ACCT-2010 Lecture Notes - Lecture 12: Cash Flow, Current Liability, Income Statement
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Positioning of items within cash flow statementâIFRS vs. U.S. GAAP (LO 4-9)
Lend Corp. has a primary business model of borrowing funds at low interest rates and lending
them out at higher interest rates. The balances in Lend Corporationâs balance sheet accounts at
December 31, 2017 are as follows:
Assets | Liabilities | ||
cash | 300,000 | 40,000 | |
land | 300,000 | 800,000 | |
building | 800,000 | ||
Accum depr: Building | 160,000 | Owner's Equity | |
A/R | 20,000 | Retained Earnings | 320,000 |
Notes Rec | 900,000 | Contributed capital | 1,000,000 |
During 2018, Lend Corp. has the following transactions:
â Received $45,000 in cash interest on notes receivable.
â Paid $16,000 of cash interest on notes payable.
â Collected $10,000 cash from accounts receivable.
â Paid $40,000 cash to reduce accounts payable.
â Owes $3,000 at the end of the year to administrative employees for work performed.
â Building depreciation is an additional $20,000.
Required:
1. Compute Lend Corpâs 2018 net income.
2. Show Lend Corpâs 12/31/2018 balance sheet.
3. Report Lend Corpâs 12/31/2018 statement of cash flows using the indirect method under
U.S. GAAP.
4. Report Lend Corpâs 12/31/2018 statement of cash flows using the indirect method under IFRS.
Record cash flows from interest received in the cash flows from investing section. Record cash
flows from interest paid in the cash flows from financing section.
5. Compare your net cash flows from operations computed from requirement 3 vs. require- ment 4.
Which do you think better reflects Lend Corpâs fundamental operating cash flows?
The following events occurred last year at DorderCorporation: |
Purchase of plant and equipment | $20,000 |
Sale of long-term investment | $8,000 |
Dividends received on long-term investments | $5,000 |
Paid off bonds payable | $11,000 |
Depreciation expense | $6,500 |
Based on the above information, the cash provided (used) byinvesting activities for the year on the statement of cash flowswould net to: |
$(11,000)
$(12,000)
$(24,500)
$(6,500)
Last year Burch Corporation's cash account decreased by $16,000.Net cash provided by investing activities was $7,100. Net cash usedin financing activities was $14,000. On the statement of cashflows, the net cash flow provided by (used in) operating activitieswas: |
$6,900
$(16,000)
$(9,100)
$(22,900)
McCorey Corporation recorded the following events last year: |
Repurchase by the company of its own commonstock | $39,000 |
Sale of long-term investment | $58,000 |
Interest paid to lenders | $14,500 |
Dividends paid to the company's shareholders | $68,000 |
Collection by McCorey of a loan made to anothercompany | $44,000 |
Payment of taxes to governmental bodies | $24,500 |
On the statement of cash flows, some of these events areclassified as operating activities, some are classified asinvesting activities, and some are classified as financingactivities. |
Based solely on the information above, the net cash provided by(used in) investing activities on the statement of cash flows wouldbe: |
$102,000
$(9,500)
$34,000
$(19,500)
Financial statements of Rukavina Corporation follow: |
Rukavina Corporation | ||
Ending | Beginning | |
Assets: | ||
Cash and cash equivalents | $24 | $21 |
Accounts receivable | 77 | 72 |
Inventory | 33 | 31 |
Property, plant and equipment | 528 | 480 |
Less: accumulated depreciation | 326 | 299 |
Total assets | $336 | $305 |
Liabilities and stockholders'equity: | ||
Accounts payable | $42 | $52 |
Bonds payable | 95 | 110 |
Common stock | 71 | 72 |
Retained earnings | 128 | 71 |
Total liabilities and stockholders' equity | $336 | $305 |
Income Statement | |
Sales | $705 |
Cost of goods sold | 448 |
Gross margin | 257 |
Selling and administrative expenses | 151 |
Net operating income | 106 |
Income taxes | 38 |
Net income | $68 |
Cash dividends were $11. The company did not dispose of anyproperty, plant, and equipment. It did not issue any bonds payableor repurchase any of its own common stock. The following questionspertain to the company's statement of cash flows. |
The net cash provided by (used in) investing activities for theyear was: |
$1
$(11)
$(15)
$(48)