Concept explainers
Prepare the operating activities section under direct method of L Company for the year 2016.
Explanation of Solution
Statement of cash flows: Cash flow statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period. Statement of cash flows includes the changes in cash balance due to operating, investing, and financing activities.
Operating Activities: Operating activities include
Direct method: Under direct method, cash receipts from customers (cash inflows) and cash payments to suppliers (
Prepare the operating activities section under direct method:
L Company | ||
Statement of cash flows for the year, 2016 | ||
Particulars | Amount($) | Amount($) |
Operating Activities: | ||
Cash inflows: | ||
Collection from customers(Working note 1) | 40,040 | |
Dividends collected | 820 | |
Cash inflows from operating activities | 40,860 | |
Cash outflows: | ||
Payments to suppliers(Working note 2) | (19,350) | |
Payment to employees(Working Note 3) | (11,450) | |
Other operating payments(Working Note 4) | (1,410) | |
Payments of income taxes (Working Note 5) | (1,550) | |
Cash outflows for operating activities | (33,760) | |
Net cash provided by operating activities | 7,100 |
Table (1)
Working note 1: Calculate the cash collection from customers.
Working note 2: Calculate payments made to suppliers.
Working note 3: Calculate the payments to employees.
Working note 4: Calculate the other operating payments.
Working note 5: Calculate the income taxes paid.
Therefore, the net cash provided by operating activities is $7,100.
2.
Prepare the remaining sections in the cash flow statement of L Company for the year 2016.
2.
Explanation of Solution
Prepare the cash flow statement for the year 2016.
L Company | ||
Statement of cash flows for the year, 2016 | ||
Particulars | Amount($) | Amount($) |
Investing Activities: | ||
Payment for purchase of short-term marketable securities | (1,300) | |
Proceeds from sale of long-term investment | 2,300 | |
Proceeds from sale of equipment | 100 | |
Payment for purchase of equipment | (16,200) | |
Net cash used for investing activities | (15,100) | |
Financing Activities: | ||
Proceeds from issuance of 12% bonds | 9,700 | |
Payment of dividends | (700) | |
Net cash provided by financing activities | 9,000 | |
Net increase in cash(schedule 1) | 1,000 | |
Cash, January 1, 2016 | 1,400 | |
Cash December 31, 2016 | 2,400 | |
Schedule 1: investing and financing activities not affecting cash | ||
Financing Activities: | ||
Conversion of | (9,000) | |
Issuance of common stock to convert preferred stock | 9,000 | |
Payment of long-term note by issuing common stock | (3,500) | |
Issuance of common stock to pay long- term note | 3,500 |
Table (1)
Therefore, the net increase in cash is $2,400.
Want to see more full solutions like this?
Chapter 21 Solutions
EBK INTERMEDIATE ACCOUNTING: REPORTING
- Common stock transactions on the statement of cash flows Jones Industries received 600,000 from issuing shares of its common stock and 400,000 from issuing bonds. During the year, Jones Industries also paid dividends of 60,000. How are the effects of these transactions reported on the statement of cash flows?arrow_forwardComprehensive: Balance Sheet from Statement of Cash Flows Mills Company prepared the following balance sheet at the beginning of 2019: Additional information related to the statement of cash flows: 1. The long-term bonds have a face value of 6,000 and were issued on December 31, 2019. 2. The building was purchased on December 30, 2019. 3. The land was sold at its original cost. 4. The common stock which was sold totaled 300 shares and had a par value of 10 per share. Required: Next Level Prepare a classified balance sheet for Mills as of December 31, 2019. (Hint. Review the information on the statement of cash flows and the balances in the beginning balance sheet accounts to determine the impact on the ending balance sheet accounts.)arrow_forwardTidwell Company experienced the following during 20X1: a. Sold preferred stock for 480,000. b. Declared dividends of 150,000 payable on March 1, 20X2. c. Borrowed 575,000 from a bank on a 2-year note. d. Purchased 80,000 of its own common stock to hold as treasury stock. e. Repaid 5-year bonds issued for 400,000 that mature and are due in December. Required: Prepare the net cash from financing activities section of the statement of cash flows.arrow_forward
- The following information is from Princeton Company's comparative balance sheets. Current At December 31 Prior Year Year Common stock, $10 par value Paid-in capital in excess of par Retained earnings $ 105,000 $ 100,000 567,000 313,500 342, е00 287,500 The company's net income for the current year ended December 31 was $48,000. 1. Complete the T-accounts to calculate the cash received from the sale of its common stock during the current year. es Common Stock, $10 Par Beg. bal. End. bal. Paid-in Capital in Excess of Par Beg. bal.arrow_forwardPresented below is the comparative balance sheet for Novak Company. Assets Cash Novak Company Comparative Balance Sheet As of December 31 Accounts receivable (net) Short-term investments Inventories Prepaid expenses Plant & equipment Accumulated depreciation Liabilities and Stockholders' Equity Accounts payable Accrued expenses Bonds payable Common stock Retained earnings December 31 2026 $180,100 220,200 267,500 1,055,100 24,800 2,585,300 (1,004,300) $3,328,700 $49,600 171,200 445,900 2,108,000 554,000 $3,328,700 2025 $274,700 155,800 148,900 970,300 24,800 1,943,900 (749,000) $2,769,400 $75,300 199,000 189,200 1,768,300 537,600 $2,769,400arrow_forwardAdditional information: • Weighted-average ordinary shares in 2017 were $60,000 QUESTIONS Based on the financial data above, do the following: a. Calculate the financial ratio of VENUS TRADING COMPANY in 2017 below: • Current ratio • Account receivable turnover • Inventory turnover • Asset turnover • Return on assets • Return on ordinary shareholders equity • Earnings per share • Debts to total assets ratio Provide an interpretation for each of the financial ratio calculations above. b. Based on the calculation results in point a, provide an analysis of performance finance VENUS TRADING COMPANY in 2017.arrow_forward
- Comparative balance sheets for Pharoah Company are as follows. Assets Cash Accounts receivable Inventory Land Equipment Accumulated depreciation-equipment Total Liabilities and Stockholders' Equity Accounts payable Bonds payable Common stock ($1 par) Retained earnings Total Additional information: 1. 2. 3. 4. 5. 6. 7. Pharoah Company Comparative Balance Sheets December 31 Balance Sheet Accounts Total Total Net income for 2025 was $136,000. Cash dividends of $67,000 were declared and paid Bonds payable with a carrying value of $46,000 were redeemed for $46,000 cash. Common stock was issued at par for $60,000 cash. Depreciation expense was $23,100. Sales revenue for the year was $970,000. Land was sold at cost, and equipment was purchased for cash. Investing activities Prepare a worksheet for a statement of cash flows for 2025 using the indirect method. Enter the reconciling items directly on the worksheet. (Show amounts that decrease cash flow with either a-sign eg-15,000 Statement of…arrow_forwardIn preparation for developing its statement of cash flows for the year ended December 31, 2016, Rapid Pac, Inc., collected the following information: ($ in millions) Fair value of shares issued in a stock dividend $ 65 Payment for the early extinguishment of long-term bonds (book value: $97 million) 102 Proceeds from the sale of treasury stock (cost: $17 million) 22 Gain on sale of land 4 Proceeds from sale of land 12 Purchase of Microsoft common stock 160 Declaration of cash dividends 44 Distribution of cash dividends declared in 2015 40 Required: 1. In Rapid Pac’s statement of cash flows, what were net cash inflows (or outflows) from investing activities for 2016? 2. In Rapid Pac’s statement of cash flows, what were net cash inflows (or outflows) from financing activities for 2016?arrow_forwardAPS Company issued 20,000 shares of $1 par common stock for $40 per share during 2017. The company paid cash dividends of $48,000, sold an old machine for $3000 and issued long-term notes payable of $440,000 during the year. What amount of cash flows from financing activities will be reported on the statement of cash flows? $1.195,000 net cash inflow. $352,000 net cash inflow. $705,000 net cash outflow. $1,192,000 net cash inflow.arrow_forward
- Nash's Trading Post, LLC issued 14800 shares of $1 par common stock for $40 per share during 2022. The company paid dividends of $36000 and issued long-term notes payable of $326000 during the year. What amount of cash flows from financing activities will be reported on the statement of cash flows?arrow_forwardFrom the following balance sheet of S Ltd as on 31st March, 2008 and 2009, prepare cash flow statement. ParticularsNote no. 31st March, 200831st March, 2009 I. Equity & Liabilities 1. Shareholder's Funds (a) Share Capital 400000700000 (b) Reserve & Surplus (bal. in statement of profit & loss) -50000-320000 2. Non-current Liabilities Long-term Borrowings (9% debentures) 200000400000 3. Current Liabilities (a)Trade Payables (creditors) 110000150000 (b)Other Current Liabilities (expenses) 1000020000 Total 670000950000 II. Assets 1. Non-current Assets (a) Fixed Assets 300000500000 (b) Non-current Investments 200000140000 2. Current Assets (a)Inventories (stock) 50000100000 (b)Trade Receivables (Debtors) 100000170000 (c) Cash & Cash Equivalents 2000040000 Total 670000950000 Additional InformationI. Included in fixed assets was a piece of machinery costing Rs 70,000 on which depreciation charged was Rs 40,000 and it was sold for Rs 30,000.II. During the year,…arrow_forwardRequired information [The following information applies to the questions displayed below] Markus Company's common stock sold for $5.25 per share at the end of this year. The company paid a common stock dividend of $0.63 per share this year. It also provided the following data excerpts from this year's financial statements. Cash Accounts receivable Inventory Current assets Total assets Current liabilities Total liabilities Common stock, $1 par value Total stockholders' equity Total liabilities and stockholders' equity Sales (all on account) Cost of goods sold Gross margin Net operating income Interest expense Net Income This Year $ 1,095,000 $ 635,100 $ 459,900 $313,875 $ 15,500 $ 208,862 Ending Balance $ 49,000 $ 92,000 $76,300 $ 217,300 $ 801,000 $ 85,500 $206,000 $ 165,000 $ 595,000 $ 801,000 Beginning Balance: $ 44,200 $ 68,700 $ 92,000 $ 204,900 $ 875,400 $ 90,000 $ 185,400 $ 165,000 $ 690,000 $ 875,400arrow_forward
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
- Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub