ACCT30110 Lecture 27: Session 27
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Statement of Cash Flows
The following is a list of the items to be included in thepreparation of Warrick Company's 2016 statement of cash flows:
Net income, $59,200
Payment for purchase of building, $98,000
Increase in accounts receivable, $7,400
Proceeds from issuance of common stock, $37,100
Increase in accounts payable, $4,500
Proceeds from sale of land, $7,000
Depreciation expense, $12,600
Payment of dividends, $36,000
Gain on sale of land, $5,300
Decrease in inventory, $3,700
Payment for purchase of long-term investments, $9,600
Amortization of discount on bonds payable, $1,900
Proceeds from issuance of note, $18,000
Increase in deferred taxes payable, $5,000
Equipment acquired by capital lease, $19,500
Decrease in salaries payable, $2,300
Beginning cash balance, $20,300
Required
1. Prepare the statement of cash flows.
WARRICK COMPANY | ||
Statement of Cash Flows | ||
For Year Ended December 31, 2016 | ||
Operating Activities: | ||
Net income | $ | |
Adjustment for noncash income items: | ||
Add: Depreciation expense | ||
Add: Amortization of discount on bonds payable | ||
Add: Accumulated depreciation | ||
Less: Gain on sale of land | ||
Adjustments for cash flow effects from working capital items: | ||
Increase in accounts receivable | ||
Decrease in inventory | ||
Increase in accounts payable | ||
Decrease in salaries payable | ||
Net cash provided by operating activities | $ | |
Investing Activities: | ||
Payment for purchase of building | $ | |
Proceeds from sale of land | ||
Payment for purchase of long-term investments | ||
Net cash used for investing activities | ||
Financing Activities: | ||
Proceeds from issuance of common stock | $ | |
Payment of accounts payable | ||
Proceeds from issuance of note | ||
Net cash provided by financing activities | ||
Net Decrease in Cash | $ | |
Cash, January 1, 2016 | ||
Cash, December 31, 2016 | $ | |
Investing and Financing Activities Not Affecting Cash | ||
Investing Activities: | ||
Acquisition of equipment under capital lease | $ | |
Financing Activities: | ||
Incurrence of capital lease obligation for equipment |
For each of the following transactions:
indicate whether it will result in an increase (+), decrease (â), or have no effect (NE) on cash flows;
classify each of the transactions as an operating (O), investing (I), financing (F), or significant noncash investing / financing (NC) activity or no effect (NE)
Impact (+), (â) or (NE) | Classification (O), (I), (F), (NC) or (NE) | |
Repayment of mortgage payable | ||
Payment of interest on mortgage | ||
Purchase of land in exchange for common shares | ||
Issue of preferred shares for cash | ||
Collection of accounts receivable | ||
Declaration of cash dividend | ||
Payment of cash dividend | ||
Cash purchase of inventory |
Selected information (CAD millions) are presented for two firms ROP and DUL, operating in the same industries:
DUL | ROH | |
Net income | $ 4,529 | $ 161 |
Net cash provided by operating activities | 6,539 | 212 |
Net cash provided (used) by investing activities | (1,420) | 35 |
Net cash provided (used) by financing activities | 735 | (176) |
Net increase in cash and cash equivalents | $ 5,854 | $ 71 |
Cash and cash equivalents, beginning of year | $ 2,078 | $ 267 |
Cash and cash equivalents, end of year | $ 7,932 | $ 338 |
Required:
i) Compare and discuss the performance / activity the two companies based on the above Cash Flow and Net Income information.
ii) Which company appears to be in a stronger Cash position? Why?