Description
Problem 14A – 5 Prepare
a Statement of Cash Flows.
A comparative balance
sheet and income statement for Eaton Company follows:
|
Eaton |
||
|
Comparative |
||
|
December |
||
|
2011 |
2010 |
|
|
Assets |
||
|
Current Assets: |
||
|
Cash |
$4 |
$11 |
|
Accounts receivable |
$310 |
$230 |
|
Inventory |
$160 |
$195 |
|
Prepaid expenses |
$8 |
$6 |
|
Total current Assets |
$482 |
$442 |
|
Plant and equipment |
$500 |
$420 |
|
Less: Accumulated Depreciation |
$85 |
$70 |
|
Net plant and equipment |
$415 |
$350 |
|
Long term investments |
$31 |
$38 |
|
Total Assets |
$928 |
$830 |
|
Liabilities and Stockholder’s equity |
||
|
Current Liabilities |
||
|
Accounts Payable |
$300 |
$225 |
|
Accrued Liabilities |
$70 |
$80 |
|
Income taxes payable |
$71 |
$63 |
|
Total current Liabilities |
$441 |
$368 |
|
Bonds Payable |
$195 |
$170 |
|
Total Liabilities |
$636 |
$538 |
|
Stockholder’s equity |
||
|
Common Stock |
$160 |
$200 |
|
Retained earnings |
$132 |
$92 |
|
Total Stockholder’s equity |
$292 |
$292 |
|
Total Liabilities and Stockholder’s |
$928 |
$830 |
|
Eaton |
||
|
Income |
||
|
For |
||
|
Sales |
$750 |
|
|
Cost of goods sold |
$450 |
|
|
Gross Margin |
$300 |
|
|
Selling and administrative expenses |
$223 |
|
|
Net operating income |
$77 |
|
|
Non-operating items |
||
|
Gain on sales of investments |
$5 |
|
|
Loss on sale of equipment |
-$2 |
$3 |
|
Income before taxes |
$80 |
|
|
Income tax |
$24 |
|
|
Net Income |
$56 |
During 2011, Eaton
sold some equipment for $18 that had cost $30 and on which there was
accumulated depreciation of $10. In addition, the company sold long term
investments for $12 that had cost $7 when purchased several years ago. A cash
dividend was paid during 2011 and the company repurchased $40 of its stock.
Eaton did not retire any bonds during 2011.
Required:
1. Using the direct method, determine the net
cash provided by operating activities for 2011.
2. Using the information in (1) above, along
with an analysis of remaining balance sheet accounts, prepare a statement of
cash flows for 2011.
Problem 14 – 8 Prepare
a Statement of Cash Flows.
A comparative balance
sheet and income statement for Eaton Company follows:
|
Eaton |
||
|
Comparative |
||
|
December |
||
|
2011 |
2010 |
|
|
Assets |
||
|
Current Assets: |
||
|
Cash |
$4 |
$11 |
|
Accounts receivable |
$310 |
$230 |
|
Inventory |
$160 |
$195 |
|
Prepaid expenses |
$8 |
$6 |
|
Total current Assets |
$482 |
$442 |
|
Plant and equipment |
$500 |
$420 |
|
Less: Accumulated Depreciation |
$85 |
$70 |
|
Net plant and equipment |
$415 |
$350 |
|
Long term investments |
$31 |
$38 |
|
Total Assets |
$928 |
$830 |
|
Liabilities and Stockholder’s equity |
||
|
Current Liabilities |
||
|
Accounts Payable |
$300 |
$225 |
|
Accrued Liabilities |
$70 |
$80 |
|
Income taxes payable |
$71 |
$63 |
|
Total current Liabilities |
$441 |
$368 |
|
Bonds Payable |
$195 |
$170 |
|
Total Liabilities |
$636 |
$538 |
|
Stockholder’s equity |
||
|
Common Stock |
$160 |
$200 |
|
Retained earnings |
$132 |
$92 |
|
Total Stockholder’s equity |
$292 |
$292 |
|
Total Liabilities and Stockholder’s |
$928 |
$830 |
|
Eaton |
||
|
Income |
||
|
For |
||
|
Sales |
$750 |
|
|
Cost of goods sold |
$450 |
|
|
Gross Margin |
$300 |
|
|
Selling and administrative expenses |
$223 |
|
|
Net operating income |
$77 |
|
|
Non-operating items |
||
|
Gain on sales of investments |
$5 |
|
|
Loss on sale of equipment |
-$2 |
$3 |
|
Income before taxes |
$80 |
|
|
Income tax |
$24 |
|
|
Net Income |
$56 |
During 2011, Eaton
sold some equipment for $18 that had cost $30 and on which there was
accumulated depreciation of $10. In addition, the company sold long term
investments for $12 that had cost $7 when purchased several years ago. A cash
dividend was paid during 2011 and the company repurchased $40 of its stock.
Eaton did not retire any bonds during 2011.
Required:
3. Using the indirect method, determine the
net cash provided by operating activities for 2011.
4. Using the information in (1) above, along
with an analysis of remaining balance sheet accounts, prepare a statement of
cash flows for 2011.
Problem 14 – 14 Prepare
and Interpret a Statement of Cash Flows; Free Cash Flow
Sharon Feldman, president of Allied Company, considered
$20,000 to be a minimum cash balance for operating purposes. As can be seen
from the following statements, only $15,000 in cash was available at the end of
2011. Because the company reported a large net income for the year, and also
issued bonds and sold some long term investments, the sharp decline in cash is
puzzling to Ms. Feldman.
|
Allied |
||
|
Comparative |
||
|
December |
||
|
2011 |
2010 |
|
|
Assets |
||
|
Current Assets: |
||
|
Cash |
$15,000 |
$33,000 |
|
Accounts receivable |
$2,00,000 |
$2,10,000 |
|
Inventory |
$2,50,000 |
$1,96,000 |
|
Prepaid expenses |
$7,000 |
$15,000 |
|
Total current Assets |
$4,72,000 |
$4,54,000 |
|
Long term investments |
$90,000 |
$1,20,000 |
|
Plant and equipment |
$8,60,000 |
$7,50,000 |
|
Less: Accumulated Depreciation |
$2,10,000 |
$1,90,000 |
|
Net plant and equipment |
$6,50,000 |
$5,60,000 |
|
Total Assets |
$12,12,000 |
$11,34,000 |
|
Liabilities and Stockholder’s equity |
||
|
Current Liabilities |
||
|
Accounts Payable |
$1,75,000 |
$2,30,000 |
|
Accrued Liabilities |
$8,000 |
$15,000 |
|
Income taxes payable |
$42,000 |
$39,000 |
|
Total current Liabilities |
$2,25,000 |
$2,84,000 |
|
Bonds Payable |
$2,00,000 |
$1,00,000 |
|
Total Liabilities |
$4,25,000 |
$3,84,000 |
|
Stockholder’s equity |
||
|
Common Stock |
$5,95,000 |
$6,00,000 |
|
Retained earnings |
$1,92,000 |
$1,50,000 |
|
Total Stockholder’s equity |
$7,87,000 |
$7,50,000 |
|
Total Liabilities and Stockholder’s |
$12,12,000 |
$11,34,000 |
|
Allied |
||
|
Income |
||
|
For |
||
|
Sales |
$8,00,000 |
|
|
Cost of goods sold |
$5,00,000 |
|
|
Gross Margin |
$3,00,000 |
|
|
Selling and administrative expenses |
$2,14,000 |
|
|
Net operating income |
$86,000 |
|
|
Non-operating items |
||
|
Gain on sales of investments |
$20,000 |
|
|
Loss on sale of equipment |
-$6,000 |
$14,000 |
|
Income before taxes |
$1,00,000 |
|
|
Income tax |
$30,000 |
|
|
Net Income |
$70,000 |
The following additional information is available for the
year 2011:
a.
The company sold long term investments with an
original cost of $30,000 for $50,000 during the year.
b.
Equipment that had cost $90,000 and on which
there was $40,000 in accumulated depreciation was sold during was sold during
the year for $44,000.
c.
The company declared and paid cash dividend
during the year.
d.
The stock of a dissident stockholder was
repurchased for cash and retired during the year. No issues of stock were made.
e.
The company did not retire any bonds during the
year.
Required:
1.
Using the indirect method, compute the net cash
provided by operating activities for 2011.
2.
Prepare a statement of cash flows for 2011.
Reviews
There are no reviews yet.