MGAB02H3 Chapter Notes - Chapter 5: Cash Flow, Retained Earnings, Current Liability

48 views3 pages

champagnerat201

12 Apr 2013

School

Department

Course

Professor

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

The statement of cash flows explains how the cash balance at the beginning of the period changed to another cash balance at the end of the period. Cash includes cash and cash equivalents which are short-term, highly liquid investments with an original maturity of less than three months (little risk that their value will change if interest rates changes) Cash flows from operating activities is always the same whether it is computed by using the direct or indirect method. Cash flows from investing activities are cash inflows and outflows related to the acquisition or sale of productive facilities and investments in the securities of other companies. Cash flows from financing activities are cash inflows and outflows related to external sources of financing (owners and creditors) for the enterprise. Combination of the net cash flows from operating, investing and financing activities must equal the net increase (decrease) in cash for the reporting period.

Related Questions

16. Mendes Charters reported the following information atDecember 31, 2015:

Preferred stock, $100 par, 500 shares authorized, andoutstanding;

cumulative; nonparticipating; callable at par value $50,000

Common stock, $12 par, 50,000shares authorized and outstanding 600,000

Additional paid-incapital--Common 25,000

Retained earnings825,000

Mendesâ total contributed capitalis

a. $ 650,000 b. $ 675,000 c. $1,500,000 d. $ 625,000

17. Which of the following should be considered when a companydecides to declare a cash dividend on common stock?

a. The retained earnings balance only

b. The amount of authorized shares of common stock

c. The book value of the company's stock

d. The cash available and the retained earnings balance

18. The primary reason for a stock split is to

a. distribute cash to the investor.

b. decrease the market value of the stock.

c. decrease the number of shares outstanding.

d. increase the contributed capital of the corporation.

19. Nordic Exports Inc. reported net income of $150,000 for2015, but its cash balance decreased $40,000. Which financialstatement should Nordic Exportsâ management refer to for anexplanation of this situation? a

. Balance Sheet

b. Income Statement

c. Statement of Retained Earnings

d. Statement of Cash Flows

20. The primary purpose of the statement of cash flows is toprovide information about

a. the financial position of the company.

b. the profitability of the company.

c. the investing and financing activities of the company.

d. the cash inflows and outflows of the company.

21. Cash flows from acquiring and disposing of long-term assetsare classified as

a. operating activities.

b. investing activities

. c. financing activities.

d. purchasing activities.

22. Cash flows from borrowing and paying off a 90-day bank loanare classified as

a. operating activities. b. investing activities. c. financingactivities. d. purchasing activities.

23. Cash flows from issuing and repurchasing stock or issuingand repaying (retiring) debt are classified as

a. operating activities. b. investing activities. c. financingactivities. d. borrowing activities.

24. Cash flows from acquiring and selling products areclassified as

a. operating activities. b. investing activities. c. financingactivities. d. distribution activities.

25. Presented below is the operating activities section of thestatement of cash flows for Golden Consulting for 2016:

Operating activities:

Net income $ 92,000

Add: Depreciation 20,000

Decrease in accounts receivable 8,000

__________

$120,000

Deduct: Decrease in accounts payable (6,000)

Net cash inflow from operating activities $114,000

Which method of preparing the operating activities section hasGolden Consulting used?

a. The direct method b. The indirect method c. Either method d.Cannot be determined without further information

redcaribou302

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

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

MGAB02H3 Chapter Notes - Chapter 5: Cash Flow, Retained Earnings, Current Liability

Document Summary

Get access

Related Documents

MGAB02H3 Chapter Notes - Chapter 13: Cash Flow Statement, Current Liability, Current Asset

MGAB02H3 Study Guide - Quiz Guide: Operating Cash Flow, Cash Cash, Accounts Payable

MGAB02H3 Chapter Notes - Chapter 10: Bulk Barn, Deferred Income, Promissory Note

Related Questions