AFM101 Midterm: AFSA Education AFM 101 Chapter 5 and 6

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turquoisecicada972

27 Oct 2015

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM101

Professor

Jiye Li

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AFM101 Full Course Notes

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Document Summary

Note: understand the differences between cash flow from operating/investing/financing activities and be able to create a cash flow statement using the indirect method. Cash flow: management of current assets and current liabilities, designed to help managers and analysts answer important cash-related questions. Direct: reports components of cash flows from operating activities section listed as gross receipts and gross payments. Indirect: adjusts net earnings to compute cash flows from operating activities. Relationships to the statement of financial position and. Manipulation of accounting equations: assets = liabilities + share holder"s equity, cash + non cash assets = liabilities + share holder"s equity, cash = liabilities + share holder"s equity non cash assets. Decrease in non cash assets or increase in liabilities and se is cash inflow. Increase in non cash assets or decrease in liabilities and se is cash outflow. Reporting cash flows from operating activities indirect method: general structure is as follows:

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urgent need it an hour wil rate

The comparative balance sheets of Posner Company, for Years 1 and 2 ended December 31, appear below in condensed form.

1		Year 2	Year 1
2	Cash	$53,000.00	$50,000.00
3	Accounts Receivable (net)	37,000.00	48,000.00
4	Inventories	108,500.00	100,000.00
5	Investments		70,000.00
6	Equipment	573,200.00	450,000.00
7	Accumulated Depreciation-Equipment	(142,000.00)	(176,000.00)
8		$629,700.00	$542,000.00
9	Accounts Payable	$62,500.00	$43,800.00
10	Bonds Payable, Due Year 2		100,000.00
11	Common Stock, $10 par	325,000.00	285,000.00
12	Paid-In Capital in Excess of ParâCommon Stock	80,000.00	55,000.00
13	Retained Earnings	162,200.00	58,200.00
14		$629,700.00	$542,000.00

The income statement for the current year is as follows:

1	Sales		$625,700.00
2	Cost of merchandise sold		340,000.00
3	Gross profit		$285,700.00
4	Operating expenses:
5	Depreciation expense	$26,000.00
6	Other operating expenses	68,000.00	94,000.00
7	Income from operations		$191,700.00
8	Other revenue and expense:
9	Gain on sale of investment	$4,000.00
10	Interest expense	(6,000.00)	(2,000.00)
11	Income before income tax		$189,700.00
12	Income tax		60,700.00
13	Net income		$129,000.00

Additional data for the current year are as follows:

(a)	Fully depreciated equipment costing $60,000 was scrapped, no salvage, and new equipment was purchased for $183,200.
(b)	Bonds payable for $100,000 were retired by payment at their face amount.
(c)	5,000 shares of common stock were issued at $13 for cash.
(d)	Cash dividends declared and paid, $25,000.

Required:

Prepare a statement of cash flows using the indirect method of reporting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

Labels and Amount Descriptions

Labels
For the Year Ended December 31, Year 2
Amount Descriptions
Cash from sale of common stock
Cash from sale of investments
Cash paid for dividends
Cash paid for purchase of equipment
Cash paid to retire bonds payable
Decrease in accounts payable
Decrease in accounts receivable
Decrease in cash
Decrease in inventories
Depreciation
Gain on sale of investment
Increase in accounts payable
Increase in accounts receivable
Increase in cash
Increase in inventories
Loss on sale of investment
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
Net income
Net loss

Statement of Cash Flows

Posner Company

Statement of Cash Flows

1	Cash flows from operating activities:
2
3	Adjustments to reconcile net income to net cash flow from operating activities:
4
5
6	Changes in current operating assets and liabilities:
7
8
9
10
11	Cash flows from investing activities:
12
13
14
15	Cash flows from financing activities:
16
17
18
19
20
21	Cash at the beginning of the year
22	Cash at the end of the year

violetclam852

The comparative balance sheet of Cromme Inc. for December 31,2016 and 2015, is shown as follows:

Question not attempted.

1		Dec. 31, 2016	Dec. 31, 2015
2	Assets
3	Cash	$626,640.00	$585,760.00
4	Accounts receivable (net)	226,900.00	208,390.00
5	Inventories	641,350.00	616,130.00
6	Investments	0.00	239,300.00
7	Land	328,730.00	0.00
8	Equipment	705,940.00	553,530.00
9	Accumulated depreciation-equipment	(166,970.00)	(148,000.00)
10	Total assets	$2,362,590.00	$2,055,110.00
11	Liabilities and Stockholdersâ Equity
12	Accounts payable (merchandise creditors)	$425,140.00	$404,540.00
13	Accrued expenses payable (operating expenses)	42,020.00	52,750.00
14	Dividends payable	23,580.00	19,500.00
15	Common stock, $4 par	154,000.00	100,000.00
16	Paid-in capital: Excess of issue price over parâcommon stock	416,600.00	279,400.00
17	Retained earnings	1,301,250.00	1,198,920.00
18	Total liabilities and stockholdersâ equity	$2,362,590.00	$2,055,110.00

Additional data obtained from an examination of the accounts inthe ledger for 2016 are as follows:

A.	The investments were sold for $279,880 cash.
B.	Equipment and land were acquired for cash.
C.	There were no disposals of equipment during the year.
D.	The common stock was issued for cash.
E.	There was a $198,010 credit to Retained Earnings for netincome.
F.	There was a $95,680 debit to Retained Earnings for cashdividends declared.

Prepare a statement of cash flows, using the indirect method ofpresenting cash flows from operating activities

The section of the statement of cash flows that reports the cashtransactions affecting the determination of net income.

. Refer to the Labels and Amount Descriptions list provided forthe exact wording of the answer choices for text entries. Be sureto complete the heading of the statement. In the operatingactivities section, use the minus sign to indicate cash outflows,decreases in cash and a net cash outflow, if required. In theinvesting and financing activities section, use a minus sign onlyto indicate a NET cash outflow for the section.

Labels

In CengageNOW, a Label is a text entry that does not have anamount associated with it.

and Amount Descriptions

In CengageNOW, an Amount Description is a text entry other thanan Account that has an amount associated with it.

Cash paid for dividends

Cash paid for merchandise

Cash paid for purchase of equipment

Cash paid for purchase of land

Cash received from customers

Cash received from sale of common stock

Cash received from sale of investments

December 31, 2016

Decrease in accounts payable

Decrease in accounts receivable

Decrease in accrued expenses payable

Decrease in inventories

Decrease in cash

Depreciation

For the Year Ended December 31, 2016

Gain on sale of investments

Increase in accounts payable

Increase in accounts receivable

Increase in accrued expenses payable

Increase in cash

Increase in inventories

Loss on sale of investments

Net cash flow from operating activities

Net cash flow used for operating activities

Net cash flow from investing activities

Net cash flow used for investing activities

Net cash flow from financing activities

Net cash flow used for financing activities

Net income

Prepare a statement of cash flows, using the indirect method ofpresenting cash flows from operating activities

The section of the statement of cash flows that reports the cashtransactions affecting the determination of net income.

Question not attempted.

Cromme Inc.

Statement of Cash Flows

1	Cash flows from operating activities:
2
3	Adjustments to reconcile net income to net cash flow fromoperating activities:
4
5
6	Changes in current operating assets and liabilities:
7
8
9
10
11
12
13	Cash flows from investing activities:
14
15
16
17
18
19	Cash flows from financing activities:
20
21
22
23
24	Cash at the beginning of the year
25	Cash at the end of the year

scarletkoala290

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

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AFM101 Midterm: AFSA Education AFM 101 Chapter 5 and 6

AFM101 Full Course Notes

Document Summary

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