Barcamone only 9.0

Problem 1

To compare statement of cash flow reporting under the direct and indirect methods, enter a check mark to indicate which items are used with each method.

 


Cash Flows

Statement of Cash Flows Method

(and related changes)

Direct

Indirect

 

 1.

 

Salaries payable increase or decrease

 

 

 

 2.

 

Payments to employees

 

 

 

 3.

 

Cash collections from customers

 

 

 

 4.

 

Prepaid rent increase or decrease

 

 

 

5.

 

Payments to suppliers

 

 

 

6.

 

Inventory increase or decrease

 

 

 

 7.

 

Utilities payable, increase or decrease

 

 

 

 8.

 

Depreciation expense

 

 

 

 9.

 

Net income

 

 

 

10.

 

Cash flows from operating activities

 

 

 

11.

 

Cash flows from investing activities

 

 

 

12.

 

Cash flows from financing activities

 

 

 

13.

 

Net increase or decrease in cash during the period

 

 

 


 

Problem 2

A company completed its income statement and balance sheet for the year and provided the following information:

 

                                                                Income Statement

 

                                Service Revenue                                              $55,000

                                Expenses:

                                                Salaries                                                   42,500

                                                Rent                                                          7,200

                                                Depreciation                                          6,800

                                                Amortization of copyrights             1,000

                                Total Expenses                                                    57,500

                                Net loss                                                                                $(2,500)

 

                                                                Partial Balance Sheet

                                                                                                                Current Year      Prior Year

                                Accounts receivable                                       $ 7,000                  $16,000

                                Salaries Payable                                                                14,000                      7,200

                                Prepaid rent                                                          6,200                      2,400

 

In addition, the company bought a small piece of equipment costing $6,500.

 

Required:

    1. Prepare the operating activities section of the statement of cash flows using the indirect method.

    1. Explain why the company was able to report positive operating cash flow despite having a net loss for the year.

 

 


Problem 3

For the most recent accounting year, a company reported the following operating and cash activities:

 

Investments in other companies

(8,628)

Increase in inventories

(2,685)

Depreciation and amortization

35,254

Long-term debt repayment

(165,243)

Net income

28,961

Proceeds from issuance of common stock

13,485

Proceeds from sale of property and equipment

3,590

Payment of dividends

(6,255)

Proceeds from long-term debt issuance

61,785

Purchases of property and equipment

(25,400)

Decrease in accounts receivable

5,291

Decrease in accounts payable

(8,466)

 

Requirements:

    1. Prepare the operating, investing and financing sections of the cash flow statement.

    1. Explain the major sources and uses of cash for the year.

 


Problem 4

The balance sheet and income statement for a company are provided below, along with selected additional financial information.

 

 

Current Year

Prior Year

Balance Sheet

 

 

   Cash

79,250

73,840

   Accounts Receivable

18,820

24,185

   Merchandise Inventory

15,354

6,976

   Property and equipment

285,735

175,000

   Accumulated Depreciation

(89,000)

(72,630)

Total Assets

310,159

207,371

   Accounts Payable

8,500

18,200

   Wages Payable

3,208

2,194

   Notes payable, long-term

72,840

86,100

   Contributed capital

84,255

65,980

   Retained earnings

141,356

34,897

Total Liabilities and Stockholders’ Equity

310,159

207,371

 

 

 

Income Statement

 

 

   Sales

284,955

 

   Cost of goods sold

91,357

 

   Wages

32,187

 

   Depreciation expense

16,370

 

   Other Expense

22,358

 

 
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