Bono Contemporanea

Mariano Marquez
M00465293
BADM 6310 Contemporary Aspects of Accounting

Prof. Enrique Martinez
Problem 23-7:
(a)
Both the direct method and the indirect method for reporting cash flows from
operating activities are acceptable in preparing a statement of cash flows according
to GAAP; however, the FASB encourages the use of the direct method. Under the
direct method, the statement of cash flows reports the major classes of cash receipts
and cash disbursements, and discloses more information; this may be the
statements principal advantage. Under the indirect method, net income on the accrual
basis is adjusted to the cash basis by adding or deducting noncash items included in
net income, thereby providing a useful link between the statement of cash flows and
the income statement and balance sheet.
(b)
The Statement of Cash Flows for Chapman Company, for the year ended May 31,
2014, using the direct method:
CHAPMAN COMPANY
Statement of Cash Flows
For the Year Ended May 31, 2014
Cash flows from operating activities

Cash received from customers...................................................
Cash payments:
To suppliers....................................................................
To employees.................................................................
For other expenses.........................................................
For interest.....................................................................
For income taxes............................................................
Net cash provided by operating activities..................................
$1,238,250
$684,000
276,850
10,150
73,000
43,000
Cash flows from investing activities

Purchase of plant assets.............................................................
Cash flows from financing activities
Cash received from common stock issue...................................
Cash paid:
For dividends.................................................................
To retire bonds payable..................................................
Net cash used by financing activities.........................................
1,087,000
151,250
(28,000)
$ 20,000
(105,000)
(30,000)
(115,000)
Net increase in cash...............................................................................

Cash, June 1, 2013................................................................................
Cash, May 31, 2014..............................................................................
Note 1:
Noncash investing and financing activities:

Issuance of common stock for plant assets $70,000.
Calculations:
Cash collected from customers
Sales revenue...........................................................................
Less: Increase in accounts receivable.....................................
Cash collected from customers.................................
$1,255,250
17,000
$1,238,250
Cash paid to suppliers

Cost of merchandise sold.........................................................
Less: Decrease in inventory....................................................
Increase in accounts payable.....................................
Cash paid to suppliers...............................................
$ 722,000
30,000
8,000
$ 684,000
Cash paid to employees

Salaries and wages expense.....................................................
Add: Decrease in salaries and
wages payable.............................................................
Cash paid to employees..............................................
Cash paid for other expenses
Other expenses.........................................................................
Add: Increase in prepaid expenses.......................................
Cash paid for other expenses......................................
Cash paid for interest
Interest expense........................................................................
Less: Increase in interest payable...........................................
Cash paid for interest................................................
Cash paid for income taxes:
Income tax expense (given).....................................................
$ 252,100
24,750
$ 276,850
$
$
8,150
2,000
10,150
75,000
2,000
73,000
43,000
8,250
20,000
28,250
(c)
The calculation of the cash flow from operating activities for Chapman Company,
for the year ended May 31, 2014, using the indirect method:
CHAPMAN COMPANY
For the Year Ended May 31, 2014
Net income.................................................................................
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense.....................................................
Decrease in inventory....................................................
Increase in accounts payable..........................................
Increase in interest payable............................................
Increase in accounts receivable......................................
Increase in prepaid expenses..........................................
Decrease in salaries and
wages payable............................................................
Net cash provided by operating activities.............................................
$130,000
$25,000
30,000
8,000
2,000
(17,000)
(2,000)
(24,750)
21,250
$151,250
Problem 23-8:
(a)
Net Cash Provided by Operating Activities

Cash receipts from customers
Cash payments:
To suppliers
For operating expenses
For income taxes
Net cash provided by operating activities
(1)
$608,000 (2)
226,000 (3)
43,000 (4)
877,000
$ 48,000
(Sales Revenue) less (Increase in Accounts Receivable)

$950,000 $25,000 = $925,000
(2)
(Cost of Goods Sold) plus (Increase in Inventory) less

(Increase in Accounts Payable)
$600,000 + $14,000 $6,000 = $608,000
(3)
(Operating Expenses) less (Depreciation Expense) less

(Bad Debt Expense)
$250,000 $22,000* $2,000 = $226,000
(4)
(Income Taxes) less (Increase in Income Taxes Payable)

$45,000 $2,000 = $43,000
*$21,000 [$14,000 ($10,000 X .60)]

$37,000 $28,000
(b)
$925,000 (1)
=
=
$13,000 Equipment depreciation

9,000 Building depreciation
$22,000
SHARPE COMPANY
For the Year Ended December 31, 2014

Net income....................................................................................
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation expense............................................................
Gain on sale of investments..................................................
Loss on sale of equipment....................................................
$67,000
$22,000
(15,000)
3,000
Increase in accounts receivable (net)....................................

Increase in inventory............................................................
Increase in accounts payable................................................
Increase in income taxes payable.........................................
Net cash provided by operating activities....................................
Cash flows from investing activities
Purchase of investments
[$55,000 ($85,000 $35,000)]..............................................
Purchase of equipment
[$70,000 ($48,000 $10,000)]..............................................
Sale of investments ($35,000 + $15,000).....................................
Sale of equipment
[$10,000 ($10,000 X 60%)] $3,000....................................
Net cash provided by investing activities.....................................
Cash flows from financing activities
Payment of long-term notes payable............................................
Cash dividends paid
[($95,000 + $67,000) $92,000]..............................................
Issuance of common stock............................................................
Net cash used by financing activities...........................................
(23,000)
(14,000)
6,000
2,000
(19,000)
48,000
(5,000)
(32,000)
50,000
1,000
14,000
(8,000)
(70,000)
35,000*
(43,000)
Net increase in cash.................................................................................

Cash, January 1, 2014..............................................................................
Cash, December 31, 2014........................................................................
19,000
51,000
$70,000
Noncash investing and financing activities

Issuance of common stock for land..............................................
$15,000
*$310,000 $260,000 = $50,000; $50,000 ($40,000 $25,000) = $35,000

Bono Contemporanea

Uploaded by

Copyright:

Available Formats

Bono Contemporanea

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Bono Contemporanea

Uploaded by

Copyright:

Available Formats

Mariano Marquez

BADM 6310 Contemporary Aspects of Accounting

Cash flows from operating activities

Cash flows from investing activities

Net increase in cash...............................................................................

Noncash investing and financing activities:

Cash paid to suppliers

Cash paid to employees

Net Cash Provided by Operating Activities

(Sales Revenue) less (Increase in Accounts Receivable)

(Cost of Goods Sold) plus (Increase in Inventory) less

(Operating Expenses) less (Depreciation Expense) less

(Income Taxes) less (Increase in Income Taxes Payable)

*$21,000 [$14,000 ($10,000 X .60)]

$13,000 Equipment depreciation

Cash flows from operating activities

Increase in accounts receivable (net)....................................

Net increase in cash.................................................................................

Noncash investing and financing activities

*$310,000 $260,000 = $50,000; $50,000 ($40,000 $25,000) = $35,000

You might also like