MGAB01H3 Chapter Notes - Chapter 5: Cash Flow Statement, Income Statement
MGAB01H3 Full Course Notes
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The comparative balance sheet of Del Ray Enterprises Inc. atDecember 31, 2016 and 2015, is as follows:
1 | Dec. 31, 2016 | Dec. 31, 2015 | |
2 | Assets | ||
3 | Cash | $146,600.00 | $179,800.00 |
4 | Accounts receivable (net) | 224,600.00 | 242,000.00 |
5 | Merchandise inventory | 321,600.00 | 299,200.00 |
6 | Prepaid expenses | 13,400.00 | 9,600.00 |
7 | Equipment | 655,000.00 | 537,000.00 |
8 | Accumulated depreciation-equipment | (170,800.00) | (132,200.00) |
9 | Total assets | $1,190,400.00 | $1,135,400.00 |
10 | Liabilities and Stockholdersâ Equity | ||
11 | Accounts payable (merchandise creditors) | $250,200.00 | $237,600.00 |
12 | Mortgage note payable | ââââ0.00 | 336,000.00 |
13 | Common stock, $10 par | 74,000.00 | 24,000.00 |
14 | Paid-in capital: Excess of issue price over parâcommon stock | âââ470,000.00 | 320,000.00 |
15 | Retained earnings | 396,200.00 | 217,800.00 |
16 | Total liabilities and stockholdersâ equity | $1,190,400.00 | $1,135,400.00 |
Additional data obtained from the income statement and from anexamination of the accounts in the ledger for 2016 are asfollows:
A. | Net income, $332,000 |
B. | Depreciation reported on the income statement, $83,400 |
C. | Equipment was purchased at a cost of $162,800 and fullydepreciated equipment costing $44,800 was discarded, with nosalvage realized. |
D. | The mortgage note payable was not due until 2018 but the termspermitted earlier payment without penalty. |
E. | 10,000 shares of common stock were issued at $20 for cash. |
F. | Cash dividends declared and paid, $153,600 |
Prepare a statement of cash flows, using the indirect method ofpresenting cash flows from operating activities. Refer to theLabels and Amount Descriptions list provided for the exact wordingof the answer choices for text entries. Be sure to complete theheading of the statement. In the operating activities section, usethe minus sign to indicate cash outflows, decreases in cash and anet cash outflow, if required. In the investing and financingactivities section, use a minus sign only to indicate a NET cashoutflow for the section.
I have the statement of cash flows, but I need help with thespreadsheet (worksheet) for statement of cash flows.
DEL RAY ENTERPRISES INC. | |||||||||||||
Statement of Cash Flows | |||||||||||||
For the Year Ended December 31, 2016 | |||||||||||||
Cash flows from operating activities: | |||||||||||||
Net income | $ 332,000 | ||||||||||||
Adjustments to reconcile net income to net cash | |||||||||||||
flow from operating activities: | |||||||||||||
Depreciation | 83,400 | ||||||||||||
Changes in current operating assets and liabilities: | |||||||||||||
Decrease in accounts receivable | 17,400 | ||||||||||||
Increase in merchandise inventory | (22,400) | ||||||||||||
Increase in prepaid expenses | (3,800) | ||||||||||||
Increase in accounts payable | 12,600 | ||||||||||||
Net cash flow from operating activities | $ 419,200 | ||||||||||||
Cash flows from investing activities: | |||||||||||||
Less cash paid for purchase of equipment | $ (162,800) | ||||||||||||
Net cash flow used for investing activities | (162,800) | ||||||||||||
Cash flows from financing activities: | |||||||||||||
Cash received from sale of common stock | $ 200,000 | ||||||||||||
Less cash paid for dividends | (153,600) | ||||||||||||
Less cash paid to retire mortgage note payable | (336,000) | ||||||||||||
Net cash flow used for financing activities | (289,600) | ||||||||||||
Increase (decrease) in cash | $ (33,200) | ||||||||||||
Cash at the beginning of the year | 179,800 | ||||||||||||
Cash at the end of the year | $ 146,600 | ||||||||||||
DEL RAY ENTERPRISES INC. | |||||||||||||||
Spreadsheet (Work Sheet) for Statement of CashFlows | |||||||||||||||
For the Year Ended December 31, 2016 | |||||||||||||||
Balance, | Transactions | Balance, | |||||||||||||
Dec. 31, 2015 | Debit | Credit | Dec. 31, 2016 | ||||||||||||
Cash | 179,800 | 146,600 | |||||||||||||
Accounts receivable (net) | 242,000 | 224,600 | |||||||||||||
Merchandise inventory | 299,200 | 321,600 | |||||||||||||
Prepaid expenses | 9,600 | 13,400 | |||||||||||||
Equipment | 537,000 | 655,000 | |||||||||||||
Accum. depr. - equipment | (132,200) | (170,800) | |||||||||||||
Accounts payable | (237,600) | (250,200) | |||||||||||||
Mortgage note payable | (336,000) | - | |||||||||||||
Common stock, $25 par | (24,000) | (74,000) | |||||||||||||
Paid-in capital in excess of par | (320,000) | (470,000) | |||||||||||||
Retained earnings | (217,800) | (396,200) | |||||||||||||
Totals | - | - | |||||||||||||
Operating activities: | |||||||||||||||
Net income | |||||||||||||||
Depreciation | |||||||||||||||
Decrease in accounts receivable | |||||||||||||||
Increase in merchandise inventory | |||||||||||||||
Increase in prepaid expenses | |||||||||||||||
Increase in accounts payable | |||||||||||||||
Investing activities: | |||||||||||||||
Purchase of equipment | |||||||||||||||
Financing activities: | |||||||||||||||
Payment of cash dividends | |||||||||||||||
Sale of common stock | |||||||||||||||
Payment of mortgage note payable | |||||||||||||||
Net decrease in cash | |||||||||||||||
Totals | |||||||||||||||
The comparative balance sheet of Canace Products Inc. forDecember 31, 2016 and 2015, is shown as follows:
1 | Dec. 31, 2016 | Dec. 31, 2015 | |
2 | Assets | ||
3 | Cash | $643,320.00 | $679,710.00 |
4 | Accounts receivable (net) | 567,060.00 | 547,290.00 |
5 | Inventories | 1,010,150.00 | 983,330.00 |
6 | Investments | 0.00 | 240,620.00 |
7 | Land | 520,090.00 | 0.00 |
8 | Equipment | 879,420.00 | 680,200.00 |
9 | Accumulated depreciation-equipment | (244,310.00) | (200,240.00) |
10 | Total assets | $3,375,730.00 | $2,930,910.00 |
11 | Liabilities and Stockholdersâ Equity | ||
12 | Accounts payable (merchandise creditors) | $772,600.00 | $747,990.00 |
13 | Accrued expenses payable (operating expenses) | 63,150.00 | 70,180.00 |
14 | Dividends payable | 8,990.00 | 7,370.00 |
15 | Common stock, $2 par | 56,000.00 | 32,000.00 |
16 | Paid-in capital: Excess of issue price over parâcommon stock | 408,000.00 | 192,000.00 |
17 | Retained earnings | 2,066,990.00 | 1,881,370.00 |
18 | Total liabilities and stockholdersâ equity | $3,375,730.00 | $2,930,910.00 |
The income statement for the year ended December 31, 2016, is asfollows:
1 | Sales | $5,978,640.00 | |
2 | Cost of merchandise sold | 2,452,460.00 | |
3 | Gross profit | $3,526,180.00 | |
4 | Operating expenses: | ||
5 | Depreciation expense | $44,070.00 | |
6 | Other operating expenses | 3,099,060.00 | |
7 | Total operating expenses | 3,143,130.00 | |
8 | Operating income | $383,050.00 | |
9 | Other expense: | ||
10 | Loss on sale of investments | (65,430.00) | |
11 | Income before income tax | $317,620.00 | |
12 | Income tax expense | 103,420.00 | |
13 | Net income | $214,200.00 |
Additional data obtained from an examination of the accounts inthe ledger for 2016 are as follows:
| A. | Equipment and land were acquiredfor cash. |
| B. | There were no disposals ofequipment during the year. |
| C. | The investments were sold for$175,190 cash |
| D. | The common stock was issued forcash. |
| E. | There was a $28,580 debit toRetained Earnings for cash dividends declared. |
Prepare a statement of cash flows, using the direct method ofpresenting cash flows from operating activities. Be sure tocomplete the heading of the statement. Refer to the Labels andAmount Descriptions list provided for the exact wording of theanswer choices for text entries. Use the minus sign only toindicate the net cash outflows for each section. âDeductâ, âLessâor colons (:) will automatically appear if required.
Labels and Amount Descriptions
| Labels andAmount Descriptions | |
|---|---|
| Cash paid for dividends | |
| Cash paid for purchase ofequipment | |
| Cash paid for purchase of land | |
| Cash paid for purchase of treasurystock | |
| Cash payments for income taxes | |
| Cash payments for merchandise | |
| Cash payments for operatingexpenses | |
| Cash received from customers | |
| Cash received from sale of commonstock | |
| Cash received from sale ofinvestments | |
| December 31, 2016 | |
| Decrease in cash | |
| Depreciation | |
| For the Year Ended December 31,2016 | |
| Gain on sale of investments | |
| Increase in cash | |
| Issuance of common stock foracquisition of land | |
| Issuance of common stock forpurchase of equipment | |
| Loss on sale of investments | |
| Net cash flow from financingactivities | |
| Net cash flow from investingactivities | |
| Net cash flow from operatingactivities | |
| Net cash flow used for financingactivities | |
| Net cash flow used for investingactivities | |
| Net cash flow used for operatingactivities |
Statement of Cash Flows
Prepare a statement of cash flows, using the direct method ofpresenting cash flows from operating activities. Be sure tocomplete the heading of the statement. Refer to the Labels andAmount Descriptions list provided for the exact wording of theanswer choices for text entries. Use the minus sign only toindicate the net cash outflows for each section. âDeductâ, âLessâor colons (:) will automatically appear if required.
Canace Products Inc. |
Statement of Cash Flows |
1 | Cash flows from operating activities: | |||
2 | ||||
3 | ||||
4 | ||||
5 | ||||
6 | ||||
7 | ||||
8 | Cash flows from investing activities: | |||
9 | ||||
10 | ||||
11 | ||||
12 | ||||
13 | ||||
14 | Cash flows from financing activities: | |||
15 | ||||
16 | ||||
17 | ||||
18 | ||||
19 | Cash at the beginning of the year | |||
20 | Cash at the end of the year |
The comparative balance sheet of Canace Products Inc. forDecember 31, 2016 and 2015, is shown as follows:
1 | Dec. 31, 2016 | Dec. 31, 2015 | |
2 | Assets | ||
3 | Cash | $643,460.00 | $679,530.00 |
4 | Accounts receivable (net) | 566,490.00 | 548,320.00 |
5 | Inventories | 1,010,720.00 | 982,600.00 |
6 | Investments | 0.00 | 240,910.00 |
7 | Land | 519,510.00 | 0.00 |
8 | Equipment | 879,710.00 | 680,990.00 |
9 | Accumulated depreciation-equipment | (243,750.00) | (200,970.00) |
10 | Total assets | $3,376,140.00 | $2,931,380.00 |
11 | Liabilities and Stockholdersâ Equity | ||
12 | Accounts payable (merchandise creditors) | $772,290.00 | $748,770.00 |
13 | Accrued expenses payable (operating expenses) | 63,970.00 | 69,800.00 |
14 | Dividends payable | 8,000.00 | 7,040.00 |
15 | Common stock, $2 par | 56,000.00 | 32,000.00 |
16 | Paid-in capital: Excess of issue price over parâcommon stock | 408,000.00 | 192,000.00 |
17 | Retained earnings | 2,067,880.00 | 1,881,770.00 |
18 | Total liabilities and stockholdersâ equity | $3,376,140.00 | $2,931,380.00 |
The income statement for the year ended December 31, 2016, is asfollows:
1 | Sales | $5,974,620.00 | |
2 | Cost of merchandise sold | 2,451,470.00 | |
3 | Gross profit | $3,523,150.00 | |
4 | Operating expenses: | ||
5 | Depreciation expense | $42,780.00 | |
6 | Other operating expenses | 3,099,440.00 | |
7 | Total operating expenses | 3,142,220.00 | |
8 | Operating income | $380,930.00 | |
9 | Other expense: | ||
10 | Loss on sale of investments | (64,890.00) | |
11 | Income before income tax | $316,040.00 | |
12 | Income tax expense | 102,160.00 | |
13 | Net income | $213,880.00 |
Additional data obtained from an examination of the accounts inthe ledger for 2016 are as follows:
| A. | Equipment and land were acquired for cash. |
| B. | There were no disposals of equipment during the year. |
| C. | The investments were sold for $176,020 cash |
| D. | The common stock was issued for cash. |
| E. | There was a $27,770 debit to Retained Earnings for cashdividends declared. |
Prepare a statement of cash flows, using the direct method ofpresenting cash flows from operating activities. Be sure tocomplete the heading of the statement. Refer to the Labels andAmount Descriptions list provided for the exact wording of theanswer choices for text entries. Use the minus sign only toindicate the net cash outflows for each section. âDeductâ, âLessâor colons (:) will automatically appear if required.
Labels and Amount Descriptions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash paid for dividends | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash paid for purchase of equipment | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash paid for purchase of land | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash paid for purchase of treasury stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash payments for income taxes | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash payments for merchandise | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash payments for operating expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash received from customers | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash received from sale of common stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash received from sale of investments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Decrease in cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| For the Year Ended December 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gain on sale of investments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Increase in cash | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for acquisition of land | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for purchase of equipment | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss on sale of investments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net cash flow from financing activities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net cash flow from investing activities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net cash flow from operating activities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net cash flow used for financing activities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net cash flow used for investing activities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net cash flow used for operating activities Prepare a statement of cash flows, using the direct method ofpresenting cash flows from operating activities. Be sure tocomplete the heading of the statement. Refer to the Labels andAmount Descriptions list provided for the exact wording of theanswer choices for text entries. Use the minus sign only toindicate the net cash outflows for each section. âDeductâ, âLessâor colons (:) will automatically appear if required.
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