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Module 11 - Questions

The document provides a template for preparing a cash flow statement using the indirect method, detailing cash flows from operating, investing, and financing activities. It includes financial statements for Bait and Tackle and Bubbles Company, along with additional information necessary for cash flow calculations. The document also outlines specific requirements for preparing cash flow statements for both companies.

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0 views

Module 11 - Questions

The document provides a template for preparing a cash flow statement using the indirect method, detailing cash flows from operating, investing, and financing activities. It includes financial statements for Bait and Tackle and Bubbles Company, along with additional information necessary for cash flow calculations. The document also outlines specific requirements for preparing cash flow statements for both companies.

Uploaded by

rhlvajpayee
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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MODULE 11 – Statement of Cash Flows – QUESTIONS

Note: we are only covering the indirect method for the operating activities.

Template for class (similar to Tony’s template)


Title:

Cash flows from Operating Activities


Net Income
Adjustments for non-cash items:
Depreciation
Gain/loss on sale of PPE
Gain/loss on sale of investments
Goodwill Amortization
Change in non-cash working capital accounts:
Change in prepaid rent
Change in taxes payable
Change in wages/salaries payable
Change in accounts receivable
Change in inventory
Change in prepaid insurance
Change in offi ce supplies
Change in accounts payable
Change in interest payable
Change in other (accrued) liabilities
Net cash inflow/(outflow) from operating activities

Cash flows from Investing Activities


Cash paid for PPE
Cash received on sale of PPE
Cash paid for investments
Cash received on sale of investments
Net cash inflow/(outflow) from investing activities

Cash flows from Financing Activities


Cash paid for reduction in bonds/non-current debt
Cash received on issuance of bonds/non-current debt
Cash paid for redemption of shares
Cash received on issuance of shares
Cash paid for dividends
Cash paid/received on current debt
Net cash inflow/(outflow) from financing activities

Net increase/decrease in cash


Cash balance, Jan 1
Cash balance, Dec 31
11-1A – Basic Cash Flow Statement
The financial statements of Bait and Tackle are presented below:

Bait and Tackle


Balance Sheet
As at December 31
2024 2023
Cash $39,000 $24,000
Accounts receivable 64,000 50,000
Inventory 58,000 88,000
Equipment 325,000 250,000
Accumulated depreciation (92,000) (125,000)
Total assets $394,000 $287,000

Accounts payable $32,000 $40,000


Income taxes payable 10,000 11,000
Bank loan payable 20,000 0
Common shares 60,000 50,000
Retained earnings 272,000 186,000
Total liabilities and shareholders’ equity $394,000 $287,000

Bait and Tackle


Income Statement
For the Year Ended December 31, 2024
Sales $635,000
Cost of goods sold 320,000
Gross profit 315,000
Operating expenses 135,000
Operating income 180,000
Interest expense 1,000
Income before taxes 179,000
Income taxes 43,000
Net income $136,000

Additional information:
1.) Operating expenses are composed of: Depreciation $12,000; Salaries $50,000; Loss on Sale of Equipment $9,000;
other operating expenses $64,000.
2.) Other operating expenses are cash expenses.
3.) Equipment was purchased during the year for $135,000 cash.
4.) Equipment was sold for cash during the year. The original cost of the equipment was $60,000, and the accumulated
depreciation was $45,000.
5.) Dividends were declared and paid during the year.

Required:
Prepare a cash flow statement using the direct method or indirect method or both (depending on what your instructor
assigns).

NOTE: Download the template from https://1drv.ms/u/s!At1yy2fk54ntqnD8LllqN8quCxNx?e=PYsxA9

Free Video Walkthrough:


11-1A (Part 1) https://www.youtube.com/watch?v=ikMso8YBIAE
11-1A (Part 2) https://www.youtube.com/watch?v=__jBl0jXqok
11-1A (Part 3) https://www.youtube.com/watch?v=W6Z3YbYNrY4
QUESTION 2 – BUBBLES

Bubbles Company
Balance Sheet
December 31, 2022

2022 2020
Assets
Cash $ 813 $ 92
Accounts Receivable 165 150
Inventory 235 240
ST Investments 300 400
Equipment 830 500
Accumulated depreciation (280) (282)
Total $ 2,063 $ 1,100

Liabilities and Shareholders’ Equity

Accounts payable $ 229 $ 190


Bonds payable 300 100
Common shares 1,000 450
Retained earnings 534 360
Total $ 2,063 $ 1,100

Bubbles Company
Income Statement
For the year ended December 31, 2022

Sales $1,500
Cost of goods sold 980
Gross profit 520

Depreciation expense $ (48)


Other expenses (233)
Gain on sale of equipment 20 (261)
Net Income $ 259

 Equipment costing $530 was bought by paying cash.


 ST Investments were sold for book value.
 Bonds amounting to $500 were issued for cash.
 Common shares were issued for cash during the year.

REQUIRED
 Prepare a cash flow statement for the year ended December 31, 2022.
Harder/longer problem:

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