ACCTMIS 2000 Lecture Notes - Lecture 8: Cash Flow, Income Statement
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Erroneous Statement of Cash Flows
Ryan Company's bookkeeper prepared the following 2016 statement of cash flows:
Flows of Cash Statement December 31, 2016 | |||
Sources (Inflows) of Cash | |||
Net Source from Operations | |||
Net income | $47,800 | ||
Add: Cash receipt from sale of land | 6,500 | ||
Inflow from issuing 10% bonds payable | 25,000 | ||
Depreciation expense | 13,200 | ||
Reduction in inventory | 1,900 | ||
Less: Outflow to buy equipment | (16,400) | ||
Increase in prepaid expenses | (700) | ||
Cash (principal) paid on long-term note | (9,500) | ||
ordinary gain | (2,000) | ||
Total source from operations | $65,800 | ||
Other Sources (Inflows) of Cash | |||
Loss on sale of land | $2,300 | ||
Increase in accounts payable | 1,000 | ||
Cash from issuing preferred stock | 38,700 | ||
Patent amortization expense | 2,100 | ||
Total other sources of cash | 44,100 | ||
Sources (Financing) Not Affecting Cash | |||
Issuance of common stock for patent | 11,000 | ||
Total inflows of cash | $120,900 | ||
Uses (Outflows) of Cash | |||
To purchase building | $(62,000) | ||
Increase in accounts receivable | (7,800) | ||
For acquiring marketable securities | (7,100) | ||
Decrease in income taxes payable | (1,400) | ||
Total uses of cash | (78,300) | ||
Uses (Investing) Not Affecting Cash | |||
Acquisition of patent by issuing common stock | (11,000) | ||
Net inflow before dividends | $ 31,600 | ||
Less: Cash dividends | (24,000) | ||
Net increase in cash | $7,600 | ||
Cash, January 1, 2016 | 15,300 | ||
Cash, December 31, 2016 | $22,900 |
After a thorough investigation, you have determined that the amounts of the items listed on the statement are correct. However, you notice several items that are incorrectly classified and reported.
Required
Prepare a corrected 2016 statement of cash flows for the Ryan Company. Use the minus sign to indicate cash outflows, a decrease in cash or cash payments.
Operating Activities
________________ __________
Adjustment for non cash income items:
________________ __________
________________ __________
________________ __________
________________ __________
Adjustments for cash flow effects from working capital items:
________________ __________
________________ __________
________________ __________
________________ __________
________________ __________
Net cash provided by operating activities ____________
Investing Activities:
________________ __________
________________ __________
________________ __________
________________ __________
Net cash used for investing activities _________
Financing Activities:
________________ __________
________________ __________
________________ __________
________________ __________
Net cash provided by financing activies _________
Net increase in cash _________
Cash, january 1, 2016 _________
Cash, december 31, 2016 _________
Investing and Financing Activities not Affecting Cash
Investing Activities:
Acquistion of patent by issuing commons stock ______________
Financing Activities:
Issuance of common stock for patent ____________
Accounting prepare Statement of cahs flow indrect method anddirect method!
Balance sheet
Asset
Cash $35,473 20,238
Accounts receivable 32,552 14,496
Merchandise inventory 26,812 20,470
Property, plant, and equipment 59,924 78,086
Accumulated depreciation (29,150) (23,526)
Total $125,611 $109,764
Liability and stockholderâs equity
Accounts Payable $28,796 15,092
Income Taxes payable 6,695 7,961
Bonds payable 26,691 33,309
Common stock 17,800 13,400
Retained earning 45,629 40,002
Total $125,611 $109,764
Income Statement
Sales $243,765
Cost of Good Sold $176,279
Operating expense 23,863
Interest Expense 3,141
Income Tax expense 7,592
Net income $32,890
Additional information
Dividends declared and paid were $27,263
During the year equipment was sold for $8,353 cash. This equipmentcost $18,162 originally and had a book value of $8,353 at the timeof sale.
All depreciation expense, $15,433 is in the selling expensecategory
All sales and purchases are on accounts.
*This is direct method I solved.
Cash flows from operatingactivities | ||
Cash Received from customers | 225709 | |
Deduct: Cash payments for merchandise | 168917 | |
Cash payments for operating expenses | 23,863 | |
Cash payments for interest | 3,141 | |
Cash payments for income tax | 8,858 | 204779 |
Net cash flow from operatingactivities | 20930 |
*Indrect methods I solved
Cash Flows from operatingactivities: | ||
Net Income | 32890 | |
Adjustments to reconcile net income to netcash flow from operations: | ||
Depreciation expense | 15433 | |
Changes in current operating assets andliabilities | ||
Increase in accounts receivable | -18056 | |
Increase in inventory | -6342 | |
Increase in accounts payable | 13704 | |
Interest paid | -3141 | |
Decrease in income taxes payable | -8858 | -7260 |
Net cash flow provided byoperating activities | 25630 | |
Cash flow from investing activities: | ||
Cash recevied from sale of equipment | 8353 | |
Net cash flow used investingactivities | 8353 | |
Cash flow from financing activities | ||
Cash received from sale of commonstock | 4400 | |
Less Cash paid for dividends | -27263 | |
Less cash paid to retire bondspayable | -6618 | |
Net cash flow used byfinancing activities | -29481 | |
Increase in Cash | 4502 | |
Cash at beginning of period | 20238 | |
Cash at end of period | 24740 | |
I'm sure there are some error. Please correct it!