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PROBLEM 18-88

(a) Indirect method
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KIT-N-KABOODLE COMPANY LTD.
Cash Flow Statement
For the Year Ended December 31,2003

Cash flows from operating activities
Net income ................................................................
Adjustments to reconcile net inconie
to net cash provided by operating activities:
Amortization expense ......................................
lncrease in accounts receivable .....................
Decrease in income taxes payable .................
Decrease i n merchandise inventory ...............
Increase in accounts payable ..........................
Net cash provided by operating activities

Cash flows from investing activities
Sale of equipment ....................................................
Cash flows from financing activities
'Redemption of bonds .............................................. $(6,000)
Issue of common shares ......................................... 4,000
Payment of dividends ..............................................(3,000)
Net cash used by financing activities .......
Net increase in cash and cash equivalents ...................
Cash and cash equivalents, January 1 ..........................
Cash and cash equivalents, December 31.....................

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PROBLEM 48-88 (Continued)

(b) Direct method

KIT-N-KABOODLE COMPANY LTD.
Cash Flow Statement
For the Year Ended December 31,2003

Cash flows from operating activities
Cash receipts from customers (1) $206,000...............................
Cash payments
TO suppliers .....................................................
$166,000 (2)
For operating expenses 18,500 (3) ..................................
For interest .......................................................
2,000
For income tax .................................................
7,000 (4) 193,500
Net cash provided by operating activities 12,500

Cash flows from investing activities
Sale of equipment ....................................................
Cash flows from financing activities
Redemption of bonds .............................................. $(6,000)
Issue of common shares ......................................... 4,000
Payment of dividends .............................................. (3,000)
Net cash used by financing activities .......
Net increase in cash and cash equivalents ...................
Cash and cash equivalents, January 1 ..........................
Cash and cash equivalents, December 31.....................
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PROBLEM 18-8B (Continued)
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(b) (Continued)
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Calculations:

(1) Cash receipts from customers

Sales............................................................................................ $220,000
Less: Increase in accounts receivable ................................... 14,000
Cash receipts from customers ............................................. $206.000

(2) Cash payments to suppliers

Cost of goods sold ................................................................ $180,000
Less: Decrease in inventory .................................................... 10.000
Cost of goods purchased ...................................................... 170,000
Less: Increase in accounts payable ........................................ 4,000
Cash payments to suppliers .................................................... $166.000

(3) Cash payments for operating expenses

Operating expenses ................................................................... $24,000
Less: Amortization expense
-
[$20,000 - ($24,000 $9,500) = $5,5001 ............................ 5,500
Cash payments for operating expenses .................................. $18?500

(4) Cash payments for income tax

Income tax expense ................................................................... $4,000
Add: Decrease in income tax payable .................................... 3,000
Cash payments for income tax ................................................. u~!u2
PROBLEM 18-8A

(a) Indirect method

ST. ALBAN'S COMPANY LTD.
Cash Flow Statement
For the Year Ended December 31,2003

Cash flows from operating activities
Net income ......................................................................
Adjustments to reconcile net income
to net cash provided by operating activities:
Amortization expense ..................................... $11,000
Increase in accounts receivable .................... (6,000)
lncrease in inventory ...................................... . (3,000)
Decrease in accounts payable ....................... (7,000)
Decrease in income tax payable .................... (5,000)
Net cash provided by operating activities

Cash flows from investing activities
Sale of equipment ................................................... $10,000
Purchase of equipment .......................................... (7,000)
Net cash provided by investing activities

Cash flows from financing activities
Issue of bonds ....................................................... $10,000
Payment of cash dividends .................................... (9.000)
Net cash provided by financing activities

Net increase in cash and cash equivalents ..................
Cash and cash equivalents, January 1.........................
Cash and cash equivalents, December 31 ...................
PROBLEM 18-8A (Continued)

(b) Direct method

ST. ALBAN'S COMPANY LTD.
Cash Flow Statement
For the Year Ended December 31,2003

Cash flows from operating activities
Cash receipts from customers .........................
Cash payments
To suppliers ................................................ $190,000 (2)
For operating expenses ............................. 23,000 (3)
For interest.................................................. 2,000
For income tax ...................................... . 12.000 (4)
Net cash provided by operating activities

Cash flows from investing activities
Sale of equipment .............................................. $10,000
Purchase of equipment ..................................... (7,000)
Net cash provided by investing activities 3,000

Cash flows from financing activities
Issue of bonds ................................................... $10,000
Payment of cash dividends ...............................(9,000)
Net cash provided by financing activities

Net increase in cash and cash equivalents .............
Cash and cash equivalents, January I....................
Cash and cash equivalents, December 31 ..............
- PROBLEM 18-8A (Continued)

Cash current debt coverage

$7,000
= 0.2 times
r $41,000 + $53,0001

2. Cash return on sales

3. Cash flow per share

Cash total debt coverage

$7,000
r $61,ooo + $63,000 1
= 0.1 times