Brief Exercise 5-12

Brief Exercise 5-12

Stellar Beverage Company reported the following items in the most recent year.

Net income $43,400
Dividends paid 5,210
Increase in accounts receivable 11,440
Increase in accounts payable 8,490
Purchase of equipment (capital expenditure) 8,720
Depreciation expense 5,490
Issue of notes payable 24,020

Compute net cash provided by operating activities, the net change in cash during the year. (Show amounts that decrease cash flow with either a – sign e.g. -15,000 or in parenthesis e.g. (15,000).)

STELLAR BEVERAGE COMPANY Statement of Cash Flows
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Compute free cash flow.

Free Cash Flow $

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Exercise 5-13

The major classifications of activities reported in the statement of cash flows are operating, investing, and financing. Classify each of the transactions listed below as:

1. Operating activity-add to net income.
2. Operating activity-deduct from net income.
3. Investing activity.
4. Financing activity.
5. Reported as significant noncash activity

The transactions are as follows.

Transactions Classifications of Activities
(a) Issuance of common stock. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(b) Purchase of land and building. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(c) Redemption of bonds https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(d) Sale of equipment. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(e) Depreciation of machinery. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(f) Amortization of patent. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(g) Issuance of bonds for plant assets. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(h) Payment of cash dividends. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(i) Exchange of furniture for office equipment. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(j) Purchase of treasury stock. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(k) Loss on sale of equipment. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(l) Increase in accounts receivable during the year. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(m) Decrease in accounts payable during the year. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif

Exercise 5-14

The comparative balance sheets of Bridgeport Inc. at the beginning and the end of the year 2017 are as follows.

BRIDGEPORT INC. BALANCE SHEETS
Dec. 31, 2017 Jan. 1, 2017 Inc./Dec.
Assets
Cash $ 46,620 $ 14,620 $32,000  Inc.
Accounts receivable 95,230 90,610 4,620  Inc.
Equipment 43,230 24,610 18,620  Inc.
Less: Accumulated Depreciation-Equipment 21,230 11,000 10,230  Inc.
    Total $163,850 $118,840
Liabilities and Stockholders’ Equity
Accounts payable $ 24,230 $ 17,610 6,620  Inc.
Common stock 101,620 82,610 19,010  Inc.
Retained earnings 38,000 18,620 19,380  Inc.
    Total $163,850 $118,840

Net income of $48,230 was reported, and dividends of $28,850 were paid in 2017. New equipment was purchased and none was sold. Prepare a statement of cash flows for the year 2017. (Show amounts that decrease cash flow with either a – sign e.g. -15,000 or in parenthesis e.g. (15,000).)

BRIDGEPORT INC. Statement of Cash Flows

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Adjustments to reconcile net income to
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Brief Exercise 23-1

Novak Corporation is preparing its 2017 statement of cash flows, using the indirect method. Presented below is a list of items that may affect the statement. Using the code below, indicate how each item will affect Novak’s 2017 statement of cash flows.

Code Letter Effect
A Added to net income in the operating section
D Deducted from net income in the operating section
R-I Cash receipt in investing section
P-I Cash payment in investing section
R-F Cash receipt in financing section
P-F Cash payment in financing section
N Noncash investing and financing activity
(a) Purchase of land and building. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(b) Decrease in accounts receivable. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(c) Issuance of stock. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(d) Depreciation expense. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(e) Sale of land at book value. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(f) Sale of land at a gain. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(g) Payment of dividends. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(h) Increase in accounts receivable. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(i) Purchase of available-for-sale debt investment. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(j) Increase in accounts payable. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(k) Decrease in accounts payable. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(l) Loan from bank by signing note. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(m) Purchase of equipment using a note. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(n) Increase in inventory. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(o) Issuance of bonds. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(p) Redemption of bonds payable. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(q) Sale of equipment at a loss. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif
(r) Purchase of treasury stock. https://edugen.wileyplus.com/edugen/art2/common/pixel.gif

Exercise 23-13

Flint Inc., a greeting card company, had the following statements prepared as of December 31, 2017.

FLINT INC. COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2017 AND 2016
12/31/17 12/31/16
Cash $5,900 $7,000
Accounts receivable 62,500 51,200
Short-term debt investments (available-for-sale) 35,300 17,900
Inventory 39,800 60,100
Prepaid rent 5,100 3,900
Equipment 155,200 130,400
Accumulated depreciation—equipment (34,700 ) (25,200 )
Copyrights 45,500   50,400  
Total assets $314,600   $295,700  
 
Accounts payable $46,100 $39,900
Income taxes payable 4,100 6,000
Salaries and wages payable 8,000 4,000
Short-term loans payable 8,000 10,100
Long-term loans payable 60,400 69,100
Common stock, $10 par 100,000 100,000
Contributed capital, common stock 30,000 30,000
Retained earnings 58,000   36,600  
Total liabilities & stockholders’ equity $314,600   $295,700  
FLINT INC. INCOME STATEMENT FOR THE YEAR ENDING DECEMBER 31, 2017
Sales revenue $340,650
Cost of goods sold 175,900
Gross profit 164,750
Operating expenses 121,000
Operating income 43,750
Interest expense $11,500
Gain on sale of equipment 2,000 9,500
Income before tax 34,250
Income tax expense 6,850
Net income $27,400

Additional information:

1. Dividends in the amount of $6,000 were declared and paid during 2017.
2. Depreciation expense and amortization expense are included in operating expenses.
3. No unrealized gains or losses have occurred on the investments during the year.
4. Equipment that had a cost of $20,200 and was 70% depreciated was sold during 2017.

Prepare a statement of cash flows using the direct method. (Show amounts that decrease cash flow with either a – sign e.g. -15,000 or in parenthesis e.g. (15,000).)

FLINT INC. Statement of Cash Flows

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Exercise 23-14

Marin Inc., a greeting card company, had the following statements prepared as of December 31, 2017.

MARIN INC. COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2017 AND 2016
12/31/17 12/31/16
Cash $6,000 $7,000
Accounts receivable 62,600 50,600
Short-term debt investments (available-for-sale) 35,200 18,100
Inventory 39,600 59,700
Prepaid rent 5,000 4,000
Equipment 152,800 128,900
Accumulated depreciation—equipment (34,900 ) (24,800 )
Copyrights 45,900   49,800  
Total assets $312,200   $293,300  
 
Accounts payable $45,900 $39,900
Income taxes payable 4,000 6,000
Salaries and wages payable 8,100 3,900
Short-term loans payable 8,000 10,000
Long-term loans payable 60,500 68,500
Common stock, $10 par 100,000 100,000
Contributed capital, common stock 30,000 30,000
Retained earnings 55,700   35,000  
Total liabilities & stockholders’ equity $312,200   $293,300  
MARIN INC. INCOME STATEMENT FOR THE YEAR ENDING DECEMBER 31, 2017
Sales revenue $337,675
Cost of goods sold 175,500
Gross profit 162,175
Operating expenses 119,500
Operating income 42,675
Interest expense $11,300
Gain on sale of equipment 2,000 9,300
Income before tax 33,375
Income tax expense 6,675
Net income $26,700

Additional information:

1. Dividends in the amount of $6,000 were declared and paid during 2017.
2. Depreciation expense and amortization expense are included in operating expenses.
3. No unrealized gains or losses have occurred on the investments during the year.
4. Equipment that had a cost of $20,000 and was 70% depreciated was sold during 2017.

Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a – sign e.g. -15,000 or in parenthesis e.g. (15,000).)

MARIN INC. Statement of Cash Flows

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Adjustments to reconcile net income to
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