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Assignment - CASH FLOW

The document contains information about cash flow activities for several companies. It provides details of operating, investing and financing cash flows including income, expenses, purchases, sales, dividends and changes in balance sheet accounts. The document also includes examples of direct and indirect method cash flow statements and answers to practice problems calculating cash flows.

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Fariha tamanna
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136 views6 pages

Assignment - CASH FLOW

The document contains information about cash flow activities for several companies. It provides details of operating, investing and financing cash flows including income, expenses, purchases, sales, dividends and changes in balance sheet accounts. The document also includes examples of direct and indirect method cash flow statements and answers to practice problems calculating cash flows.

Uploaded by

Fariha tamanna
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Answer to the do it no.

01

1) Issued 100,000 shares of $5 par value common stock for $800,000 cash.
= Financing activity
2) Borrowed $200,000 from Castle Bank, signing a 5-year note bearing 8% interest.
= Financing activity
3) Purchased two semi-trailer trucks for $170,000 cash.
= Investing activity.
4) Paid employees $12,000 for salaries and wages.
= Operating activity.
5) Collected $20,000 cash for services performed.
= Operating activity.

Answer to the do it no. 02(a)

Cash flows from operating activities $73,000


Net income
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation expense $7,000
Gain on disposal of equipment (2,500)
Increase in accounts receivable (4,000)
Decrease in accounts payable (3,800) (3,300)
Net cash provided by operating activities $69,700

Answer to the do it no. 02 (b)


REYNOLDS COMPANY
Statement of Cash Flows—Indirect Method
For the Year Ended December 31, 2017

Answer to the do it no. 03


(a) Free cash fl ow 5 $29,300 2 $19,000 2 $9,000 5 $1,300
(b) Net cash provided by operating activities fails to take into account that a company
must invest in new plant assets just to maintain the current level of operations.
Companies must also maintain dividends at current levels to satisfy investors.
The measurement of free cash fl ow provides additional insight regarding a company’s
cash-generating ability.

Answer to the question no. 17A-1


COMPUTER SERVICES COMPANY
Statement of Cash Flows—Direct Method
For the Year Ended December 31, 2017

Answer to the question no. Practice Exercise 2 (Pg. 762)


STRONG CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2017

Cash flows from operating activities $ 28,300


Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense $ 5,200
Loss on sale of equipment 4,500
Increase in accounts payable 8,500
Increase in accounts receivable (1,900) 16,300
Net cash provided by operating activities 44,600
Cash flows from investing activities
Sale of equipment 4,300
Purchase of investments (7,000)
Net cash used by investing activities (2,700)
Cash flows from fi nancing activities
Issuance of common stock 15,000
Retirement of bonds (20,000)
Payment of dividends (26,400)
Net cash used by fi nancing activities (31,400)
Net increase in cash 10,500
Cash at beginning of period 17,700
Cash at end of period $ 28,200
[$14,000 - ($10,000 - $1,200)]; [$4,300 - ($10,000 - $1,200)]

(b) $44,600 - $0 -$26,400 = $18,200

Answer to the question no. Practice Problem 2 (Pg. 763)


KOSINSKI MANUFACTURING COMPANY
Statement of Cash Flows—Direct Method
For the Year Ended December 31, 2017
KOSINSKI MANUFACTURING COMPANY
Statement of Cash Flows—Direct Method For the Year
Ended December 31, 2017
Cash flows from operating activities

Cash collections from customers $6,418,000

Cash payments:

For operating expenses $4,843,000


For income taxes 353,000 5,196,000
Net cash provided by operating 1,222,000
activities
Cash flows from investing activities
Sale of equipment 270,000
Purchase of equipment (750,000)
Net cash used by investing activities (480,000)
Cash flows from financing activities
Payment of cash dividends (200,000)
Net cash used by financing activities (200,000)
Net increase in cash 542,000
Cash at beginning of period 130,000
Cash at end of period $ 672,000

Direct-Method Computations:
Computation of cash collections from
customers:
Sales revenue $6,583,000
Deduct: Increase in accounts (165,000)
receivable
Cash collections from customers $6,418,000
Computation of cash payments for
operating
expenses:
Operating expenses $4,920,000
Deduct: Loss on disposal of (24,000)
equipment
Deduct: Decrease in inventories (33,000)
Deduct: Increase in accounts payable (20,000)
Cash payments for operating expenses $4,843,000

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