20,160

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158 Chapter 5 Chapter 5 158

5–27. (Concluded)

(b) Operating activities:

Net income $ 5,500
Adjustments:
Depreciation $16,700
Decrease in inventory 1,760
Increase in salaries payable 150
Increase in accounts receivable (3,200)
Decrease in accounts payable (750) 14,660
Net cash provided by operating activities $20,160

5–28.
Statement of
Income Statement Adjustments Cash Flows

Sales $ 675,400 – 5,000 $ 670,400

Cost of goods sold (243,500) – 5,800 (248,000)
+ 1,300

Depreciation expense (51,000) + 51,000 0

Salaries expense (124,600) No adjustment (124,600)
Interest expense (11,300) – 400 (11,700)
Income taxes expense (44,000) + 1,800 (42,200)
Other expenses (98,700) + 1,100 (97,600)
Net income $ 102,300 $ 146,300

(a) Operating activities:

Cash collected from customers $670,400
Cash paid for inventory $248,000
Cash paid for salaries 124,600
Cash paid for interest 11,700
Cash paid for income taxes 42,200
Cash paid for other expenses 97,600 (524,100)
Net cash provided by operating activities $146,300

(b) Operating activities:

Net income $102,300
Adjustments:
Depreciation $ 51,000
Increase in accounts payable 1,300
Increase in income taxes payable 1,800
Decrease in prepaid expenses 1,100
Increase in accounts receivable (5,000)
Increase in inventory (5,800)
Decrease in interest payable (400) 44,000

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Another random document with
no related content on Scribd:
 Launcelot.—Nay, indeed, if you had your eyes, you might fail of
the knowing me: it is a wise father that knows his own child. Well, old
man, I will tell you news of your son: give me your blessing. Truth will
come to light; murder cannot be hid long,—a man’s son may; but, in
the end, truth will out.
Gobbo.—Pray you, sir, stand up: I am sure you are not Launcelot,
my boy.
Launcelot.—Pray you, let’s have no more fooling about it, but give
me your blessing: I am Launcelot, your boy that was, your son that
is, your child that shall be.
Gobbo.—I cannot think you are my son.
Launcelot.—I know not what I shall think of that: but I am
Launcelot, the Jew’s man; and I am sure Margery your wife is my
mother.
Gobbo.—Her name is Margery, indeed: I’ll be sworn, if thou be
Launcelot, thou art mine own flesh and blood. Lord, worship’d might
he be! What a beard hast thou got! thou hast got more hair on thy
chin than Dobbin, my fill-horse, has on his tail.
Launcelot.—It should seem, then, that Dobbin’s tail grows
backward: I am sure he had more hair of his tail than I have on my
face, when I last saw him.
Gobbo.—Lord, how art thou chang’d! How dost thou and thy
master agree? I have brought him a present. How ’gree you now?
Launcelot.—Well, well; but, for mine own part, as I have set up my
rest to run away, so I will not rest till I have run some ground. My
master’s a very Jew: give him a present! give him a halter: I am
famish’d in his service; you may tell every finger I have with my ribs.
Father, I am glad you are come: give me your present to one Master
Bassanio, who, indeed, gives rare new liveries: if I serve not him, I
will run as far as God has any ground.—O rare fortune! here comes
the man:—to him, father, for I am a Jew, if I serve the Jew any
longer.
—Act II, Scene II, Lines 29-104.
 HAMLET’S DECLARATION OF FRIENDSHIP

Hamlet. What ho! Horatio!

Horatio. Here, sweet lord, at your service.

Hamlet. Horatio, thou art e’en as just a man

As e’er my conversation coped withal.

Horatio. O, my dear lord,—

Hamlet. Nay, do not think I flatter;

For what advancement may I hope from thee
That no revenue hast, but thy good spirits,
To feed and clothe thee? Why should the poor be flatter’d?
No, let the candied tongue lick absurd pomp,
And crook the pregnant hinges of the knee
Where thrift may follow fawning. Dost thou hear?
Since my dear soul was mistress of her choice
And could of men distinguish, her election
Hath sealed thee for herself; for thou hast been
As one, in suffering all, that suffers nothing,
A man that fortune’s buffets and rewards
Hast ta’en with equal thanks: and blest are those
Whose blood and judgment are so well commingled
That they are not a pipe for Fortune’s finger
To sound what stop she pleases. Give me that man
That is not passion’s slave, and I will wear him
In my heart’s core, ay, in my heart of hearts,
As I do thee.

—From Act III, Scene 2.

OTHELLO’S APOLOGY
[The speech calls for great dignity, ease, and power, in both speech
and manner.]
Most potent, grave, and reverend signiors,
My very noble and approved good masters,
That I have ta’en away this old man’s daughter,
It is most true; true, I have married her:
The very head and front of my offending
Hath this extent, no more. Rude am I in my speech,
And little bless’d with the soft phrase of peace;
For since these arms of mine had seven years’ pith,
Till now some nine moons wasted, they have used
Their dearest action in the tented field,
And little of this great world can I speak,
More than pertains to feats of broil and battle,
And therefore little shall I grace my cause
In speaking for myself. Yet, by your gracious patience,
I will a round unvarnish’d tale deliver
Of my whole course of love; what drugs, what charms,
What conjuration, and what mighty magic,—
For such proceeding I am charg’d withal,—
I won his daughter.
...
Her father loved me; oft invited me;
Still question’d me the story of my life,
From year to year,—the battles, sieges, fortunes,
That I have pass’d.
I ran it through, even from my boyish days,
To the very moment that he bade me tell it:
Wherein I spake of most disastrous chances,
Of moving accidents by flood and field,
Of hair-breadth scapes i’ the imminent deadly breach,
Of being taken by the insolent foe
And sold to slavery, of my redemption thence
And portance in my travels’ history:
...

This to hear
Would Desdemona seriously incline:
But still the house-affairs would draw her thence;
Which ever as she could with haste despatch,
She’d come again, and with a greedy ear
Devour up my discourse: which I observing,
Took once a pliant hour, and found good means
To draw from her a prayer of earnest heart
That I would all my pilgrimage dilate,
Whereof by parcels she had something heard,
But not intentively: I did consent,
And often did beguile her of her tears,
When I did speak of some distressful stroke
That my youth suffer’d. My story being done,
She gave me for my pains a world of sighs:
She swore, in faith, ’twas strange, ’twas passing strange,
’Twas pitiful, ’twas wondrous pitiful:
She wish’d she had not heard it, yet she wish’d
That heaven had made her such a man: she thank’d me,
And bade me, if I had a friend that loved her,
I should but teach him how to tell my story,
And that would woo her. Upon this hint I spake:
She loved me for the dangers I had pass’d;
And I lov’d her that she did pity them.
This only is the witchcraft I have used.

THE SEVEN AGES

[This is a succession of purely imaginative ideas which the voice
should touch lightly. In this speech one meets always the question of
impersonation: shall the mewling infant, the whining schoolboy, the
sighing lover and the rest be imitated by the reader? It is in better
taste not to impersonate these seven characters beyond certain
almost imperceptible hints which the gayety of Jaques’s mind might
naturally throw off.]

All the world’s a stage,

And all the men and women merely players:
They have their exits and their entrances;
And one man in his time plays many parts,
His acts being seven ages. At first the infant,
Mewling and puking in the nurse’s arms:
And then the whining schoolboy, with his satchel
And shining morning face, creeping like snail
Unwillingly to school. And then the lover,
Sighing like furnace, with a woeful ballad
Made to his mistress’ eyebrow. Then a soldier,
Full of strange oaths and bearded like the pard,
Jealous in honor, sudden and quick in quarrel,
Seeking the bubble reputation
Even in the cannon’s mouth. And then the justice,
In fair round belly with good capon lined,
With eyes severe and beard of formal cut,
Full of wise saws and modern instances;
And so he plays his part. The sixth age shifts
Into the lean and slipper’d pantaloon,
With spectacles on nose and pouch on side;
His youthful hose, well saved, a world too wide
For his shrunk shank; and his big manly voice,
Turning again toward childish treble, pipes
And whistles in his sound. Last scene of all,
That ends this strange eventful history,
Is second childishness and mere oblivion,
Sans teeth, sans eyes, sans taste, sans everything.

—“As You Like it,” Act II, Scene 7.

SOLITUDE PREFERRED TO COURT LIFE

Duke S. Now, my co-mates and brothers in exile,

Hath not old custom made this life more sweet
Than that of painted pomp? Are not these woods
More free from peril than the envious court?
Here feel we but the penalty of Adam.
The season’s difference, as the icy fang
And churlish chiding of the winter’s wind,
Which, when it bite and blows upon my body,
Even till I shrink with cold, I smile and say
’Tis no flattery; these are counselors
That feelingly persuade me what I am.
Sweet are the uses of adversity,
Which, like the toad, ugly and venomous,
Wears yet a precious jewel in his head;
And this our life, exempt from public haunt,
Finds tongues in trees, books in the running brooks,
Sermons in stones, and good in everything.
I would not change it.

Amiens. Happy is your grace,

That can translate the stubbornness of fortune
Into so quiet and so sweet a style.

...

Duke S. Come, shall we go and kill us venison?

And yet it irks me the poor dappled fools,
Being native burghers of this desert city,
Should in their own confines with forked heads
Have their round haunches gor’d.

—“As You Like It,” Act II.

THE POTION SCENE

Scene: Juliet’s Chamber

(Enter Juliet and Nurse, who bears wedding garments.)

Juliet (looking at garments).

Ay, those attires are best; but, gentle nurse,

I pray thee, leave me to myself to-night;
For I have need of many orisons
To move the heavens to smile upon my state,
Which, well thou knowest, is cross and full of sin.
 (Enter Lady Capulet.)

Lady Capulet.

What are you busy, ho? need you my help?

Juliet.

No, madam; we have cull’d such necessaries

As are behoveful for our state to-morrow:
So please you, let me now be left alone,
And let the nurse this night sit up with you;
For, I am sure, you have your hands full all,
In this so sudden business.

Lady Capulet (crossing and kissing Juliet on the forehead).

Good night;
Get thee to bed and rest, for thou hast need.

(Exit Lady Capulet with nurse.)

Juliet (looking after them).

Farewell! God knows when we shall meet again.

I have a faint cold fear thrills through my veins,
That almost freezes up the heat of life:
I’ll call them back again to comfort me. (Runs to R.)
Nurse! What should she do there?
My dismal scene I needs must act alone.
Come, vial. (Takes vial from bosom.)
What if this mixture do not work at all?
Shall I be married then to-morrow morning?
No, no! (draws dagger) this shall forbid it.

(Lays dagger on table.)

Lie you there. (To vial.)

What if it be a poison, which the friar
Subtly hath ministered to have me dead,
Lest in this marriage he should be dishonored
Because he married me before to Romeo?
I fear it is; and yet, methinks, it should not,
For he hath still been tried a holy man.

(Puts vial in bosom.)

How if, when I am laid into the tomb,

I wake before the time that Romeo
Come to redeem me? there’s a fearful point!
Shall I not then be stifled in the vault,
To whose foul mouth no healthsome air breathes in,
And there die strangled ere my Romeo comes?
Or, if I live, is it not very like,
The horrible conceit of death and night,
Together with the terror of the place,—
As in a vault, an ancient receptacle,
Where, for these many hundred years, the bones
Of all my buried ancestors are packed;
Where bloody Tybalt, yet but green in earth,
Lies festering in his shroud; where as they say,
At some hours in the night spirits resort; ...
O, if I wake, shall I not be distraught,
Environed with all these hideous fears?
And madly play with my forefathers’ joints?
And pluck the mangled Tybalt from his shroud?
And, in this rage, with some great kinsman’s bone,
As with a club, dash out my desperate brains?
O, look! methinks I see my cousin’s ghost
Seeking out Romeo, ...
Stay, Tybalt, stay!—
Romeo, I come! (Drawing out vial—then cork.)
This do I drink to thee.

(Throws away vial. She is overcome and sinks to the floor.)

—From “Romeo and Juliet,” Act IV, Scene 3.

 BANISHMENT SCENE
SCENE III, A ROOM IN THE PALACE
(Enter Celia and Rosalind.)
Cel. Why, cousin; why Rosalind;—Cupid have mercy;—Not a
word?
Ros. Not one to throw to a dog.
Cel. No, thy words are too precious to be cast away upon curs,
throw some of them at me; come, lame me with reasons.
Ros. Then there were two cousins laid up; when the one should be
lamed with reasons, and the other mad without any.
Cel. But is all this for your father?
Ros. No, some of it for my father’s child: O, how full of briars is this
working-day world!
Cel. They are but burrs, cousin, thrown upon thee in holiday
foolery; if we walk not in the trodden paths, our very coats will catch
them.
Ros. I could shake them off my coat; these burrs are in my heart.
Cel. Hem them away.
Ros. I would try; if I could cry hem, and have him.
Cel. Come, come, wrestle with thy affections.
Ros. O, they take the part of a better wrestler than myself.
Cel. Is it possible, on such a sudden, you should fall into so strong
a liking with old Sir Rowland’s youngest son?
Ros. The duke my father lov’d his father dearly.
Cel. Doth it therefore ensue, that you should love his son dearly?
By this kind of chase, I should hate him, for my father hated his
father dearly; yet I hate not Orlando.
Ros. No ’faith, hate him not, for my sake.
Cel. Why should I not? Doth he not deserve well?
 Ros. Let me love him for that; and do you love him, because I do:
Look, here comes the duke.
Cel. With his eyes full of anger.
(Enter Duke Frederick, with Lords.)
Duke F. Mistress, despatch you with your safest haste, and get
you from our Court.
Ros. Me, uncle?
Duke F. You, cousin, within these ten days if thou be’st found so
near our public court as twenty miles, thou diest for it.
Ros. I do beseech your grace, let me the knowledge of my fault
bear with me: if with myself I hold intelligence, or have acquaintance
with mine own desires; if that I do not dream, or be not frantic (as I
do trust I am not), then, dear uncle, never so much as in a thought
unborn, did I offend your highness.
Duke F. Thus do all traitors, if their purgation did consist in words,
they are as innocent as grace itself: let it suffice thee, that I trust thee
not.
Ros. Yet your mistrust cannot make me a traitor: tell me, whereon
the likelihood depends.
Duke F. Thou art thy father’s daughter, there’s enough.
Ros. So was I, when your highness took his dukedom; so was I,
when your highness banish’d him: treason is not inherited, my lord:
or, if we did derive it from our friends, what’s that to me? my father
was no traitor: then, good my liege, mistake me not so much, to think
my poverty is treacherous.
Cel. Dear sovereign, hear me speak.
Duke F. Aye, Celia; we stay’d here for your sake. Else had she
with her father rang’d along.
Cel. I did not then entreat to have her stay, it was your pleasure,
and your own remorse; I was too young that time to value her, but
now I know her; if she be a traitor, so am I: we still have slept
together; rose at an instant, learn’d, play’d, eat together;

And wheresoe’er we went, like Juno’s swans,

Still we went coupled, and inseparable.

Duke F. She is too subtle for thee; and her smoothness,

Her very silence, and her patience,
Speak to the people and they pity her.
Thou art a fool: she robs thee of thy name;
And thou wilt show more bright, and seem more virtuous,
When she is gone: then open not thy lips;
Firm and irrevocable is my doom
Which I have pass’d upon her; she is banish’d.

Cel. Pronounce that sentence then on me, my liege;

I cannot live out of her company.

Duke F. You are a fool:—You, niece, provide yourself;

If you outstay the time, upon my honor,
And in the greatness of my word, you die.

(Exeunt Duke Frederick and Lords.)

Cel. O my poor Rosalind: whither wilt thou go?

Wilt thou change fathers? I will give thee mine.
I charge thee, be not thou more griev’d than I am.

Ros. I have more cause.

Cel. Thou hast not, cousin,

Pr’ythee, be cheerful: know’st thou not, the duke
Hath banish’d me his daughter?

Ros. That he hath not.

Cel. No? hath not? Rosalind lacks then the love

Which teaches thee that thou and I art one:
Shall we be sunder’d? shall we part, sweet girl?
No; let my father seek another heir.
Therefore devise with me, how we may fly,
Whither to go, and what to bear with us:
And do not seek to take your charge upon you,
To bear your griefs yourself, and leave me out;
For by this heaven, now at our sorrows pale,
Say what thou can’st, I’ll go along with thee.

Ros. Why, whither shall we go?

Cel. To seek my uncle.

Ros. Alas, what danger will it be to us,

Maids as we are, to travel so far?
Beauty provoketh thieves sooner than gold.

Cel. I’ll put myself in poor and mean attire,

And with a kind of umber smirch my face;
The like do you; so shall we pass along,
And never stir assailants.

Ros. Were it not better,

Because that I am more than common tall,
That I did suit me in all points like a man?
A boar-spear in my hand; and in my heart
Lie there what hidden woman’s fear there will,
We’ll have a swashing and a martial outside;
As many other mannish cowards have,
That do outface it with their semblances.

Cel. What shall I call thee when thou art a man?

Ros. I’ll have no other worse than Jove’s own page,

And therefore, look you, call me Ganymede.
But what will you be call’d?

Cel. Something that hath a reference to my state:

No longer Celia, but Aliena.

Ros. But, cousin, what if we assayed to steal

The clownish fool out of your father’s court?
Would he not be a comfort to our travel?

Cel. He’ll go along o’er the wide world with me;

Leave me alone to woo him: Let’s away
And get our jewels and our wealth together;
Devise the fittest time, and safest way
To hide us from pursuit that will be made
After my flight: Now go we in content,
To liberty, and not to banishment.

—From “As You Like It,” Act I.

CORYDON
By Thomas Bailey Aldrich
SCENE, A ROAD-SIDE IN ARCADY

Shepherd. Good sir, have you seen pass this way

A mischief straight from market-day?
You’d know her at a glance, I think;
Her eyes are blue, her lips are pink;
She has a way of looking back
Over her shoulder, and alack!
Who gets that look one time, good sir,
Has naught to do but follow.

Pilgrim. I have not seen this maid methinks,

Though she that passed had lips like pinks.

Shepherd. Or like two strawberries made one

By some sly trick of dew and sun.

Pilgrim. A poet.
Shepherd. Nay, a simple swain
That tends his flocks on yonder plain
Naught else I swear by book and bell.
But she that passed you marked her well
Was she not smooth as any be
That dwells here—in Arcady?

Pilgrim. Her skin was the satin bark of birches.

Shepherd. Light or dark?

Pilgrim. Quite dark.

Shepherd. Then ’twas not she.

Pilgrim. The peaches side

That next the sun is not so dyed
As was her cheek. Her hair hung down
Like summer twilight falling brown;
And when the breeze swept by, I wist
Her face was in a somber twist.

Shepherd. No that is not the maid I seek;

Her hair lies gold against her cheek,
Her yellow tresses take the morn,
Like silken tassels of the corn,
And yet brown-locks are far from bad.

Pilgrim. Now I bethink me this one had

A figure like the willow tree
Which, slight and supple, wondrously
Inclines to droop with pensive grace,
And still retain its proper place.
A foot so arched and very small
The marvel was she walked at all;
Her hand in sooth, I lack for words—
Her hand, five slender snow-white birds,
Her voice, tho’ she but said “God Speed”—
Was melody blown through a reed;
The girl Pan changed into a pipe
Had not a note so full and rife.
And then her eye—my lad, her eye!
Discreet, inviting, candid, shy,
An outward ice, an inward fire,
And lashes to the heart’s desire.
Soft fringes blacker than the sloe—

Shepherd. Good sir, which way did this one go?

Pilgrim. So he is off! The silly youth

Knoweth not love in sober sooth,
He loves—thus lads at first are blind—
No woman, only womankind.
I needs must laugh, for by the mass
No maid at all did this way pass.
 PART FOUR
Oratoric Reading and the Art of Public Speech
Discussion of forceful speech in making history. Value of forceful
speech. Practice selections.

HAMLET’S INSTRUCTION TO THE PLAYERS

Speak the speech, I pray you, as I pronounced it to you,—
trippingly on the tongue; but if you mouth it, as many of our players
do, I had as lief the town-crier spake my lines. Nor do not saw the air
too much with your hand, thus, but use all gently; for in the very
torrent, tempest, and, as I may say, whirlwind of your passion, you
must acquire and beget a temperance, that may give it smoothness.
Oh! it offends me to the soul to hear a robustious periwig-pated
fellow tear a passion to tatters,—to very rags,—to split the ears of
the groundlings; who, for the most part, are capable of nothing but
inexplicable dumb show and noise. I would have such a fellow
whipped for o’erdoing Termagant; it out-herods Herod. Pray you
avoid it.
—Shakespeare.
 CHAPTER XIII
ORATORIC READING AND THE ART OF PUBLIC SPEECH

Upon this important subject of public speaking, and the

interpretation of the addresses made by others, great men have thus
expressed themselves: Dr. Charles W. Eliot, formerly President of
Harvard University, says: “Have we not all seen, in recent years, that
leading men of business have a great need of a highly trained power
of clear and convincing expression? Business men seem to me to
need, in speech and writing, all the Roman terseness and the French
clearness. That one attainment is sufficient reward for the whole long
course of twelve years spent in liberal study.” Abraham Lincoln
likewise said: “Extemporaneous speaking should be practiced and
cultivated. It is the lawyer’s avenue to the public. However able and
faithful he may be in other respects, people are slow to bring him
business if he can not make a speech.”
Every thinker knows what a vital part eloquence plays in national
as well as individual welfare. If at first thought effective speaking
seems a simple thing and a superficial part of education, on mature
thought and consideration it will be found to be one of the most
complex, vital and difficult problems that education has to meet. And
yet, notwithstanding this complexity of the problem, the teacher is
cheered by the delightful assurance of giving the student a
consciousness of his latent talents and the ability to reveal and make
use of them for the proper influencing of his fellow men.
There is a belief fairly commonly held that only a limited few need
study the art of public speaking. Never was there a greater error or a
more fatal mistake—especially in a republic like ours, where every
man should be vitally interested in public affairs. No single citizen
can afford not to be able to stand before his fellows and clearly,
pleasingly and convincingly present his ideas upon any subject of
local, state, or national importance. It is no more an ornamental
accomplishment than is grammar, penmanship or simple arithmetic.
It should be as universal as “the three r’s.” The hints and selections
that follow are carefully chosen to incite every good citizen to the
acquirement of this useful and practical aid for his own benefit as
well as that of his fellows. All the lessons and analyses that have
gone before in these pages will materially aid in the elucidation of
these brief lessons.
The basis for development in Effective Speaking rests upon one’s
bodily, emotional and mental agencies of expression, and a
knowledge of their respective importance and efficient use. That
which counts most for development is conscientious practice; without
which, progress is impossible.
There are three definite means of communicating thought and
feeling to others: (a) Pantomime: face, hands, body; (b) Vocal: tone
sound; (c) Verbal: words, which are conventional symbols
manifesting mental and emotional states.
The problem, then, is to obtain a harmonious coördination of these
three languages. In other words, the content of the word when
spoken should be reflected in the tone and in the body. Thus speech
becomes effective merely because it receives its just and fair
consideration.
With this general understanding let us take up and master the
successive steps which ultimately lead to a realization of the desired
end.
The first important essential of effective speaking is the Spirit of
Directness. By this is meant natural, unaffected speech. Nothing can
be more important than that the person speaking use in public
address the ordinary elements of Conversation.
Hence, the first step is practice in natural speaking. Commit to
memory Hamlet’s Instructions to the Players given on a preceding
page. Do this not line by line, but the entire selection as a whole.
First: Read it through silently three times to familiarize yourself with
the subject-matter. Second: Read it aloud at least five times. Third:
Speak it conversationally at least five times from memory. In this
practice always be intensely conscious that you are addressing an
individual and not an audience.
 Now take any of the prose or poetic selections from the earlier
pages of this book, memorize them, after studying them as the
instructions require, and speak them directly and naturally, in the
ordinary conversational style.
Sufficient practice in this is the necessary preparation for the next
step, viz., the acquiring of a natural elevated conversational style,
which is merely another name for the higher type of public speaking.
Commit all, or a part, of the following selections, keeping in mind
that in speaking them you are addressing a group of people.

THE GETTYSBURG ADDRESS

By Abraham Lincoln
Fourscore and seven years ago our fathers brought forth upon this
continent a new nation, conceived in liberty, and dedicated to the
proposition that all men are created equal. Now we are engaged in a
great Civil War, testing whether that nation, or any nation, so
conceived and so dedicated, can long endure. We are met on a
great battlefield of that war. We are met to dedicate a portion of it as
the final resting place of those who here gave their lives that that
nation might live.
It is altogether fitting and proper that we should do this. But in a
larger sense we cannot dedicate, we cannot consecrate, we cannot
hallow this ground. The brave men, living and dead, who struggled
here, have consecrated it far above our power to add or detract. The
world will little note, nor long remember, what we say here, but it can
never forget what they did here.
It is for us, the living, rather to be dedicated here to the unfinished
work they have thus far so nobly carried on. It is rather for us to be
here dedicated to the great task remaining before us, that from these
honored dead we take increased devotion to the cause for which
they gave their last full measure of devotion; that we here highly
resolve that these dead shall not have died in vain, that the Union
shall, under God, have a new birth of freedom, and that the
government of the people, by the people, and for the people, shall
not perish from the earth.

By this time you should have mastered Ordinary Conversational

Style; Elevated Conversational Style; and Abandon and Flexibility of
Speech. The next consideration is the importance of Clearness.
Clearness in speech means making prominent central words and
subordinating unimportant words, or phrases. In other words, the
logical sequence of thought must be clearly shown. This is brought
about by a variety of inflections, changes of pitch, pause, etc.
Clearness in speech is dependent upon clearness of Thinking.
It is important now to give full consideration to the subject of
Emphasis. There are more ways than one of emphasizing your
thought. The most common way is by merely increasing the stress of
voice upon a word. This, however, is the most undignified form of
emphasis. It is common to ranters and “soap-box” orators and is one
mark of an undisciplined and uncultured man. Remember that
loudness is a purely physical element, and does not manifest
thought. Such emphasis is an appeal to the brute instinct, and is only
expressive of the lower emotions. But Inflection, Changes of Pitch,
Pause, Movement and Tone-Color—as have been fully explained in
preceding pages—all appeal to the exalted nature of man.
In proportion to the nobleness of an emotion or thought, we find a
tendency to accentuate these above-named elements. Such
methods of emphasis are appropriate to the most disciplined and
cultured man. More than that, they are the surest evidence of a great
personality.
Commit, then make clear to the hearer, the vital thought in the
following:

He have arbitrary power! My lords, the East India Company

have not arbitrary power to give him; the King has no arbitrary
power to give him; your Lordships have not; nor the
Commons; nor the whole legislature. We have no arbitrary
power to give, because arbitrary power is a thing which