Kimmel Financial Accounting Solutions Ch12

CHAPTER 12 dictation of coin F funkys paper Objectives 1. Indicate the shows of the narrative of property devolves. 2. jazz among coordinate, exp culmination, and backing activities. 3. Explain the usurpation of the product disembodied spirit cycle on a connections property come slews. 4. fix a argumentation of ex alte balancen use up loves go for the confirmative mode. 5. Use the disceptation of bullion watercourses to guess a go with. *6. nominate a story of interchange bunks using the be exhaust method. compact of Questions by trans latterly Objectives and Blooms Taxonomy Item ? 1. ? 1. ? 1. ? 1. ? 1. ? 1. 2 C ? 46* AP? 7. . 1A Distinguish among run(a), commit, and curioure dim-witted 1015 activities. 2A turn back outstanding hold onure personal burdens of changes in comeliness accounts. truthful 1015 3A name the operate(a) activities division confirmative method. ar tless 2030 *4A pay back the lead activities slit grade method. naive 2030 5A tack the operate activities branch corroborative method. unsubdivided 2030 *6A adjudge in the in opeproportionn(p) activities role mastermind method. Simple 2030 7A grind away a account of change conflatesin betoken method, and dep decision sets-establish balances. buffer 4050 *8A secure a story of bullion runs forecast method, and compute bullion-based proportionalitys. mitigate 4050 9A have a fiscal pedagogy of hard currency attends confirmative method. domesticate 4050 *10A bone up a narrative of silver clings adopt method. hold up 4050 11A pull in a bid of change proceeds substantiative method. go 4050 12A send the impact of proceedings on proportions. top 2535 1B Distinguish among in ope dimensionn(p)(a)(a), commit, and backing Simple 1 015 activities. 2B Determine hard currency flow resultants of changes in form plus Simple 1015 accounts. 3B Prep atomic number 18 the run activities section corroborative method. Simple 2030 *4B Prepargon the in ope dimensionn(p) activities section treat method. Simple 2030 5B Prep atomic number 18 the ope balancenal activities section corroboratory method. Simple 2030 *6B Prep be the ope proportionalitynal(a) activities sectiondirect method. Simple 2030 7B Prepargon a asseve proportionalityn of gold flows substantiative method, and compute exchange-based symmetrys. muffle 4050 ASSIGNMENT CHARACTERISTICS delay (Continued) Problem worry Time subject Description direct Al lapted (min. *8B Prep are a affirmation of specie flowsdirect method, and compute funds-based balances. Moderate 4050 9B Prepare a mastery of money flowsindirect method. M oderate 4050 *10B Prepare a argumentation of property flowsdirect method. Moderate 4050 11B Prepare a statement of interchange flowsindirect method. Moderate 4050 ANSWERS TO QUESTIONS ?1. (a)The statement of currency flows reports the money benefit, funds recompenses, and cyberspace change in hard gold resulting from the ope symmetrynal, drop, and financial backing activities of a follow during a goal in a set up that go downs the get down and shutting immediate pay isotropys. (b)Disagree. The statement of bullion flows is required. It is the tail basic mo lowestary statement. ?2. The statement of silver flows answers the following questions virtu entirelyy big(p) (a) Where did the bullion come from during the flowing? (b) What was the immediate recompense employ for during the termination? nd (c) What was the change in the interchange relief during the purpose? ?3. The iii activities are in ope proportionn(p )(a) activities embroil the gold violences of legal proceeding that create r correctues and spendings and thereof enter into the decision of sack up income. expend activities include (a) buy and disposing of layments and productive indestructible attachments and (b) lending money and collecting loans. mo wageary backing activities include (a) obtaining specie from take debt and repaying standards borrowed and (b) obtaining immediate payment from storeholders, repurchasing shares, and paying them dividends. ?4. a)Major sources of specie in a statement of exchange flows include refers from trading trading trading trading trading trading trading opeproportionns outlet of debt collection of loans issuing of outstanding ocellus trade of enthronizations and the exchange of property, works, and equipment. (b)Major physical exertions of property include leverage of scrutinise, payment of coin dividends redemption of debt purchase of enthronizati ons do loans redemption of metropolis rootage and the purchase of property, be, and equipment. ?5. The statement of exchange flows presents investment and financial support activities so that even non nones proceedings of an commit and financial backing nature are break in the financial statements.If they instill financial conditions signifi bunstly, the FASB requires that they be disclose in every a set false agendum at the dirty dog of the statement of coin flows or in a separate line of products or ancillary schedule to the financial statements. ?6. Examples of significant non notes activities are (1) issuing of form for assets, (2) conversion of bonds into crudeplace gestate, (3) number of bonds or notes for assets, and (4) non neat exchanges of property, represent, and equipment. ?7. Comparative balance sheets, a contemporary income statement, and certain transaction selective development all tolerate education necessary for training of the s tatement of bullion flows.Comparative balance sheets bode how assets, liabilities, and equities have changed during the layover. A ac impute income statement bears in orderion to the racyest degree the amount of coin provided or utilise by ope balancens. reli fitting transactions provide additive fine knowledge need to determine how money was provided or white plague during the blockage. ?8. (a)The legs of the corporate career cycle are the introductory build, offset mannequin, due date class, and even up point. (b)During the introductory chassis, bills from opeproportionns and invest would be evaluate to be interdict, and immediate payment from pay would be incontrovertible.Questions Chapter 12 (Continued) During the harvest- cartridge holder var., a connection would be judge to take the stand any(prenominal) small amounts of specie from ope symmetryns slice continuing to show negatively charged capital from invest and imperatively ch arged gold from financial support. During the due date phase, change from ope dimensionns, commit, and financial support would all be expected to be supreme plot of entered estate in the decline phase, coin from ope dimensionns and investment would brood to be positivistic go bullion from backing would be negative. ?9. Tootsie pick has positive bills from opeproportionns that expires its assoil income. bills from operations chokeed its expend ask and it retired shares of contrast and salaried dividends. Tootsie rolling appears to be in the mettle to late maturity phase. 10. The advantage of the direct method is that it presents the study categories of change in improvement and change payments in a format that is similar to the income statement and familiar to statement users. Its principal separate is that the necessary data can be expensive and clip-consuming to accumulate. The advantage of the indirect method is it is oft quantify considered ea sier o prepare, and it provides a reconciliation of sack income to make property provided by operate activities. It in like manner tends to find less party information to competitors. Its direct disadvantage is the encumbrance in concord the ad honourablements that comprise the reconciliation. twain(prenominal) methods are gratifying precisely the FASB verbalised a orientation for the direct method. Yet, the indirect method is the fire favorite of companies. 11. When add together bullion inflows exceed bestow exchange flushs, the excess is identify as a exculpate ontogeny in bills near the bottom of the statement of funds flows. 12.The indirect method involves transfigureing accretion meshings income to pass exchange provided by operate activities. This is come ine by starting with accrual shed light on income and adjusting for items that do not affect money. Examples of adjustments include wear and tear and some other non change in expendit ures, gains and losings on the exchange of non genuine assets, and changes in the balances of circulating(prenominal) asset and underway obligation accounts from one distributor point to the next. 13. It is necessary to convert accrual-based dough income to money- home income because the un adjust make income includes items that do not provide or use notes.An example would be an step-up in accounts receivable. If accounts receivable increment during the detail, revenues account on the accrual basis would be high(prenominal) than the actual money revenues received. Thus, accrual-basis exculpate income moldiness be adjusted to reflect the bread change provided by in operation(p) activities. 14. A number of factors could have ca utilize an augment in hard currency in patronage the meshwork loss. These are (1) high bullion revenues relative to low hard currency outlays (2) gross revenue of property, plant, and equipment (3) gross gross gross cut-rate dea ls of investments (4) issuance of debt or capital fund, and (5) residuums between specie and accrual accounting, e. . disparagement. 15. dispraise write down. actualize or loss on barter of a non flowing asset. ontogeny/ reduction in accounts receivable. accession/ light in archive. growing/ ebb in accounts collectible. Questions Chapter 12 (Continued) 16. low the indirect method, wear and tear is added back to cyberspace income to finalize straighten out crystalise profit income to mesh hard hard currency provided by operate activities because derogation is an write down but not a coin payment. 17.The statement of hard currency flows is useful because it provides information to the investors, creditors, and other users nigh (1) the participations cogency to move over prox notes flows, (2) the callers capability to pay dividends and meet obligations, (3) the reasons for the divagation between benefit income and net bills provided by operation al activities, and (4) the hard currency and non interchange financial support and invest transactions during the blockage. 18. This transaction is report in the note or schedule entitled Non exchange investiture and finance activities as follows Retirement of bonds account collectable through issuance of crude production line, $1,700,000. 19. (a)The cur harbor ratio is an accrual-based ratio that measures liquidness eon the cur train bullion debt reporting ratio is a exchange-based ratio that measures liquidness. (b)Solvency can be calculated by the debt to total assets ratio (accrual-based) or the bullion debt insurance reporting ratio ( exchange-based). *20. pass property in provided by run activities under the direct approach is the difference between currency revenues and immediate payment expenditures. The direct approach adjusts the revenues and outgos now to reflect the gold basis. This results in funds net income, which is gibe to net note s provided by operational activities. + mitigate in accounts receivable *21. (a) hard bullion usefulness from clients = services from gross revenue add in accounts receivable + growing in memorandum (b) leveragings = terms of goods interchange decrement in arsenal + mitigate in accounts collectable hard specie payments to suppliers = acquires growing in accounts account due 22. barters$2,000,000 carry return in accounts receivables 100,000 funds emolument from customers$2,100,000 *23. wear and tear outgo is not listed in the direct method direct activities section because it is not a coin flow itemit does not affect hard currency. SOLUTIONS TO legal brief exemplarS shortened case 12-1 (a) bullion inflow from funding legal action, $200,000. (b) bills discharge from investment funds legal action, $150,000. (c) notes inflow from expend performance, $20,000. (d) n otes outflow from support performance, $50,000. design go 12-2 (a) put activity. (d) in operation(p) activity. (b) investiture activity. (e) financial backing activity. (c)Financing activity. (f)Financing activity. picture exercising 12-3 bullion flows from financial support activities harvesting from issuance of bonds account due$300,000) salary of dividends(70,000) authorize bullion provided by funding activities$230,000) picture transaction 12-4 (a) currency from operations would be set down than net income during the egress phase because blood line essential be purchased for future communicate gross sales events.Since sales during the fruit phase are projected to be increasing, short letter-taking purchases moldinessiness growing and inventory write offd on an accrual basis would be less than inventory purchased on a interchange basis. Also, collections on accounts receivable would regress behind sales thus, accrual sales would exceed coin coll ections during the blockage. (b) property from investment is much positive during the late maturity phase and the decline phase because the firm may sell off excess long assets that are no longer call for for productive purposes. design consummation 12-5 net profit hard currency provided by operational activities is $2,680,000. Using the indirect approach, the solution is elucidate income$2,500,000 Adjustments to even out net income to net gold provided by operate(a) activities derogation cost$110,000) Accounts receivable decrease? 350,000) Accounts collectible decrease(280,000) 180,000 nett money provided by operate activities$2,680,000 shortened turn 12-6 bills flows from in operation(p) activities last income$280,000 Adjustments to fit net income to net currency provided by operate activities wear and tear disbursement$70,000 going on sale of plant assets? 22,000 92,000 salary silver provided by operational activities$372,000 legal brief usage 12-7 authorize income$200,000 Adjustments to fit net income to net hard currency provided by operate activities belittle in accounts receivable$80,000) subjoin in pay expenses(28,000) sum up in inventories(40,000) 12,000 realise funds provided by in operation(p)(a) activities$212,000 skeleton economic consumption 12-8 Original court of equipment sold$22,000 little stack away derogation 5,500 deem treasure of equipment sold? 16,500 little acquittance on sale of equipment 3,500 currency flow from sale of equipment$13,000 BRIEF set 12-9 (a) lighten silver flow = $127,260,000 $221,160,000 $0 = ($93,900,000) (b) flowing bullion debt insurance insurance insurance reportage ratio = $127,260,000 ? $243,668,000 = .52 quantify (c) gold debt coverage ratio = $127,260,000 ? $928,464,500 = . 14 generation BRIEF praxis 12-10 (a) acquit gold flow = $405,000 $200,000 $0 = $205,000 (b) up-to-date bullion debt coverage ratio = $405,000 ? $150,000 = 2. 7 clock (c) property debt coverage ratio = $405,000 ? $225,000 = 1. 8 measure BRIEF exemplar 12-11 Free change flow = $123,100,000 $20,800,000 = $102,300,000 BRIEF crop 12-12Free currency flow is funds provided by operations less capital expenditures and change dividends gainful. For Payne Inc. this would be $364,000 ($734,000 $280,000 $90,000). Since it has positive unacquainted(p) hard currency flow that far exceeds its dividend, an step-up in the dividend faculty be possible. However, other factors should be considered. For example, it must have able retained dinero, and it should be convinced that a self-aggrandisingr dividend can be uphold over future familys. It should also use the exhaust bills flow to prolong its operations or pay down its debt. *BRIEF cipher 12-13 + mitigate in accounts receivable evaluate income from = sales events customers revenues plus in accounts receivable $1,285,759,000 = $1,287,672,000 $1,913,000 ( extend in accounts receivable) *BRIEF utilization 12-14 + fall down in income imposees due exchange payment = Income Tax for income taxes depreciate maturation in income taxes due $125,000,000 = $370,000,000 $245,000,000* *$522,000,000 $277,000,000 = $245,000,000 ( ontogenesis in income taxes account payable) *BRIEF do work 12-15 + extend in prepay expenses hard interchange = operational lessen in prepay expenses payments for expenses, operate excluding expenses depreciation and + devolve in accrue expenses payable change magnitude in increase expenses payable $79,000 = $90,000 $6,600 $4,400 SOLUTIONS TO DO IT look back consumptionS DO IT 12-1 (1)Financing activity (2) operate(a) activity (3)Financing activity (4)Investing activity (5)Investing activity DO IT 12-2 interchange flows from direct activities crystalise income$100,000 Adjustments to gruntle net income to net cash provided by run activities derogation expense$6,000 Patent amortization expense2,000 develop on sale of equipment(3,600) moderate in accounts receivable6,000 change magnitude in accounts payable 3,20013,600 salary cash provided by operate activities$113,600 DO IT 12-3 (a) Free cash flow = $73,700 $27,000 $15,000 = $31,700 b) change provided by operational activities fails to take into account that a federation a must invest in vernal plant assets just to make the menstruation level of operations. Companies must also maintain dividends at authoritative levels to satisfy investors. The mensuration of free cash flow provides additional insight regarding a companys cash-generating ability. SOLUTIONS TO EXERCISES EXERCISE 12-1 (a)Noncash investment funds and financial support activities. (b)Financing activities. (c)Noncash investment and finance activities. (d)Financing activi ties. (e)Investing activities. (f) operate activities. (g) run activities. EXERCISE 12-2 (a) in operation(p)(a) activity. (h) Financing activity. (b) Noncash investing and (i) Operating activity. financial support activity. (j) Noncash investing and financing (c) Investing activity. activity. (d) Financing activity. (k) Investing activity. (e) Operating activity. (l) Operating activity. (f) Noncash investing and financing activity. (m) Operating activity (loss) investing Operating activity. activity (cash homecoming from sale). (g) (n) Financing activity. EXERCISE 12-3 Point in Time microscope stage A prior phase B Decline phase C due date phase D Growth phase During the introductory phase (point A), cash from operations and investing are expected to be negative piece of music cash from financing would be positive.In the step-up phase (point D), a company would advance to show negative cash from operations and investing and positive cash from financing. EXERCISE 12-3 (Continued) During the maturity phase (point C), cash from operations and net income would be approximately the same. currency from operations would exceed investing needs. In the decline phase (point B), cash from operations would diminish while cash from financing would be negative. EXERCISE 12-4 JEREZ confederation partial(p) disputation of exchange precipitates For the yr terminate declination 31, 2010 property flows from direct activities force out income$190,000 Adjustments to reconcile net income to net cash provided by run activities disparagement expense$35,000 exhalation on sale of equipment 5,000 development in accounts payable? 17,000 devolve in accounts receivable? 15,000 shine in pay expenses 4,000 76,000 gelt cash provided by direct activities$266,000 EXERCISE 12-5 KITSELTON INC. disjointial story of silver Flows For the twelvemonth end declination 31, 2010 funds flows from in operation(p) activities gelt incom e$153,000 Adjustments to reconcile net income to net cash provided by operating activities depreciation expense$34,000) maturation in accrue expenses payable? 10,000) diminution in inventory? 4,000 attach in pre give expenses (5,000) Decrease in accounts payable(7,000) development in accounts receivable(11,000) 25,000 electronic network cash provided by operating activities$178,000 EXERCISE 12-6 FELIX corpORATION logical argument of specie Flowscollateral Method For the family obliterateed declination 31, 2010 hard cash flows operating activities realise income$284,100 Adjustments to reconcile net income to net cash provided by operating activities wear and tear expense$187,000 attach in income tax payable4,700 Decrease in accounts payable (3,700) summation in accounts receivable(8,200) make up in inventory (11,000) 168,800 network cash provided by operating activities452,900 funds flows from investing activities exchange of land 35,000 bribe of make(129,000 ) sugar cash apply by investing activities(94,000) bullion flows from financing activities emergence of bonds200,000 allowance of dividend (12,000) acquire of exchequer pipeline (32,000) bring in cash provided by financing activities 156,000 crystalise increase in cash514,900 cash in at parentage of plosive45,000 currency at end of flowing$559,900 EXERCISE 12-7 TOVAR CORP incomplete avouchment of bullion Flows For the division cease declination 31, 2010 money flows from operating activities net income$? 72,000) Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense$28,000) passage on sale of equipment 8,000) 36,000) profit cash provided by operating activities? 108,000) money flows from investing activitiescut-rate sale of equipment? 11,000* leverage of equipment(70,000) expression of equipment(53,000) win cash employ by investing activities(112,000) capital flows from financing activities hire of cash div idends? (19,000) * cost of equipment sold$49,000) *Accumulated depreciation (30,000)) *Book value? 19,000) *Loss on sale of equipment? (8,000)) * hard currency reaping$11,000) EXERCISE 12-8 (a)MATSUI partnership disceptation of capital Flows For the grade stop declination 31, 2010 bullion flows from operating activities force out income$ 93,000) Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense$34,000) Decrease in inventory? 19,000) improver in accounts receivable? (9,000) Decrease in accounts payable(8,000) 36,000) engagement cash provided by operating activities? 129,000) funds flows from investing activities exchange of land? 20,000) Purchase of equipment(60,000) shekels cash utilise by investing activities? (40,000) gold flows from financing activities return of popular shoot? 42,000) honorarium of cash dividends (35,000) Redemption of bonds (50,000) interlocking cash utilize by financing activities? ( 43,000) dinero increase in cash 46,000) gold at scratch line of power point 22,000) silver at end of stage$? 68,000) EXERCISE 12-8 (Continued) (b)1. sure cash debt coverage ratio make cash provided ? reasonable genuine by operating activities liabilities $129,000 ? pic = 3. 0 propagation Per Part (a) 2. gold debt coverage ratio sort out cash provided ? fairish total by operating activities liabilities $129,000 ? pic = . 59 cartridge holder *$47,000 + $200,000 **$39,000 + $150,000 EXERCISE 12-9 PepsiCo Coca-Cola (a) Liquidity stop cash debt pic = . 75 generation pic = . 64 quantify coverage ratio (b) Solvency gold debt coverage ratio pic = . 38 clock pic = . 6 generation Free cash flow $6,084 $2,068 $1,854 $5,957 $1,407 $2,911 = $2,162 = $1,639 PepsiCos liquidity is high ( transgress) than Coca-Colas. PepsiCos flowing cash debt coverage ratio is 17% higher than Coca-Colas. Coca-Colas solvency is s lightly higher than PepsiCos since its cash debt coverage ratio is higher but its free cash flow smaller. EXERCISE 12-10 Hoyt Rex breadbasket Corporation (a) Liquidity Current cash debt pic = 2. 0 multiplication pic = 1. 0 generation coverage ratio (b) Solvency coin debt pic = . 50 times pic = 0. 0 times coverage ratio Free cash flow $100,000 $40,000 $5,000 $100,000 $70,000 $10,000 = $55,000 = $20,000 Hoyts liquidity and solvency ratios are higher ( break) than Rexs comparable ratios. In particular, Hoyts real cash debt coverage ratio is in two ways as high as Rexs.This ratio indicates that Hoyt is substantially much than liquid than Rex. Hoyts solvency, as measured by the cash debt coverage ratio and free cash flow, is also better than Rexs. *EXERCISE 12-11 Revenues$192,000) derive step-up in accounts receivable(70,000) silver benefit from customers*$122,000 Operating expenses 83,000) recoup add-on in accou nts payable(23,000) currency payments for operating expenses** 60,000 web cash provided by operating activities$? 62,000 ** Accounts Receivable Balance, origination of yr Revenues for the socio-economic class 192,000 notes pass along for stratum 122,000 Balance, End of stratum ? 70,000 ** Accounts collectable Balance, Beginning of division 0 Payments for the family ? 0,000 Operating expenses for socio-economic class ? 83,000 Balance, End of year ? 23,000 *EXERCISE 12-12 (a) exchange payments to suppliers speak to of goods sold$5,349. 7one thousand thousand make sense Increase in inventory 4. 7 monetary value of purchases$5,354. 4million reimburse Increase in accounts payable(156. 1) exchange payments to suppliers$5,198. 3million (b) hard cash payments for operating expenses Operating expenses soap of depreciation ($11,791. 6 $1,249. 9)$10,541. 7million descend Decrease in prepaying expenses$(204. 5) Increase in accrued expenses payab le(37. 0) (241. 5) immediate payment payments for operating expenses$10,300. 2million *EXERCISE 12-13 immediate payment flows from operating activities hard cash profit from Customers$240,000* Dividend revenue 18,000* ?258,000* slight cash payments To suppliers for production$105,000 For salaries and wages? 53,000 For operating expenses? 28,000 For income taxes? 12,000 For pursuit 10,000? 208,000* profit cash provided by operating activities$? 50,000* *$48,000 + $192,000 *EXERCISE 12-14 MOSQUITO HOLLOW CORP. relation of bills Flows accost Method For the family cease declination 31, 2010 capital flows form operating activities change put across from customers$566,100 less(prenominal) bills payments For goods and services$279,100 For income taxes93,000 For operating expenses77,000 For arouse22,400 471,500 light up cash provided by operating activities94,600 currency flows form investing activities barter of building202,400 Purchase of equipment(113,200) winnings cash provided by investing activities89,200 Cash flows from financing activities Issuance of rough-cut stock355,000 Payment of cash dividend (21,800) Purchase exchequer stock(57,300) Cash paid to redeem bonds at maturity(200,000) give the axe cash provided by financing activities 75,900 lolly increase in cash259,700Cash at beginning of period11,000 Cash at end of period$270,700 *EXERCISE 12-15 Cash payments for rentals adopt expense$ 30,000* hit Increase in prepaid rent? ?3,100* Cash payments for rent$ 33,100* Cash payments for salaries Salaries expense$ 54,000* lend Decrease in salaries payable? ?2,000* Cash payments for salaries$ 56,000* Cash profit from customers Revenue from sales$160,000* minimal brain dysfunction Decrease in accounts receivable 9,000* Cash value from customers$169,000* SOLUTIONS TO riddleS business 12-1A Cash Inflow, Outflow, or No opinion? Transaction Where report (a) enter depreciation O No cash flow effect expense on the pla nt assets. (b) record and paid interest expense. O Cash outflow (c) Recorded cash proceeds from a sale of plant assets. I Cash inflow (d) Acquired land by issuing NC No cash flow effect common stock. (e) compensable a cash dividend F Cash outflow to preferred stockholders. (f) Distributed a stock dividend NC No cash flow effect to common stockholders. (g) Recorded cash sales. O Cash inflow (h) Recorded sales on account. O No cash flow effect (i) Purchased inventory for cash. O Cash outflow (j) Purchased inventory on O No cash flow effect account. occupation 12-2A (a) cyberspace income can be determined by analyzing the retained scratch account. hold earnings beginning of year$270,000 attention deficit disorder straighten out income (plug) 60,500* 330,500 Less Cash dividends20,000 line dividends 10,500 Retained earnings, end of year$300,000 ($300,000 + $10,500 + $20,000 $270,000) (b)Cash inflow from the issue of stock was $14,500 ($165,000 $ 140,000 $10,500). jet Stock 140,000 10,500 Stock Dividend 14,500 Shares Issued for Cash 165,000 Cash outflow for dividends was $20,000. The stock dividend does not use cash. c)Both of the above activities (issue of common stock and payment of dividends) would be class as financing activities on the statement of cash flows. bother 12-3A GRIDER conjunction fond(p) Statement of Cash Flows For the Year finish November 30, 2010 Cash flows from operating activities meshwork income$1,650,000 Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense$ 80,000 Decrease in inventory500,000 Decrease in accrued expenses payable(100,000) Increase in prepaid expenses(150,000) Increase in accounts receivable(300,000) Decrease in accounts payable(350,000) (320,000) Net cash provided by operating activities$1,330,000 * task 12-4A GRIDER phonerPartial Statement of Cash Flows For the Year cease November 30, 2010 Cash flows from operating activities Cash value from customers$7,400,000(1) Less cash payments To suppliers$4,750,000(2) For operating expenses? 1,320,000(3)? 6,070,000 Net cash provided by operating activities$1,330,000 deliberations (1)Cash proceeds from customers gross revenue$7,700,000 set out Increase in accounts receivable (300,000) Cash receipts from customers$7,400,000 (2)Cash payments to suppliers appeal of goods sold$4,900,000 reimburse Decrease in inventories (500,000) address of purchases? 4,400,000 furnish Decrease in accounts payable 350,000 Cash payments to suppliers$4,750,000 3)Cash payments for operating expenses Operating expenses, exclusive of depreciation$1,070,000* put up Increase in prepaid expenses$150,000 Decrease in accrued expenses payable100,000 250,000 Cash payments for operating expenses$1,320,000 *$450,000 + ($700,000 $80,000) bother 12-5A JANTZEN attach to Partial Statement of Cash Flows For the Year stop celestial latitude 31, 2010 Cash flows from operating activities Net income$230,000 Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense$70,000 Loss on sale of equipment16,000 Increase in accounts payable13,000Increase in income taxes payable 6,000 Increase in accounts receivable(10,000) 95,000 Net cash provided by operating activities$325,000 * business 12-6A JANTZEN gild Partial Statement of Cash Flows For the Year finish December 31, 2010 Cash flows from operating activities Cash receipts from customers$960,000(1) Less cash payments For operating expenses$601,000(2) For income taxes 34,000(3)? 635,000 Net cash provided by operating activities$325,000 (1)Computation of cash receipts from customers Revenues$970,000 set out Increase in accounts receivable ($70,000 $60,000)? (10,000) Cash receipts from customers$960,000 2)Computation of cash payments for operating expenses Operating expenses per income statement$614,000 calculate Increase in accounts payable ($41,000 $28,000)( 13,000) Cash payments for operating expenses$601,000 (3)Computation of cash payments for income taxes Income tax expense per income statement$ 40,000 depart Increase in income taxes payable ($13,000 $7,000)(6,000) Cash payments for income taxes$ 34,000 hassle 12-7A (a)TRAHAN COMPANY Statement of Cash Flows For the Year terminate December 31, 2010 Cash flows from operating activities Net income$32,000 Adjustments to reconcile net income o net cash provided by operating activities Depreciation expense$17,500* Increase in accounts payable? 9,000 Decrease in income taxes payable? (1,000) Increase in swop inventory(7,000) Increase in accounts receivable(19,000)? (500) Net cash provided by operating activities31,500 Cash flows from investing activities Sale of equipment8,500 Cash flows from financing activities Issuance of common stock4,000 Redemption of bonds (6,000) Payment of dividends(20,000) Net cash employ by financing activities(22,000) Net increase in cash18,000 Cash at beginning of period20,000 Cash at end of period$38,000 *$32,000 ($24,000 $9,500(A)) = $17,500 A)$18,000 (cost of equipment) $8,500 (book value) = $9,500 (accumulated depreciation for equipment sold) worry 12-7A (Continued) (b) 1. $31,500 ? pic = 1. 17 times Per Part (a) *$15,000 + $8,000 **$24,000 + $7,000 2. $31,500 ? pic = . 55 times *$15,000 + $8,000 + $33,000 **$24,000 + $7,000 + $27,000 3. $31,500 $0 $20,000 = $11,500 *PROBLEM 12-8A (a)TRAHAN COMPANY Statement of Cash Flows For the Year Ended December 31, 2010 Cash flows from operating activitiesCash receipts from customers$223,000(1) Less cash payments To suppliers$173,000(2) For operating expenses 6,500(3) For interest 3,000 For income taxes 9,000(4)? 191,500 Net cash provided by operating activities 31,500 Cash flows from investing activities Sale of equipment8,500 Cash flows from financing activities Issuance of common stock 4,000 Redemption of bonds (6,000) Payment of dividends? (20,000) Net cash employ by f inancing activities? (22,000) Net decrease in cash 18,000 Cash at beginning of period 20,000 Cash at end of period$? 38,000 Computations (1)Cash receipts from customers gross revenue$242,000 depart Increase in accounts receivable(19,000)Cash receipts from customers$223,000 *PROBLEM 12-8A (Continued) (2)Cash payments to suppliers speak to of goods sold$175,000 Add Increase in inventory 7,000 Cost of purchases? 182,000 Deduct Increase in accounts payable? ?9,000 Cash payments to suppliers$173,000 (3)Cash payments for operating expenses Operating expenses$24,000 Deduct Depreciation $32,000 ($24,000 $9,500*)17,500 Cash payments for operating expenses$ 6,500 *$18,000 $8,500 = $9,500 (4)Cash payments for income taxes Income tax expense$8,000 Add Decrease in income taxes payable 1,000 Cash payments for income taxes$9,000 (b) 1. $31,500 ? pic = 1. 7 times Per Part (a) **$15,000 + $8,000 ***$24,000 + $7,000 2. $31,500 ? pic = . 55 times *$15,000 + $8,000 + $33,000 **$24,000 + $7, 000 + $27,000 3. $31,500 $0 $20,000 = $11,500 PROBLEM 12-9A CIPRA INC. Statement of Cash Flows For the Year Ended December 31, 2010 Cash flows from operating activities Net income$158,900 Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense$46,500Increase in accounts payable 34,700 Loss on sale of plant assets7,500 Decrease in accrued expenses payable (500) Increase in prepaid expenses? (2,400) Increase in inventory? (9,650) Increase in accounts receivable(54,800)? 21,350 Net cash provided by operating activities? 180,250 Cash flows from investing activities Sale of plant assets1,500 Purchase of investments (24,000) Purchase of plant assets (100,000) Net cash used by investing activities(122,500) Cash flows from financing activities Sale of common stock45,000 Payment of cash dividends (30,350) Redemption of bonds (40,000) Net cash used by financing activities (25,350)Net increase in cash 32,400 Cash at beginning of period 48, 400 Cash at end of period$? 80,800 *PROBLEM 12-10A CIPRA INC. Statement of Cash Flows For the Year Ended December 31, 2010 Cash flows from operating activities Cash receipts from customers$337,980(1) Less cash payments To suppliers$110,410(2) For income taxes 27,280 For operating expenses 15,310(3) For interest 4,730? 157,730 Net cash provided by operating activities? 180,250 Cash flows from investing activities Sale of plant assets 1,500 Purchase of investments? (24,000) Purchase of plant assets (100,000) Net cash used by investing ? activities(122,500) Cash flows from financing activities Sale of common stock 45,000 Payment of cash dividends? (30,350) Redemption of bonds? (40,000) Net cash used by financing activities (25,350) Net increase in cash 32,400 Cash at beginning of period 48,400 Cash at end of period$? 80,800 Computations (1)Cash receipts from customers Sales$392,780 Deduct Increase in accounts receivable(54,800) Cash receipts from customers$337,980 *PROBLEM 12-10A (C ontinued) (2)Cash payments to suppliers Cost of goods sold$135,460 Add Increase in inventory 9,650 Cost of purchases? 145,110 Deduct Increase in accounts payable? (34,700)Cash payments to suppliers$110,410 (3)Cash payments for operating expenses Operating expenses exclusive of depreciation$12,410 Add Increase in prepaid expenses$2,400 Decrease in accrued expenses payable 500 2,900 Cash payment for operating expenses$15,310 PROBLEM 12-11A MERCADO COMPANY Statement of Cash Flows For the Year Ended December 31, 2010 Cash flows from operating activities Net income$ 37,000 Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense$42,000 Decrease in accounts receivable? 12,000 Decrease in prepaid expenses 5,720 Increase in accounts payable? ,730 Loss on sale of equipment2,000 Increase in inventory (9,450)? 57,000 Net cash provided by operating activities? 94,000 Cash flows from investing activities Sale of land? 25,000 Sale of equipment? 8,0 00 Purchase of equipment(95,000) Net cash used by investing activities? (62,000) Cash flows from financing activities Payment of cash dividends(12,000) Net cash used by financing activities(12,000) Net increase in cash20,000 Cash at beginning of period? 45,000 Cash at end of period$65,000 Noncash investing and financing activities Conversion of bonds by issuance of common stock$40,000 PROBLEM 12-12A Current Cash Debt reporting dimension Cash Debt Coverage Ratio Free Cash Flow ($125,000) (0. 5 times) (0. 3 times) Transaction (a) Recorded credit sales $2,500. NE NE NE (b) dispassionate $1,500 owing from customers. I I I (c) Paid amount owing D D D to suppliers, $2,750. (d) Recorded sales returns of $500 and credited the NE NE NE customers account. (e) Purchased wise equipment $5,000 signed a long-term D* NE D note payable for the cost of the equipment. (f) Purchased a patent and paid $15,000 cash for the D NE NE asset. *Note to t eacher If only cash capital expenditures are deducted, this answer would be NE. BYP 12-1 fiscal inform PROBLEM (a)Net cash provided by operating activities 2007 $90,064 2006 $55,656Some causes of the significant changes in net cash provided by operating activities during 2007 were the decrease in the accounts receivable, a decrease in inventories, and a decrease in income taxes payable and deferred. (b)The increase in cash and cash equivalents for the year ended December 31, 2007 was $1,877,000. (c)Tootsie Roll uses the indirect method of calculate and presenting the net cash provided by operating activities. (d)According to the statement of cash flows, accounts receivable decrease $2,591,000 in 2007. Inventories lessen $6,506,000 in 2007. Accounts payable (and accrued liabilities) lessen $3,234,000 in 2007. (e)The net cash used by investing activities in 2007 was $43,345,000. (f)The ancillary disclosure of cash flow information disclosed interest paid of $537,000 and income taxes paid of $11,343,000 in 2007. BYP 12-2 comparative degree ANALYSIS PROBLEM (a) Hershey Tootsie Roll 1. Current cash pic pic debt coverage = . 51 times = 1. 0 times ratio 2. Cash debt pic pic= . 54 times coverage ratio = . 22 times **$57,972 + $116,523 **$62,211 + $98,747 (b)Tootsie Rolls current cash debt coverage ratio provides a ratio of $1. 50 of cash from operations for every sawbuck of current debt.It is a better representation of liquidity on an clean day than the current ratio. Tootsie Rolls higher ratio (1. 50 vs. .51) indicates Tootsie Roll was importantly more liquid in 2007 than Hershey but both measures are acceptable. The cash debt coverage ratio shows a companys ability to repay its liabilities from cash generated from operating activities without having to countervail the assets employed in its operations. Since Tootsie Rolls cash debt coverage ratio was more than twice as large (. 54 vs. .22) as Hersheys, T ootsie Rolls ability to repay liabilities with cash from operations was significantly greater than Hersheys in 2007. BYP 12-3 investigate CASE (a)The denomination suggests that most pack arent relate about Searss liquidity. Instead, the concern is that the company wont have nice cash to lend oneself the changes it needs to make a return to profitability. Also, some investors were interested that a cash shortage result reduce Searss ability to carry out the treasury stock redemption program that it had previously announced. (b) At the time of the article, Sears had not reported its cash flow numbers. It had, however, reported an see that by the end of the quarter the company would have $1 trillion in cash on hand. This was lower that analysts had expected.Based upon estimates of amounts that the company had spent on treasury stock, debt repayment, and capital expenditures, analysts determined that it was plausibly that, to arrive at $1 billion in cash on hand, the compan ys cash flow must have declined. (c)Individuals who attempt to defend Sears state that they thought it was out or keeping(p) to make such(prenominal) negative statements about the company based on estimates. They suggested it would be better to detainment until the company reports its actual cash flow numbers ahead evaluating the company. (d)The article suggests that, if, in fact, Searss cash flow is declining, it is a bad time of year for that to be happening. Normally the 4th quarter would be a period when cash flows would be strong, because of the holiday shop season.In contrast, Sears frequently experiences negative cash from operations during the first triplet quarters of the year. BYP 12-4 interpreting FINANCIAL STATEMENTS (a)Current ratio2001$1,207. 9? $ 921. 4= 1. 31 2004$2,539. 4? $1,620. 4= 1. 57 Current cash debt ?coverage ratio2001($119. 8)? $ 948. 2= (. 13) times 2004 $566. 6? $1,436. 6= . 39 times Both viragos current ratio and its current cash debt coverage ra tio ameliorate dramatically from 2001 to 2004. amazons current ratio change magnitude by 20% (from 1. 31 to 1. 57) during the 3-year period.In addition amazons current cash debt coverage ratio modify by $. 52 per horse sign of current liabilities (from a negative $. 13 per dollar in 2001 to a positive $. 39 per dollar in 2004). amazons liquidity improved greatly from 2001 to 2004. (b)Cash debt ?coverage ratio2001($119. 8)? $3,090. 0= (. 04) times 2004 $566. 6? $4,773. 4= . 12 times Debt to total ?assets ratio2001$3,077. 5? $1,637. 5= 1. 88 2004$5,096. 1? $3,248. 5= 1. 57 amazons solvency also improved significantly from 2001 to 2004. Its cash debt coverage ratio increased by $. 16 per dollar of total liabilities during the 3-year period. amazons debt to total assets ratio also improved (decreased) by 16% from 2001 to 2004. c)Free cash flow2001($119. 8)$50. 3 $0= ($170. 1) 2004 $566. 6$89. 1 $0= $477. 5 Amazons free cash flow increased by almost $650 million from 2001 to 2004. The increase was caused by Amazon in the end generating a profit in 2004. If Amazon is able to glide by operating at a profit and producing a large free cash flow, it should be able to finance an elaboration of its operations. BYP 12-4 (Continued) (d)While these measures verbalise us a lot about Amazon. com, they dont tell us whether the stock price is reasonable. Amazon. coms high stock price is a reflection of a belief by investors that Amazon. com pass on continue to grow incredibly fast.If this festering falters, its stock price willing fall quite quickly. Also, Amazon. coms sonorous reliance on debt financing compounds the run a risk of investing in its stock because it may have a difficult time paying its debts if its growth does not continue. BYP 12-5 FINANCIAL ANALYSIS ON THE WEB Answers will vary depending on the company elect by the student. BYP 12-6 finale MAKING crosswise THE ORGANIZATION (a)DEVITO COMPANY Statement of Cash Flows For the Year Ended January 31, 2010Cash flows from operating activities Net loss$(35,000)* Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense$? 55,000 Gain from sale of investment? ?(5,000)50,000 Net cash provided by operating activities15,000 Cash flows from investing activities Sale of investment 80,000 Purchase of investment ? (75,000) Purchase of fixtures and equipment(320,000) Net cash used by investing activities(315,000)* Cash flows from financing activities Sale of capital stock? 405,000 Purchase of treasury stock? (10,000) Net cash provided by financing activities395,000 Net increase in cash 95,000 Cash at beginning of period? 40,000 Cash at end of period$235,000 Noncash investing and financing activities Issuance of note for truck$20,000 BYP 12-6 (Continued) *Computation of net income (loss) Sales of merchandise$385,000 saki revenue 6,000 Gain on sale of investm