ACC 703 Chapter Notes - Chapter 8: Franchise Agreement, Retained Earnings, Book Value
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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 |
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 ____________
IKIBAN INC. | ||||||||
2015 | 2014 | |||||||
Assets | ||||||||
Cash | $ | 96,500 | $ | 56,200 | ||||
Accounts receivable, net | 69,300 | 51,400 | ||||||
Inventory | 66,600 | 96,800 | ||||||
Prepaid expenses | 5,100 | 6,400 | ||||||
Total current assets | 237,500 | 210,800 | ||||||
Equipment | 135,200 | 120,000 | ||||||
Accum. depreciation—Equipment | (28,900 | ) | (10,500 | ) | ||||
Total assets | $ | 343,800 | $ | 320,300 | ||||
Liabilities and Equity | ||||||||
Accounts payable | $ | 26,900 | $ | 32,200 | ||||
Wages payable | 7,100 | 16,700 | ||||||
Income taxes payable | 2,500 | 4,100 | ||||||
Total current liabilities | 36,500 | 53,000 | ||||||
Notes payable (long term) | 42,000 | 70,000 | ||||||
Total liabilities | 78,500 | 123,000 | ||||||
Equity | ||||||||
Common stock, $5 par value | 240,000 | 189,000 | ||||||
Retained earnings | 25,300 | 8,300 | ||||||
Total liabilities and equity | $ | 343,800 | $ | 320,300 | ||||
IKIBAN INC. | ||||||
Sales | $ | 673,000 | ||||
Cost of goods sold | 407,000 | |||||
Gross profit | 266,000 | |||||
Operating expenses | ||||||
Depreciation expense | $ | 53,000 | ||||
Other expenses | 66,900 | |||||
Total operating expenses | 119,900 | |||||
| 146,100 | |||||
Other gains (losses) | ||||||
Gain on sale of equipment | 2,600 | |||||
Income before taxes | 148,700 | |||||
Income taxes expense | 59,480 | |||||
Net income | $ | 89,220 | ||||
a. A $28,000 note payable is retired at its $28,000 carrying (book) value in exchange for cash.
b. The only changes affecting retained earnings are net income and cash dividends paid.
c. New equipment is acquired for $63,800 cash.
d. Received cash for the sale of equipment that had cost $48,600, yielding a $2,600 gain.
e. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.
f. All purchases and sales of inventory are on credit.
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(2) Compute the company's cash flow on total assets ratio for its fiscal year 2015.