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The cash flow statement helps users to assess a companys liquidity, financial flexibility, operating capabilities, and risk. The statement of cash flows is useful because it provides answers to the following important questions:
Where did cash come from? What was cash used for? What was the change in the cash balance?
Specifically, the information in a statement of cash flows, if used with information in the other financial statements, helps external users to assess:
1. 2. 3. 4. A companys ability to generate positive future net cash flows, A companys ability to meet its obligations and pay dividends, A companys need for external financing, The reasons for differences between a companys net income and associated cash receipts and payments, and Both the cash and noncash aspects of a companys financing and investing transactions.
5.
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What can we learn from SCF that is not already available in the other financial statements?
Net income does not always tell the whole story about operating performance. A statement of cash flows is an excellent forecasting tool.
Review of terms
Cash and cash equivalents
It is a short-term, highly liquid investment. It must be readily convertible to cash and it must be so near to maturity that there is insignificant risks of changes in value due to changes in interest rate.
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Operating Activities
(Usually associated with working capital accounts like Accounts receivable, inventory, salaries payable, etc.) Inflows:
From sale of goods and services From receiving dividends investments From receiving interest from investments or loans From sale of trading securities From reduced income taxes due to excess tax deduction related to stock options
Outflows:
To suppliers for inventory and other materials To employees for services To other entities for services (insurance, etc.) To government for taxes To lenders for interest To purchase trading securities Interest expense is an operating item! Investment earnings (dividends & interest) is an operating item! Buying and selling trading securities are operating activities! These things may not make sense to you so memorize.
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Investing Activities
(Usually associated with long-term assets)
Inflows:
From sale of property, plant and equipment From sale of debt or equity investments of other entities* From collections of principal on loans to other entities
Outflows:
To purchase property, plant and equipment To purchase debt or equity securities of other entities To make loans to other entities
*except investments classified as trading securities which are included in operating activities
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Financing Activities
(Usually associated with long-term liability and equity items)
Inflows:
From issuance of debt (bonds and notes) From issuance of equity securities
Common stock Preferred stock Re-issuance of treasury stock Outflows:
To stockholders as dividends To repay or retire long-term debt, including capital leases for lessee (interest on leases is classified as operating) To reacquire capital stock (treasury stock)
An anomaly on SCF
Dividends are paid to stockholders and interest is paid to bondholders. Dividends paid are shown as outflows under financing activities However, FASB defined interest expense to be an operating activity Interest & dividend revenue are defined to be operating activities, too.
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Other disclosures
Under both methods (direct & indirect), you must disclose noncash financing and investing activities
This can be on face of the statement or in the notes to the financial statements. Examples: Trade common stock for land Convertible bonds converted to common stock
Noncash Items
Some financing and investing activities do not affect an entitys cash flow.
Examples: Trade common stock for land Issue bonds in exchange for a building Convertible bonds converted to common stock
Significant transactions should be disclosed separately. The disclosure of significant noncash financing and investing activities are required under both methods (direct & indirect) The disclosure can be on face of the statement or in the notes to the financial statements.
Theoretical Considerations The direct method has the advantage of reporting operating cash inflows separately from operating cash outflows, which may be useful in estimating future cash flows. The direct method is more meaningful to most financial statement users and the tie in to net income is also provided in a separate schedule which is the same as the indirect method presentation. Under the indirect method, adjustments are made to net income to arrive at cash flow from operating activities. Thus, cash from operating activities is tied to net income. An advantage of the indirect method is that income flows are converted from an accrual basis to a cash flow basis. In this manner, the indirect method shows the quality of earnings by providing information about intervals of leads and lags between income flows and operating cash flows.
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Credit
Year ending 12/31/07 42,000 37,500 (4,500) 43,000 6,000 236,000 (82,000) 278,000 (31,000) (9,000) (1,500) (5,500) (8,000) (15,000) (145,000) (63,000) (278,000) 1997 Rec/(Disb)
Target 27,000 (2,500) (1,500) 18,000 3,000 21,000 (2,000) (8,000) (7,000) 500 (4,000) (8,000) 10,000 (45,000) (1,500) 0
Closing entry for Sales Gain/(loss) on sale of PP&E Realized gain/(loss) - land Cost of goods sold Salaries & other operating expenses Bad debt expense Depreciation & amortization Interest expense Income taxes expense Net income (accrual basis) Statement of Cash Flows Operating Activities Investing Activities
Financing Activities
Additional information: a. Wrote off $500 accounts receivable as uncollectible b. Sold operational assets for $4,000 cash that had cost $17,000 and had a book value of $8,000 c. Declared a cash dividend of $13,000
180694588.doc created by T. Gordon 10/16/2013
d. e. f. g.
Sold land for $30,000 that had been acquired for $10,000 Paid a $10,000 long-term note installment Purchase plant, property & equipment for $48,000 cash. Issued common stock for $45,000 cash.
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Credit
Year ending 12/31/07 42,000 37,500 (4,500) 43,000 6,000 236,000 (82,000) 278,000 (31,000) (9,000) (1,500) (5,500) (8,000) (15,000) (145,000) (63,000) (278,000)
Target 27,000 (2,500) (1,500) 18,000 3,000 21,000 (2,000) (8,000) (7,000) 500 (4,000) (8,000) 10,000 (45,000) (1,500) 0
Investing Activities
Financing Activities
Additional information: a. Wrote off $500 accounts receivable as uncollectible b. Sold operational assets for $4,000 cash that had cost $17,000 and had a book value of $8,000
180694588.doc created by T. Gordon 10/16/2013
d. Sold land for $30,000 that had been acquired for $10,000 e. Paid a $10,000 long-term note installment f. Purchase plant, property & equipment for $48,000 cash.
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Moscow Moving & Storage Cash Accounts Receivable Allowance for doubtful accounts Merchandise Inventory Prepaid Expenses Plant, property & equipment Accumulated Depreciation Accounts Payable Salaries Payable Interest payable Long term liabilities Common stock, $1 par Retained Earnings
Closing entry for Sales Gain/(loss) on sale of PP&E Cost of goods sold Salaries & other operating expenses Bad debt expense Depreciation & amortization Interest expense Income taxes expense Net income (accrual basis) Statement of Cash Flows Operating Activities Investing Activities
Financing Activities
Noncash Financing/Investing
a. Wrote off $500 accounts receivable as uncollectible b. Sold operational assets for $4,000 cash (cost $15,000, acc'd depreciation $9,000) c. Declared and paid a cash dividend, $5,000
d. Issued common stock for $36,000 cash e. Paid a $20,000 long-term note installment f. Purchased operational assets, $39,000 cash g. Acquired land in exchange for 1,000 shares of common stock worth $45 each
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Acct 592 Spring 2005 Example 3 Avery Slings & Arrows, Inc.
Avery Slings & Arrows Income Statement For year ending Sales Earnings of affiliates (equity method) Realized loss on sale of equipment Realized gain on sale of investments Interest and dividend revenue Total revenues Cost of goods sold Salaries and wages Other operating expenses Bad debt expense Depreciation expense Amortization of intangibles Accretion expense Interest expense Income tax expense Net income 3,490,000 632,000 421,000 45,000 757,000 5,000 25,000 935,000 177,000 12/31/04 6,600,000 150,000 (65,000) 53,000 15,000 6,753,000
6,487,000 266,000
Prepare a statement of cash flows (direct method) including the required reconciling schedule and any other required disclosures for Avery Slings & Arrows, Inc. Information from the balance sheet and income statement have been entered into a worksheet for your convenience. In addition to completing the worksheet, you MUST prepare a formal statement with headings, subtotals, etc. for full credit. ADDITIONAL INFORMATION a. During the year, ASA paid $2,767,000 in cash for land, building, and equipment. b. On August 5, 2004, ASA issued 25,000 shares of common stock for $42 per share. c. ASA purchased $273,000 in marketable securities during the year. d. Equipment costing $500,000 was sold during the year for $59,000. The book value was $124,000. e. During the year, AAS declared cash dividends in the amount of $203,000. f. On April 1, 2004, the holders of $1,500,000 in convertible bonds elected to convert their bonds to common stock. The conversion ratio was 25 shares of common stock for each share $1,000 face value bond. g. The noncurrent investment represents 30% of the outstanding securities of the investee. This investment is accounted for on the equity method. During 2004, ASA received $29,000 in dividends from the investment. h. On May 1, 2004, ASA acquired equipment under a capital lease. At the inception of the lease, the present value of the minimum lease payments was $648,000. i. ASA acquired a patent on a new process for $500,000 on October 15, 2004. j. During 2004, ASA sold marketable securities which it had acquired for $222,000 for $275,000. k. In February, ASA issued 150,000 shares of common stock in a 50% stock dividend. l. ASA issued $3,000,000 in bonds at face value on August 1, 2004. m. ASA sold 500 shares of treasury stock which it had acquired for $20 per share for $46 per share on January 18, 2004. n. In October, ASA acquired 1,000 shares of treasury stock at $38 per share. o. Bad debts in the amount of $33,000 were written off during the year.
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Avery Slings & Arrows Balance Sheet 12/31/04 Current Assets Cash Securities Available for Sale (at market) Accounts Receivable (net) Merchandise Inventory Prepaid Expenses Noncurrent Assets Investments in affiliated companies (equity method) Land, building & equipment Less Accumulated Depreciation Intangible Assets Total assets Current Liabilities Accounts Payable Salaries Payable Interest payable Income Taxes Payable Dividends Payable Noncurrent Liabilities Bonds Payable Premium/Discount on Bonds Payable Convertible Bonds Payable Lease obligation Asset retirement obligation Deferred Income Taxes Other long term liabilities Stockholder's Equity Common stock, $10 par Additional paid in capital - common Other paid in capital Unrealized (gain)/loss AFS invest Treasury stock (at cost) Retained Earnings Total liabilities and equity 2,261,000 258,000 1,947,000 602,000 4,000 5,072,000 2,121,000 20,715,000 (2,181,000) 568,000 26,295,000 12/31/03 2,850,000 100,000 1,900,000 900,000 50,000 5,800,000 2,000,000 17,800,000 (1,800,000) 73,000 23,873,000
347,000 18,000 156,000 45,000 128,000 694,000 7,000,000 642,000 1,500,000 2,108,000 275,000 122,000 590,000 12,237,000 5,125,000 3,525,000 13,000 27,000 (38,000) 4,712,000 13,364,000 26,295,000
650,000 21,000 55,000 32,000 60,000 818,000 4,000,000 656,000 3,000,000 1,825,000 250,000 75,000 2,590,000 12,396,000 3,000,000 1,600,000 0 (80,000) (10,000) 6,149,000 10,659,000 23,873,000
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Ref Credit
Accounts Payable Salaries Payable Interest payable Income Taxes Payable Dividends Payable Bonds Payable (Premium)/Discount on Bonds Payable Convertible Bonds Payable Lease obligation Asset retirement obligation Deferred Income Taxes Other long term liabilities
(650,000) (21,000) (55,000) (32,000) (60,000) (4,000,000) (656,000) (3,000,000) (1,825,000) (250,000) (75,000) (2,590,000)
(590,000) 2,000,000
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Avery Slings & Arrows Common stock, $10 par Additional paid in capital common Unrealized (gain)/loss AFS invest Treasury stock (at cost) Other paid in capital Retained Earnings
Year ending 12/31/03 Ref Debit (3,000,000) (1,600,000) 80,000 10,000 0 (6,149,000) (23,873,000)
Ref Credit
Year ending 12/30/04 Target (5,125,000) (2,125,000) (3,525,000) (1,925,000) (27,000) 38,000 (13,000) (4,712,000) (26,295,000) 2004 Operating Cash Inflows/ (Outflows) (107,000) 28,000 (13,000) 1,437,000
Sales Earnings of affiliated companies Gain/(loss) on sale of equipment Gain/(loss) sale of patent Realized gain/(loss) sale of land Realized gain/(loss) on investments Interest and dividend revenue Cost of goods sold Salaries and wages Other operating expenses Bad debt expense Depreciation expense Amortization of intangibles Accretion expense Interest expense Income taxes expense Net income (accrual basis)
2004 Revenue/ Re (Expense) f 6,600,000 150,000 (65,000) 0 0 53,000 15,000 (3,490,000) (632,000) (421,000) (45,000) (757,000) (5,000) (25,000) (935,000) (177,000) 266,000
Ref
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Avery Slings & Arrows Cash provided by operations: Reconciling schedule: Net income
INFLOWS
OUTFLOWS
266,000
Investing Activities
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INFLOWS
OUTFLOWS 0
Noncash Financing/Investing
589,000 x 0
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Avery Slings & Arrows Statement of Cash Flows For year ended December 31, 2004 Inflows Cash provided by operations Cash collected from customers Interest & dividends received Cash paid for merchandise Cash paid to employees Other operating disbursements Interest paid Income taxes paid 6,508,000 44,000 (3,495,000) (635,000) (375,000) (848,000) (117,000) (5,470,000) Outflows Net
6,552,000 Cash provided by investing activities Proceeds from sale of equipment Cash outlay to acquire equipment Cash outlay to acquire patent Proceeds from sale of securities Cash outlay to buy securities
1,082,000
Cash provided by financing activities Dividends paid Sold treasury stock Purchased treasury stock Payments on long term debt Payments on capital leases Common stock issued Proceeds from issuing nonconvertible bonds
(135,000) 23,000 (38,000) (2,000,000) (365,000) 1,050,000 3,000,000 4,073,000 (2,538,000) 1,535,000 (589,000) 2,850,000 2,261,000
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648,000 1,500,000
Schedule to reconcile net income to cash provided by operations Net Income Depreciation Amortization & impairment of intangibles Accretion expense Amortization of bond premium Realized loss on sale of equipment Realized gain on sale of investments Equity method investments earnings in excess of dividends Increase in deferred income taxes Change in working capital accounts: Net accounts receivable Merchandise Inventory Prepaid Expenses Accounts Payable Salaries Payable Interest Payable Income Taxes Payable Cash provided by operations:
266,000 757,000 5,000 25,000 (14,000) 65,000 (53,000) (121,000) 47,000 (47,000) 298,000 46,000 (303,000) (3,000) 101,000 13,000 1,082,000
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Acct 592 Spring 2005 Acct. 301 - Statement of Cash Flows - Homework 4 Wenatchee Whirlpool World Balance Sheet
12/31/96 12/31/95 Current Assets Cash Securities Available for Sale (at market) Accounts Receivable Allowance for doubtful accounts Merchandise Inventory Prepaid Operating Expenses Noncurrent Assets Investments (equity method) Plant, property & equipment Accumulated Depreciation Intangible Assets TOTAL ASSETS Current Liabilities Accounts Payable Salaries Payable Income Taxes Payable Dividends Payable Current portion long term debt Noncurrent Liabilities Bonds Payable Discount on Bonds Deferred Income Taxes Other long term liabilities Stockholder's Equity Convertible preferred, $100 par Common stock, $10 par Additional paid in capital Unrealized (gain)/loss investments Retained Earnings Total liabilities and equity 2,837,600 390,000 1,752,000 (120,500) 1,145,000 84,000 6,088,100 3,097,000 16,420,000 (829,000) 71,500 24,847,600 2,000,000 150,000 1,900,000 (110,000) 875,000 62,000 4,877,000 3,000,000 10,800,000 (600,000) 128,000 18,205,000
880,000 20,000 13,400 35,000 29,000 977,400 10,000,000 (247,000) 180,000 562,000 10,495,000 500,000 3,100,000 3,950,000 27,000 5,798,200 13,375,200 24,847,600
750,000 15,000 27,000 60,000 21,000 873,000 5,000,000 (270,000) 88,000 3,000,000 7,818,000 2,000,000 1,500,000 1,200,000 78,000 4,736,000 9,514,000 18,205,000
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Wenatchee Whirlpool World Income Statement For year ending 12/31/96 Sales Earnings of affiliated company (equity method) Gain/(loss) on sale of PP&E Realized gain/(loss) on investments Realized gain on sale of patent Interest and dividend revenue Total revenues Cost of goods sold Salaries and wages Other operating expenses Bad debt expense Depreciation & amortization expense Interest expense Income taxes expense Net income Additional information: a. b. c. d. e. f. g. h. i. j. k. On February 25, WWW sold an internally developed patent for $1,000,000. The patent was carried on the books at unamortized legal fees amounting to $50,000 at date of sale. On March 31, WWW issued $5,000,000 in bonds at face value. The semi-annual bonds have a coupon rate of 10% per annum. During the year, WWW disposed of various items of equipment with a total book value of $65,000 and original cost of $80,000. The amount received was $25,000 in cash. During the third quarter, shareholders holding 15,000 shares of the preferred stock converted them into common stock. The conversion ratio was 6 shares of common for each share of preferred. On July 20, WWW sold 50,000 shares of its common stock for $41 per share. By the end of the year, WWW had written off as uncollectible a total of $28,000 in accounts receivable. An existing factory with equipment was acquired during the year. The acquisition cost was allocated as follows: $772,000 to land, $3,450,000 to building and 678,000 to equipment. WWW acquired a parcel of land adjoining the new factory by giving the owner 20,000 shares of its common stock. At the date of the transaction, the market value of the stock was $40 per share. During the year WWW purchased $875,000 in marketable securities and sold securities which had cost $584,000. The market value of the portfolio at the end of the year was $390,000. WWW owns 30% of a company which manufactures parts that WWW uses in its production process. WWW received $18,000 in dividends from this partially owned company during 1996. Dividends declared during the year totaled $50,000. 3,600,000 590,000 345,000 38,500 250,500 669,400 740,400 6,200,000 115,000 (40,000) 108,000 950,000 13,000 7,346,000
6,233,800 1,112,200
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1,752,000 (148,000) (120,500) 1,145,000 84,000 3,097,000 (10,500) 270,000 22,000 97,000
Accounts Payable Salaries Payable Income Taxes Payable Dividends Payable Current portion long term debt Bonds Payable Premium/Discount on Bonds Payable Deferred Income Taxes Other long term liabilities
24,847,60 0 (880,000) (130,000) (20,000) (13,400) (35,000) (29,000) (5,000) 13,600 25,000 (8,000)
(562,000) 2,438,000
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Debit
ref
Credit
12/31/96
Target
6,200,000 115,000 (40,000) 108,000 950,000 13,000 (3,600,000) (590,000) (345,000) (38,500) (244,000) (6,500) (669,400) (740,400) 1,112,200
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Investing Activities
Financing Activities
Noncash Financing/Investing
837,600
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Uliman Company Cash Accounts receivable (net) Marketable securities (at cost) Allowance for change in value Merchandise Inventory Prepaid Expenses Investments (long-term) Land Buildings and equipment Accumulated depreciation
Accounts Payable Income Taxes Payable Wages payable Interest payable 12% bonds payable Premium/Discount on Bonds Payable Notes payable (long term) 10% Convertible bonds Deferred Income Taxes Convertible preferred, $100 par Common stock, $10 par Additional paid in capital Unrealized (gain)/loss investments Retained Earnings Closing entry for Sales Other revenue Gain/(loss) on sale of PP&E Realized gain/(loss) on investments Interest and dividend revenue Cost of goods sold Salaries & other operating expenses Other operating expense Depreciation & amortization Interest expense Income taxes expense Net income (accrual basis)
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Subtotals
Investing Activities
Financing Activities
Noncash Financing/Investing
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Driskoll Company Cash Accounts receivable (net) Inventories Prepaid Expenses Investments (long-term) Land Buildings Acc'd depreciation - Bldg Equipment Acc'd depreciation - Equip Patents
Accounts Payable Interest payable Wages payable Bonds payable Discount on bonds Common stock, $10 par Additional paid in capital Unrealized (gain)/loss investments Retained Earnings
(35,350) (107,700) ok Closing entry for 1999 Rev/(Exp) Sales 49,550 Gain/(loss) on exchange of assets 1,300 Realized gain/(loss) on (200) investments Interest and dividend revenue 790 Cost of goods sold (23,800) Salaries & other operating (16,510) expenses Other operating expense (1,100) Depreciation - buildings (2,700) Depreciation - equipment (3,100) Patent amortization (815) Interest expense (1,715) Income taxes expense (500) Extraordinary loss (net of taxes) (2,600) Net income (accrual basis) (1,400)
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Subtotals
Investing Activities
Financing Activities
Noncash Financing/Investing
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Acct 592 Spring 2005 7. Statement of Cash Flow Problem from final exam, Spring 1998
Albion Altimeters Inc. Balance Sheet Current Assets Cash Securities Available for Sale (at market) Accounts Receivable Allowance for doubtful accounts Merchandise Inventory Prepaid Operating Expenses 12/31/97 310,200 1,112,000 781,000 (33,200) 829,000 38,800 3,037,800 12/31/96 400,000 500,000 900,000 (27,000) 850,000 25,000 2,648,000 Albion Altimeters Inc. Income Statement For year ending Sales Gain/(loss) on sale of PP&E Interest and dividend revenue Total revenues Cost of goods sold Salaries and wages Other operating expenses Bad debt expense Depreciation & amortization expense Interest expense Income taxes expense Net income 413,000 7,200 23,500 0 443,700 1,000,000 118,000 103,700 1,221,700 350,000 8,500 27,000 25,000 410,500 1,000,000 124,000 88,000 1,212,000 2,100,000 650,000 230,000 17,200 30,000 87,700 180,200 12/31/97 3,600,000 (30,000) 15,000 3,585,000
Noncurrent Assets Plant, property & equipment Accumulated Depreciation TOTAL ASSETS Current Liabilities Accounts Payable Salaries Payable Income Taxes Payable Dividends Payable Noncurrent Liabilities Bonds Payable Premium/Discount on Bonds Payable Deferred Income Taxes
3,295,100 289,900
Required: Use the additional information (below) and the worksheet provided to prepare the statement of cash flow using the direct method. For full credit, use the pages provided to prepare the formal statement in addition to the worksheet. Additional information: a. AA declared dividends of $75,000 on June 30, 1997. b. On Sept. 3, AA sold equipment with a book value of $65,000 for $35,000 in cash. The original cost of the item was $90,000. c. AA purchased for cash plant, property & equipment for $1,740,000. d. On May 15, AA issued 50,000 shares of common stock at $35 each. e. AA wrote off $11,000 of bad debts during 1997. f. AA purchased for cash $585,000 in marketable securities on Apr. 1. g. On Oct. 10, AA issued 1,000 shares of stock in exchange for a parcel of land. At that date, the market price of the stock was $32.
Stockholder's Equity Common stock, $10 par Additional paid in capital Acc'd other comprehensive income* Retained Earnings Total liabilities and equity
* Other comprehensive income is composed of the holding gains/losses related to available for sale securities.
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Debit
Ref
Credit 89,800
Accounts Payable Salaries Payable Income Taxes Payable Dividends Payable Bonds Payable Premium/Discount on Bonds Payable Deferred Income Taxes Common stock, $10 par Additional paid in capital Acc'd other comprehensive income Retained Earnings
(63,000) 1,300 3,500 25,000 0 6,000 (15,700) (510,000) (1,272,000) (27,000) (214,900) (2,066,800)
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Investing Activities
Financing Activities
Noncash Financing/Investing
89,800
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Acct 592 Spring 2005 Albion Altimeters Statement of Cash Flow For year ended 12-31-97 Cash provided by operations
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Albion Altimeters Statement of Cash Flow For year ended 12-31-97 Reconciling schedule
Notes:
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6,337,000 915,000
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Acct 592 Spring 2005 Endicott Engines Inc. Additional information: a. b. c. d. e. f. g. h. i. j. k. l. On February 19, EEI sold an internally developed patent for $500,000. On April 3, EEI issued $6,000,000 in bonds at face value. The semi-annual bonds have a coupon rate of 10% per annum. During the year, EEI disposed of various items of equipment with a total book value of $60,000 and original cost of $80,000. The amount received was $30,000 in cash. During the third quarter, shareholders holding 10,000 shares of the preferred stock converted them into common stock. The conversion ratio was 8 shares of common for each share of preferred. On July 20, EEI sold 25,000 shares of its common stock for $43 per share. By the end of the year, EEI had written off as uncollectible a total of $35,000 in accounts receivable. An existing factory with equipment was acquired during the year. The acquisition cost was allocated as follows: $750,000 to land, $4,000,000 to building and 600,000 to equipment. EEI acquired a parcel of land adjoining the new factory by giving the owner 10,000 shares of its common stock. At the date of the transaction, the market value of the stock was $45 per share. New equipment for the factory was obtained under a capital lease. The present value of the minimum lease payments was $722,000. During the year EEI purchased $900,000 in marketable securities and sold securities which had cost $600,000. The market value of the portfolio at the end of the year was $536,000. EEI owns 40% of a company that manufactures parts that EEI uses in its production process. EEI received $20,000 in dividends from this partially owned company during 2002. Dividends declared during the year totaled $100,000.
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Endicott Engines Inc. Balance Sheet Current Assets Cash Securities Available for Sale Accounts Receivable Allowance for doubtful accounts Merchandise Inventory Prepaid Operating Expenses Noncurrent Assets Investments (partially owned companies) Plant, property & equipment Accumulated Depreciation Intangible Assets TOTAL ASSETS Current Liabilities Accounts Payable Salaries Payable Income Taxes Payable Dividends Payable
12/31/02 1,308,200 536,000 2,145,000 (122,200) 1,165,000 63,000 5,095,000 2,605,000 17,142,000 (934,000) 93,000 24,001,000 1,050,000 43,000 24,000 85,000 1,202,000 11,000,000 (277,000) 142,000 749,000 570,000 12,184,000 1,000,000 2,150,000 2,575,000 27,000 4,863,000 10,615,000 24,001,000
12/31/01 1,500,000 300,000 2,000,000 (110,000) 975,000 50,000 4,715,000 2,500,000 10,700,000 (700,000) 150,000 17,365,000 800,000 18,000 35,000 60,000 913,000 5,000,000 (300,000) 90,000 323,000 3,000,000 8,113,000 2,000,000 1,000,000 1,200,000 91,000 4,048,000 8,339,000 17,365,000
Noncurrent Liabilities
Bonds Payable Discount on Bonds Deferred Income Taxes Lease obligations Other long term liabilities Stockholder's Equity Convertible preferred, $100 par Common stock, $10 par Additional paid in capital Unrealized (gain)/loss investments Retained Earnings Total liabilities and equity
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Year ending
12/31/02 1,308,200 536,000 2,145,000 (122,200) 1,165,000 63,000 2,605,000 17,142,000 (934,000) 93,000 24,001,000 (1,050,000) (43,000) (24,000) (85,000) (11,000,000) 277,000 (142,000) (749,000) Target (191,800) 236,000 145,000 (12,200) 190,000 13,000 105,000 6,442,000 (234,000) (57,000)
Accounts Payable Salaries Payable Income Taxes Payable Dividends Payable Bonds Payable Premium/Discount on Bonds Payable Deferred Income Taxes Lease obligations
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12/31/01 Ref (3,000,000) (2,000,000) (1,000,000) (1,200,000) (91,000) (4,048,000) (17,365,000) Rev/(Exp) 6,500,000 125,000 (30,000) 192,000 450,000 15,000 (3,800,000) (610,000) (354,000) (47,200) (254,000) (7,000) (692,100) (572,700) 915,000
Debit
Ref
Credit
(2,150,000) (1,150,000) (2,575,000) (1,375,000) (27,000) (4,863,000) (24,001,000) Receipt/(Disb) 64,000 (815,000)
Investing Activities
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Noncash Financing/Investing
191,800
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30,000
Page 44
31-Dec-97
Inflows 95,000 0
Outflows
Net
95,000
11,000
45,000 45,000
Schedule to reconcile net income to cash Net Income Depreciation & amortization Realized gains/losses PP&E Realized gain/loss - land sale Change in working capital accounts: Net accounts receivable Merchandise Inventory Prepaid Expenses Accounts Payable Salaries Payable Income Taxes Payable Interest Payable Cash provided by operations:
provided by operations 14,500 11,000 4,000 (20,000) 4,000 (18,000) (3,000) 8,000 7,000 4,000 (500) 11,000
Page 45
Palouse Pottery Cash Accounts Receivable Allowance for doubtful accounts Merchandise Inventory Prepaid Expenses Plant, property & equipment Accumulated Depreciation Accounts Payable Salaries Payable Interest payable Income Taxes Payable Dividends Payable Long term liabilities Common stock, $1 par Retained Earnings
Target 27,000 (2,500) (1,500) 18,000 3,000 21,000 (2,000) (8,000) (7,000) 500 (4,000) (8,000) 10,000 (45,000) (1,500) 0
Statement of Cash Flows Operating Activities Net income Add back loss on sale of equipment Minus gain on sale of land depreciation Change in working capital accounts: A/R (net) Inventory Prepaid expenses A/P Salaries payable Interest payable Income taxes payable Investing Activities Sold equipment Sold land Purchase PP&E Financing Activities Dividends paid Payment on LT debt Issued common stock Noncash Financing/Investing CHANGE IN CASH Totals
11,000
20,000
b d
c e g 45,000
5,000 10,000
X 265,000
27,000 265,000
Page 46
De bit
Re f x j a h L
Cre dit 10,000 1,000 500 1,000 4,000 15,000 5,000 3,000 1,000 45,000 36,000 6,000
Ye ar e nding 12 /3 1/9 7 5,000 28,500 (2,000) 17,000 500 289,100 (16,000) 322,100 (13,000) (1,000) (1,000) (10,000) (181,000) (116,100) (322,100) 1997 Receipt/(Disb) 81,000 0 (39,000) (24,000)
Targ e t (10,000) (1,500) (500) 7,000 (4,000) 69,000 4,000 (3,000) 2,000 (1,000) 20,000 (81,000) (1,000) 0
a k g f b
b i m
n e
2,000 o 20,000 g d x
5,000
k n
7,000 2,000
14,000
(OUTFLOWS)
14,000
4,000 f 39,000
(35,000)
Financing Activities Paid cash dividend Issued common stock Paid long term debt Noncash Financing/Investing Acquired land in exchange for stock CHANGE IN CASH Totals Additional Information a. Wrote off $500 accounts receivable as uncollectible b. Sold operational assets for $4,000 cash (cost $15,000, acc'd depreciation $9,000) c. Declared and paid a cash dividend, $5,000
180694588.doc Created by T. Gordon 10/16/2013
11,000 c d 36,000 e g x 45,000 10,000 259,500 0 d. e. f. g. g x 259,500 0 20,000 45,000 (10,000) 5,000
0 0 Issued common stock for $36,000 cash Paid a $20,000 long-term note installment Purchased operational assets, $39,000 cash Acquired land in exchange for 1000 shares worth $45 each
Page 47
31-Dec-97 Inflows 81,000 0 (39,000) (14,000) (10,000) (1,000) (3,000) (67,000) Outflows Net
81,000
14,000
Schedule to reconcile net income to cash provided by operations Net Income 6,000 Depreciation & amortization 5,000 Realized gains/losses PP&E 2,000 Change in working capital accounts: Net accounts receivable 2,000 Merchandise Inventory (7,000) Prepaid Expenses 4,000 Accounts Payable 3,000 Salaries Payable (2,000) Interest Payable 1,000 Cash provided by operations: 14,000 Non-cash financing and investing activities Acquired land in exchange for common stock
Page 48
g a
500,000 20,715,000
Accumulated Depreciation Intangible Assets Total assets Accounts Payable Salaries Payable Interest payable Income Taxes Payable Dividends Payable Bonds Payable Premium/Discount on Bonds Payable Convertible Bonds Payable Lease obligation Asset retirement obligation Deferred Income Taxes Other long term liabilities Convertible preferred, $100 par Common stock, $10 par
g (1,800,000) d 73,000 I 23,873,000 (650,000) (21,000) (55,000) (32,000) (60,000) (4,000,000) (656,000) t t
(381,000) 495,000
303,000 3,000 t t 135,000 e L 14,000 1,500,000 365,000 g q w 2,000,000 b f k b f 101,000 13,000 203,000 3,000,000
e u
(347,000) 303,000 (18,000) 3,000 (156,000) (101,000) (45,000) (13,000) (128,000) (68,000) (7,000,000) (3,000,000) (642,000) 14,000
(1,500,000) 1,500,000 648,000 (2,108,000) (283,000) 25,000 (275,000) (25,000) 47,000 (122,000) (47,000) (590,000) 2,000,000 0 0 250,000 (5,125,000) (2,125,000) 375,000 1,500,000 800,000 (3,525,000) (1,925,000) 1,125,000 107,000 10,000 13,000 (27,000) 38,000 (13,000) (107,000) 28,000 (13,000) 1,437,000
(1,600,000)
Unrealized (gain)/loss AFS invest Treasury stock (at cost) Other paid in capital Retained Earnings
Page 49
Sales Earnings of affiliates (equity method) Gain/(loss) on sale of PP&E Realized gain/(loss) on investments Interest and dividend revenue Cost of goods sold Salaries and wages Other operating expenses Bad debt expense Depreciation expense Amortization of intangibles Accretion expense Interest expense Income taxes expense Net income (accrual basis)
s g
92,000 150,000
s o p p q t w (177,000) t 266,000 X
44,000 303,000 (3,495,000) 3,000 (635,000) (375,000) 0 0 0 0 14,000 (848,000) (117,000) 1,082,000 OUTFLOW S 1,082,000 1,082,000
266,000 757,000 5,000 25,000 (14,000) 65,000 (53,000) (121,000) 47,000 (47,000) 298,000 46,000 (303,000) (3,000) 101,000 13,000
1,082,000 0
Page 50
Avery Slings & Arrows Investing Activities Purchased PP&E Purchased marketable securities Sold equipment Purchased patent Sold investments
Ref
Inflows
Ref
Outflows (3,206,000)
a c d J 59,000 I 275,000
Financing Activities Issued common stock Paid dividends Issued bonds Sold treasury stock Purchased treasury stock Payments on capital leases Payments on long-term debt Noncash Financing/Investing Bonds converted into stock Capital lease Stock dividend CHANGE IN CASH Totals
f h K
1,500,000 f 648,000
1,500,000 648,000
589,000 x 20,930,000 ok
20,930,000 0
Page 51
Solution
Example 4- Acct 315 Worksheet Wenatchee Whirlpool World Cash Securities Available for Sale (at market) Accounts Receivable Allowance for doubtful accounts Merchandise Inventory Prepaid Operating Expenses Investments (equity method) Year ending 12/31/95 Ref 2,000,000 150,000 1,900,000 (110,000) 875,000 62,000 3,000,000 f p p l h Plant, property & equipment Accumulated Depreciation Intangible Assets Accounts Payable Salaries Payable Income Taxes Payable Dividends Payable Current portion long term debt Bonds Payable Premium/Discount on Bonds Payable Deferred Income Taxes Other long term liabilities Convertible preferred, $100 par 10,800,000 (600,000) 128,000 18,205,000 (750,000) (15,000) (27,000) (60,000) (21,000) (5,000,000) 270,000 (88,000) (3,000,000) 12/31/95 (2,000,000) s s ref d 2,430,000 8,000 Debit 1,500,000 h e Common stock, $10 par (1,500,000) d h e Additional paid in capital Unrealized (gain)/loss investments Retained Earnings 0 (1,200,000) (78,000) (4,736,000) (18,205,000) o k 51,000 50,000 X 1,112,200 d 200,000 500,000 900,000 600,000 1,550,000 600,000 (3,950,000) (27,000) (5,798,200) (24,847,600) (2,750,000) 51,000 (1,062,200) (3,100,000) (1,600,000) ref Credit q k 13,600 75,000 k s b r q 50,000 8,000 5,000,000 23,000 92,000 p p 130,000 5,000 g c 28,000 270,000 22,000 115,000 800,000 4,900,000 15,000 c n n a 80,000 244,000 6,500 50,000 16,420,000 (829,000) 71,500 24,847,600 (880,000) (20,000) (13,400) (35,000) (29,000) (10,000,000) 247,000 (180,000) (562,000) 12/31/96 (500,000) (130,000) (5,000) 13,600 25,000 (8,000) (5,000,000) (23,000) (92,000) 2,438,000 Target 1,500,000 5,620,000 (229,000) (56,500) j 18,000 X I Debit 837,600 875,000 o I p f m 51,000 584,000 120,000 28,000 38,500 Ref Credit Year ending 12/31/96 2,837,600 390,000 1,752,000 (120,500) 1,145,000 84,000 3,097,000 Target 837,600 240,000 (148,000) (10,500) 270,000 22,000 97,000
Page 52
Page 53
Investing Activities Sale of patent Sale of equipment Purchase factory Purchase investment securities Sold investment securities I 692,000 a c 1,000,000 25,000 g I 4,900,000 875,000
Financing Activities Issued bonds Issued common stock Dividends paid Long-term debt repaid b e 5,000,000 2,050,000 k s 75,000 2,430,000
Noncash Financing/Investing Preferred converted to common stock Swap common stock for land CHANGE IN CASH Totals 25,237,000 d h 1,500,000 800,000 d h X 1,500,000 800,000 837,600 25,237,000
Page 54
On March 31, WWW issued $5,000,000 in bonds at face value. The semi-annual bonds have a coupon rate of 10% per annum.
5,000,000 5,000,000
During the year, WWW disposed of various items of equipment with a total book value of $65,000 and original cost of $80,000. The amount received was $25,000 in cash. Accumulated depreciation would be $15,000 (80,000 - 65,000)
Cash [Investing - inflow] Accumulated depreciation Loss on sale of plant, property & equipment Plant, property and equipment
d.
During the third quarter, shareholders holding 15,000 shares of the preferred stock converted them into common stock. The conversion ratio was 6 shares of common for each share of preferred. Therefore 90,000 shares of common stock would be issues (6 * 15,000) with a par value of $900,000 ($10 par each). The book value of the preferred was 1,500,000. Therefore, additional paid in capital to balance the journal entry would be 600,000.
Convertible Preferred Stock, $100 par Common stock, $10 par Additional paid-in capital
e.
On July 20, WWW sold 50,000 shares of its common stock for $41 per share. The proceeds would be $2,050,000 (41 * 50,000) and the par value portion would be $500,000 with the rest as additional paid in capital.
Cash [Financing - inflow] Common stock, $10 par Additional paid in capital
f.
By the end of the year, WWW had written off as uncollectible a total of $28,000 in accounts receivable.
28,000 28,000
An existing factory with equipment was acquired during the year. The acquisition cost was allocated as follows: $772,000 to land, $3,450,000 to building and 678,000 to equipment. This totals to $4,900,000.
4,900,000 4,900,000
Page 55
Plant, property and equipment Common stock, $10 par Additional paid in capital
i.
During the year WWW purchased $875,000 in marketable securities and sold securities which had cost $584,000. The market value of the portfolio at the end of the year was $390,000. From the income statement, the gain on sale was 108,000. Therefore, the cash received from the sale of securities was 584+108 = $692,000
Investments - Securities available for sale Cash [Investing outflow] Cash [Investing inflow] Investments - Securities available for sale Gain on sale of investments
j.
WWW owns 30% of a company which manufactures parts that WWW uses in its production process. WWW received $18,000 in dividends from this partially owned company during 1996. Dividends received from equity-method investments reduce the investment account and do NOT appear on the income statement .
18,000 18,000
Dividends declared during the year totaled $50,000. Dividends declared reduce retained earnings and increase dividends payable. The balancing number in dividends payable (if this account exists) will be the dividends paid. If there is no dividends payable account, then the dividends declared = the dividends paid.
Starting through the income statement, looking for noncash items: l. No deposit was made for share of earnings of partially owned companies. Therefore, this account needs to be zeroed out by re-constructing the entry that recorded the share of earnings. 115,000 115,000
m. No check was written for bad debt expense. Therefore, this account needs to be zeroed out by re-constructing the entry that recorded bad debt expense for the year (the credit is always to allowance for doubtful accounts. Bad debt expense Allowance for doubtful accounts 38,500 38,500
Page 56
Acct 592 Spring 2005 n. No checks are written to record depreciation expense and amortization of intangibles. Therefore, these accounts need to be zeroed out by reconstructing the entry that recorded the expenses. 244,000 6,500 244,000 6,500
Starting through the balance sheet to investigate accounts not yet balanced: o. Securities available for sale (at market) doesnt balance by $51,000. However, this amount appears in the owners equity section as the change in Unrealized (gain)/loss on investments. Therefore, this amount must have been the adjusting entry for the allowance for change in value account. 51,000 51,000
The remaining difference in accounts receivable ($120,000) is the adjustment to sales to get from accrual basis to cash basis. The difference in Merchandise Inventory is an adjustment to cost of goods sold. The difference in prepaid operating expenses is an adjustment to other operating expenses. The change in accounts payable would mostly be related to cost of goods sold. The change in salaries payable affects salaries and wages expense. 120,000 120,000 270,000 270,000 22,000 22,000 130,000 130,000 5,000 5,000
Sales Accounts receivable Merchandise inventory Cost of goods sold Prepaid operating expenses Other operating expenses Accounts payable Cost of goods sold Salaries payable Salaries and wages q.
Income tax expense is affected by two accounts on the balance sheet - income taxes payable and deferred income taxes. 13,600 13,600 92,000 92,000
Income taxes payable Income tax expense Deferred income taxes Income tax expense r.
Page 57
Acct 592 Spring 2005 Interest expense Discount on bonds payable s. 23,000 23,000
Long-term debt is presented in two numbers on balance sheet - current and noncurrent. These accounts need to be combined to find out how much was borrowed or repaid during the year. Take the change in one account to the other. The remaining amount to balance will be the cash inflow or outflow. 8,000 8,000
After this entry, the number necessary to balance other long-term debt is $2,430,000 which must be the amount of long-term debt repaid during the year. Other long-term debt Cash [Financing - outflow] 2,430,000 2,430,000
Page 58
Acct 592 Spring 2005 Example 4 - Acct 301 Solution Wenatchee Whirlpool World Statement of Cash Flows For year ended 12/31/96 Inflows Cash provided by operations Cash collected from customers Interest & dividends received Cash paid for merchandise 6,320,000 31,000 Outflows Net
(3,740,000 ) Cash paid to employees (585,000) Other operating disbursements (367,000) Interest paid (646,400) Income taxes paid (662,000) Subtotals 6,351,000 (6,000,400 ) Cash provided by investing activities Purchase plant, property & equipment (4,900,000 )
350,600
Sale of plant, property & equipment 25,000 Sale of patent 1,000,000 Marketable securities purchased (875,000) Marketable securities sold 692,000 Subtotals 1,717,000 (5,775,000 (4,058,000 ) ) Cash provided by financing activities Dividends paid Long-term debt retired Bonds issued Common stock issued (75,000) (2,430,000 )
Non-cash financing and investing activities Preferred stock converted to common 1,500,000
Page 59
Acct 592 Spring 2005 Land obtained by issue of common stock 800,000
Page 60
Solution 12/31/96
Schedule to reconcile net income to cash provided by operations Net Income 1,112,200 Depreciation & amortization 250,500 Bond premiums/discounts 23,000 Realized gains/losses PP&E 40,000 Realized gain/loss investments (108,000) Gain on sale of patent (950,000) Undistributed Earnings of Affiliates (97,000) * Deferred income taxes 92,000 Change in working capital accounts: Net accounts receivable 158,500 ** Merchandise Inventory (270,000) Prepaid Operating Expenses (22,000) Accounts Payable 130,000 Salaries Payable 5,000 Income Taxes Payable (13,600) Cash provided by operations: 350,600 The following notes are explanations and not part of a formal statement of cash flow * Earnings of affiliates (equity method) Dividends received (equity method affiliates) (115,000) 18,000 (97,000)
** This is the easiest way to handle bad debts: just enter change in NET A/R: Change in Accounts 148,000 Receivable Change in Allowance for Doubtful 10,500 Accounts 158,500 This is the more difficult alternate: Adjustment to sales (to get cash collected from 120,000 customers) Bad debt expense 38,500 158,500
Page 61
Acct 592 Spring 2005 What does not work is to include bad debt expense + change in Accounts Receivable and change in Allowance!
Page 62
Solution Debit Worksheet Year ending Ref Credit 12/31/99 Target 1,000 1,000 2,400 (110) L 110 2,690 1,300 1,300 3,000 300 300 800 (190) M 190 7,910 410 410 1,710 (1,600) d 1,600 5,400 0 15,000 14,200 16,200 f 2,000 46,200 (400) 1,700 k 2,100 (16,400) 68,710 O p q 450 r h 300 s 3,500 9,000 i c&e c&e j 700 XX 400 10,000 10 350 104 (4,150) (2,504) (650) (400) (10,000) 290 0 0 (1,196) 0 (21,500) (13,700) (800) (14,100) (68,710) ok 1999 Receipt/(Disb) 40,040 0 0 0 820 (19,350) (11,450) (1,410) 0 0 (1,550) 7,100 (350) (104) 450 (400) (10,000) 290 3,500 9,000 (396) 0 (7,500) (5,000) (300) (4,100)
Year ending 0 01/01/99 Ref Cash 1,400 x Accounts receivable (net) 2,800 Marketable securities (at cost) 1,700 j Allowance for change in value 500 j Merchandise Inventory 8,100 Prepaid Expenses 1,300 N Investments (long-term) 7,000 Land 15,000 Buildings and equipment 32,000 g Accumulated depreciation (16,000) f Total assets 53,800 Accounts Payable Income Taxes Payable Wages payable Interest payable 12% bonds payable Premium/Discount on Bonds Payable Notes payable (long term) 10% Convertible bonds Deferred Income Taxes Convertible preferred, $100 par Common stock, $10 par Additional paid in capital Unrealized (gain)/loss investments Retained Earnings Total liab & equity ok Closing entry for Sales Other revenue Gain/(loss) on sale of PP&E Realized gain/(loss) on investments Interest and dividend revenue Cost of goods sold Salaries & other operating expenses Other operating expense Depreciation & amortization Interest expense Income taxes expense Net income (accrual basis) 1999 Rev/(Exp) 39,930 0 (200) 700 820 (19,890) (11,000) (1,000) (2,100) (410) (2,050) 4,800 (3,800) (2,400) (1,100) 0 0 0 (3,500) (9,000) (800) 0 (14,000) (8,700) (500) (10,000) (53,800)
h e c
L f
m&o
k r&s i&p XX
7,100
Page 63
7,100
4,800 200 (700) 2,100 10 396 110 190 (410) 350 104 (450) 400 7,100
f d k s i
Investing Activities Investments sold sold equipment Purchased equipment Purchase mkt securities
Noncash Financing/Investing LT debt retired by issue of common stock conversion of bonds to stock
e c
x 62,720
1,000 62,720
1,000
Page 64
Ulliman Company Statement of Cash Flows For year ended December 31, 1999 Cash flows from operating activities Collections from customers Payments to suppliers Payments to employees Other operating payments Income taxes paid Dividends collected Cash provided by operations Cash flows from investing activities Purchase of marketable securities Proceeds from sale of long-term investments Disbursements to acquire equipment Proceeds from sale of equipment Cash used by investing activities Cash flows from financing activities Proceeds from issuance of bonds Payment of dividends Cash provided by financing activities Net increase in cash Beginning balance in cash Cash balance at 12-31-97 Noncash investing and financing activities LT debt retired by issue of common stock conversion of bonds to stock
3,500 9,000
Reconcilation of net income to cash provided by operations Net income 4,800 Loss on sale of equipment 200 Gain on sale of investments (700) Depreciation expense 2,100 Bond discount amortization 10 Deferred income taxes 396 Change in WC accounts: Accounts receivable (net) 110 Merchandise Inventory 190 Prepaid Expenses (410) Accounts Payable 350 Income Taxes Payable 104 Wages payable (450) Interest payable 400 7,100
Page 65
2. Homework Assignment Driskoll Company Cash Accounts receivable (net) Inventories Prepaid Expenses Investments (long-term) Land Buildings Acc'd depreciation - Bldg Equipment Acc'd depreciation - Equip Patents
Solution Year ending 12/31/99 Ref 2,700 x 5,900 i 15,300 j 1,400 8,300 16,300 d 68,700 (35,000) c 29,600 (14,200) d 8,700 f 107,700 (8,900) (630) (2,500) (23,000) 0 (22,000) (15,320) 0 (35,350) (107,700) ok 1999 Rev/(Exp) 49,550 1,300 (200) 790 (23,800) (16,510) (1,100) (2,700) (3,100) (815) (1,715) (500) (2,600) (1,400) Debit Worksheet Year ending Ref Credit 12/31/99 Target 820 820 3,520 315 315 6,215 230 230 15,530 (400) k 400 1,000 (1,000) e 1,000 7,300 2,700 2,700 19,000 (8,000) c 8,000 60,700 500 3,200 g 2,700 (34,500) (4,000) d 4,000 25,600 (500) 2,600 g 3,100 (14,700) 485 1,300 h 815 9,185 98,850 L m a b 330 n 14,000 b 780 o f f 2,100 xx 100 8,000 65 650 650 (1,400) ok 1999 Receipt/(Disb) 49,235 0 0 790 (23,735) (16,410) (700) 0 0 0 (1,980) (500) 0 6,700 295 (9,195) (300) (2,600) (17,000) 715 (22,650) (15,970) 0 (31,850) (98,850) (295) 330 (100) 6,000 715 (650) (650) 0 3,500
Accounts Payable Interest payable Wages payable Bonds payable Discount on bonds Common stock, $10 par Additional paid in capital Unrealized (gain)/loss investments Retained Earnings
Closing entry for Sales Gain/(loss) on exchange of assets Realized gain/(loss) on investments Interest and dividend revenue Cost of goods sold Salaries & other operating expenses Other operating expense Depreciation - buildings Depreciation - equipment Patent amortization Interest expense Income taxes expense Extraordinary loss (net of taxes) Net income (accrual basis)
315 1,300
230
330
6,700
Page 66
6,700
i j k L m n
Financing Activities Retired bonds payable Proceeds of bond issue dividends paid
Noncash Financing/Investing Exchanged equipment for land Exchanged stock for patent
d f
x 54,170
820 54,170
820
Page 67
Driskoll Company Statement of Cash Flows For year ended December 31, 1998 Cash flows from operating activities Collections from customers Payments to suppliers Payments to employees Other operating payments Income taxes paid Interest paid Dividends collected Cash provided by operations Cash flows from investing activities Proceeds from insurance company Proceeds from sale of long-term investments Cash provided by investing activities Cash flows from financing activities Proceeds from issuance of bonds Retire bonds payable Payment of dividends Cash used by financing activities Net increase in cash Beginning balance in cash Cash balance at 12-31-97 Noncash investing and financing activities Exchanged stock for patent Exchanged equipment for land Reconcilation of net income to cash provided by operations Net income Depreciation amortization Extraordinary loss (net of taxes) Gain/(loss) on exchange of assets Realized gain/(loss) on investments Amort of Bond Discount Change in working capital accounts: Accounts receivable (net) Inventories Prepaid Expenses Accounts Payable Interest payable Wages payable (1,400) 5,800 815 2,600 (1,300) 200 65 (315) (230) 400 295 (330) 100 6,700
49,235 (23,735) (16,410) (700) (500) (1,980) 790 6,700 2,200 800 3,000 7,220 (14,000) (2,100) (8,880) 820 2,700 3,520
Page 68
Albion Altimeters Inc. Statement of Cash Flows For year ended Cash provided by operations Cash collected from customers Interest & dividends received Cash paid for merchandise Cash paid to employees Other operating disbursements Interest paid Income taxes paid Subtotals Cash provided by investing activities Purchase plant, property & equipment Sale of plant, property & equipment Marketable securities purchased Marketable securities sold Subtotals Cash provided by financing activities Dividends paid Common stock issued Subtotals Change in cash Beginning balance - Cash Ending balance - Cash
Outflows
Net
3,723,000
550,200
32,000
Page 69
12/31/97
Schedule to reconcile net income to cash provided by operations Net Income 289,900 Depreciation & amortization 30,000 Bond premiums/discounts (6,000) Realized gains/losses PP&E 30,000 Deferred income taxes 15,700 Change in working capital accounts: Net accounts receivable 125,200 ** Merchandise Inventory 21,000 Prepaid Operating Expenses (13,800) Accounts Payable 63,000 Salaries Payable (1,300) Income Taxes Payable (3,500) Cash provided by operations: 550,200
**
This is the more difficult alternate: Adjustment to sales (to get cash collected from customers) Bad debt expense
Page 70
Worksheet Albion Altimeters Inc. Cash Securities Available for Sale (at market) Accounts Receivable Allowance for doubtful accounts Merchandise Inventory Prepaid Operating Expenses Plant, property & equipment Accumulated Depreciation Accounts Payable Salaries Payable Income Taxes Payable Dividends Payable Bonds Payable Premium/Discount on Bonds Payable Deferred Income Taxes Common stock, $10 par Additional paid in capital Acc'd other comprehensive income Retained Earnings 0
Year ending 12/31/96 Ref 400,000 r, 500,000 f 900,000 (27,000) e 850,000 25,000 m g, 1,880,000 c (350,000) b 4,178,000 (350,000) (8,500) n (27,000) o (25,000) A (1,000,000) (124,000) (88,000) (1,000,000) (700,000) 14,000 (869,500) (4,178,000) p
Ref
Credit 89,800
11,000
J e i k
90,000 30,000
3,562,000 (355,000) 6,244,800 63,000 (413,000) (7,200) (23,500) 75,000 0 (1,000,000) (118,000) (103,700)
6,000
75,000
q 15,700 G 10,000 d 500,000 (1,510,000) G 22,000 d 1,250,000 (1,972,000) r 27,000 (13,000) x 289,900 (1,084,400) (6,244,800)
Page 71
289,900 30,000 30,000 (6,000) 15,700 119,000 6,200 21,000 (13,800) 63,000 (1,300) (3,500) 550,200
X X H B P Q
89,800 5,619,400 0
5,619,400
(89,800)
Page 72
Page 73
Check figures for cash provided by operations: Endicott Engines Camperdown Company
$ 462,000 $2,647,000
Page 74
Balance Sheet Current Liabilities Accounts Payable Salaries Payable Income Taxes Payable Dividends Payable Noncurrent Liabilities Bonds Payable Discount on Bonds Payable Deferred Income Taxes Obligation under capital leases
12/31/02 930,000 2,000 9,000 27,000 968,000 7,000,000 (605,000) 64,000 403,000 6,862,000
12/31/01 750,000 5,000 20,000 18,000 793,000 7,000,000 (640,000) 39,000 380,000 6,779,000
Camperdown Company Balance Sheet Current Assets Cash Securities Available for Sale (at cost) Allowance to adjust to market value Net accounts receivable Merchandise Inventory
12/31/02
12/31/01
Noncurrent Assets Plant, property & equipment Accumulated Depreciation Investment in Edible Oils Inc. Intangible Assets TOTAL ASSETS
Stockholder's Equity Convertible preferred stock Common stock, $10 par Additional paid in capital Acc'd other comprehensive income Treasury stock (at cost) Retained Earnings Total liabilities and equity
Page 75
9,064,000 951,000
Page 76
Year ending 12/31/01 Ref 100,000 367,000 (14,000) 1,238,000 540,000 14,500,000 (1,500,000) 2,000,000 500,000 17,731,000 (750,000) (5,000) (20,000) (18,000) (7,000,000) 640,000 (39,000) (380,000)
Credit
(2,527,000) (1,027,000) 2,023,000 480,000 19,504,000 (930,000) (2,000) (9,000) (27,000) (7,000,000) 605,000 (64,000) (403,000) (180,000) 3,000 11,000 (9,000) 0 (35,000) (25,000) (23,000) 23,000 (20,000)
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Statement of Cash Flow Problem Worksheet Camperdown Company Convertible preferred, $100 par
Debit
Ref
Credit
Target 500,000
(1,600,000)
(2,000,000)
(400,000)
Additional paid in capital Acc'd other comprehensive income Treasury stock (at cost) Retained Earnings Total Liab & owners equity Closing entry for
(1,400,000) 14,000 52,000 (2,225,000) (17,731,000) 2002 Rev/(Exp) Ref Debit Ref Credit
Sales Earnings of investees (equity method) Gain/(loss) on sale of PP&E Realized gain/(loss) on investments Cost of goods sold Salaries and wages Other operating expenses Bad debt expense Depreciation & amortization expense Interest expense Income taxes expense Net income (accrual basis)
10,000,000 50,000 (45,000) 10,000 (6,000,000) (600,000) (250,000) (21,000) (1,077,000) (565,000) (551,000) 951,000
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Investing Activities
Financing Activities
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83,000
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Acct 592 Spring 2005 Camperdown Corporation Statement of Cash Flow For year ended 12-31-02 Cash provided by operations
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Acct 592 Spring 2005 Camperdown Corporation Statement of Cash Flow For year ended 12-31-02 Reconciling schedule
Notes
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