Chapter21

TheStatementofCashFlowsRevisited

EXERCISES
Exercise211
suppliers

600

1. SummaryEntry

goodssold
payable

increase
(decrease)

increase
(decrease)

600

Alternate Exercise and Problem Solutions

(18)

600
18

600
42
558
576

42

(42)

618
558

558

Costofgoodssold
Inventory
Accountspayable
Cash(paidtosuppliersofgoods)

600

600
618

Costofgoodssold
Accountspayable
Cash(paidtosuppliersofgoods)
18

600

Costofgoodssold
Inventory
Cash(paidtosuppliersofgoods)

600

4. SummaryEntry

18

600

3. SummaryEntry

Cashpaidto
Situation
Inventory

Costofgoodssold
Cash(paidtosuppliersofgoods)

600

2. SummaryEntry

Costof
Accounts

600
18

42
576
624

The McGraw-Hill Companies, Inc., 2013

21-1

5. SummaryEntry

Costofgoodssold
Accountspayable
Inventory
Cash(paidtosuppliersofgoods)

Exercise212

600
42

18
624

RECONCILIATIONOFNETINCOMETO
NETCASHFLOWSFROMOPERATING
ACTIVITIES
($inmillions)

Netincome
Adjustmentsfornoncasheffects:
Increaseinaccountsreceivable
Increase(decrease)ininventory

$78
(162)
0

Increaseinaccountspayable

29

Increaseinsalariespayable

12

Decreaseinprepaidinsurance

18

Depreciationexpense

33

Depletionexpense

15

Decreaseinbonddiscount

Gainonsaleofequipment

(75)

Lossonsaleofland
Increaseinincometaxpayable
Netcashflowsfromoperatingactivities

24
36
$21

Exercise213 Requirement1:

The McGraw-Hill Companies, Inc., 2013

21-2

Intermediate Accounting, 7e

a.SummaryEntry

Cash(receivedfromcustomers)
Accountsreceivable
Salesrevenue

933

Costofgoodssold
Inventory
Accountspayable
Cash(paidtosuppliersofgoods)

555
39
24

c.SummaryEntry

Salariesexpense
Salariespayable
Cash(paidtoemployees)

123

d.SummaryEntry

Insuranceexpense
Prepaidinsurance
Cash(paidforinsurance)

57

e.SummaryEntry

Incometaxexpense
Incometaxpayable
Cash(paidforincometaxes)

66

b.SummaryEntry

18
915

618

15
108

27
30

60
6

Depreciationexpenseandthelossonsaleoflandarenotcashoutflows.
Requirement2:
CashFlowsfromOperatingActivities:
Cashreceivedfromcustomers
$933
Cashpaidtosuppliers
(618)
Cashpaidtoemployees
(108)
Cashpaidforinsurance
(30)
Cashpaidforincometaxes
(6)
Netcashflowsfrom
operatingactivities
$171

Alternate Exercise and Problem Solutions

The McGraw-Hill Companies, Inc., 2013

21-3

Exercise214

RECONCILIATIONOFNETINCOMETO
NETCASHFLOWSFROMOPERATING
ACTIVITIES

Netloss
Adjustmentsfornoncasheffects:
Depreciationexpense
Increaseinsalariespayable
Decreaseinaccountsreceivable
Increaseininventory
Amortizationofpatent
Reductionindiscountonbonds
Netcashflowsfromoperatingactivities

$(25,000)
30,000
2,500
10,000
(11,500)
1,500
1,000
$8,500

PROBLEMS
Problem211
Classifications
+I
Investingactivity(cashinflow)
I
Investingactivity(cashoutflow
+F
Financingactivity(cashinflow)
F
Financingactivity(cashoutflow)
N
Noncashinvestingandfinancingactivity

X
Notreportedasaninvestingand/orafinancingactivity
Transactions
Example + I 1. Sale of a building
+F 2. Issuance of preferred stock for cash
F3. Retirement of preferred stock
N4. Conversion of bonds to common stock
N5. Lease of a machine by lease
+I
6. Sale of a trademark
The McGraw-Hill Companies, Inc., 2013
21-4

Intermediate Accounting, 7e

I7. Purchase of land for cash

N8. Issuance of common stock for a building
+I
9. Collection of a note receivable (principal amount)
+F10. Sale of bonds payable
X11. Distribution of a stock dividend
N12. Payment of property dividend
F13. Payment of cash dividends
+F 14. Issuance of a short-term note payable for cash
+F15. Issuance of a long-term note payable for cash
I16. Purchase of investment securities (available-for-sale)
F17. Repayment of a note payable
X18. Cash payment for 3-year insurance policy
+I
19. Sale of land
N20. Issuance of note payable for land
I21. Purchase of common stock issued by another corporation
N22. Repayment of long-term debt by issuing common stock
X23. Payment of semiannual interest on notes payable
F24. Purchase of treasury stock
I25. Loan to a subsidiary
X26. Sale of merchandise to customers
X27. Purchase of treasury bills (cash equivalents)

Alternate Exercise and Problem Solutions

The McGraw-Hill Companies, Inc., 2013

21-5

Problem212

A2ZIndustries
SpreadsheetfortheStatementofCashFlows

Dec.31
2012

BalanceSheet
Assets:
Cash
Accountsreceivable
Inventory
Land
Building
Less:Acc.depreciation
Equipment
Less:Acc.depreciation
Patent
Liabilities:
Accountspayable
Accruedexpenses
Leaseliabilityland
Shareholders'Equity:
Commonstock
Paidincapitalex.ofpar
Retainedearnings

1,125
1,350
1,575
1,800
2,700
(810)
6,750
(1,440)
4,500
17,550

(14) 675
(1) 450
(4) 1,125
(2) 450 X

(11) 2,700
(7) 810

(3) 225
(5)
90
(7) 900
(6) 945
(8) 900

Dec.31
2013

1,800
1,800
2,700
2,025
2,700
(900)
8,550
(1,575)
3,600
20,700

1,350
675
0

(4) 900
(9) 225
X (2) 450

2,250
900
450

9,000
2,025
4,500

17,550

(12) 450
(12) 225
(10) 2,925

9,450
2,250

IncomeStatement
Revenues:
Salesrevenue
Gainonsaleofland
Expenses:
Costofgoodssold
Depreciationexpensebuild.
Depreciationexpenseequip.
Lossonsaleofequipment
The McGraw-Hill Companies, Inc., 2013
21-6

Changes

Debits
Credits

(12) 675
(13) 1,350

5,400
20,700

(1)7,935
(3) 270
(4) 1,800
(5)
90
(6) 945
(7)
45

7,935
270
1,800
90
945
45

Intermediate Accounting, 7e

Amortizationofpatent
Operatingexpenses
Netincome
Problem212(continued)

(8) 900
(9) 1,500
(10) 2,925

900
1,500
2,925

SpreadsheetfortheStatementofCashFlows

(continued)

Dec.31
2012

StatementofCashFlows
Operatingactivities:
Cashinflows:
Fromcustomers
Cashoutflows:
Tosuppliersofgoods
Foroperatingexpenses
Netcashflows
Investingactivities:
Purchaseofequipment
Saleofland
Saleofequipment
Netcashflows

Changes

Debits
Credits

Dec.31
2013

(1) 7,485
(4) 2,025
(9) 1,275

4,185

(11) 2,700
(3) 495
(7)
45

(2,160)

Financingactivities:
Paymentofcashdividends
Netcashflows
Netincreaseincash

Totals

24,465

(13) 1,350
(14)
675
24,465

(1,350)
675

XNoncashinvestingandfinancingactivity

Alternate Exercise and Problem Solutions

The McGraw-Hill Companies, Inc., 2013

21-7

Problem212(concluded)

A2ZIndustries

StatementofCashFlows
ForyearendedDecember31,2013($in000)
Cashflowsfromoperatingactivities:
Cashinflows:
Fromcustomers
Cashoutflows:
Tosuppliersofgoods
Foroperatingexpenses
Netcashflowsfromoperatingactivities

$7,485
(2,025)
(1,275)
$4,185

Cashflowsfrominvestingactivities:
Purchaseofequipment
Saleofland
Saleofequipment
Netcashflowsfrominvestingactivities

$(2,700)
495
45

Cashflowsfromfinancingactivities:
Paymentofcashdividends
Netcashflowsfromfinancingactivities

$(1,350

Netincreaseincash
Cashbalance,January1
Cashbalance,December31

(2,160)

(1,350

)
$675

1,125
$1,800

Noncashinvestingandfinancingactivities:
Landacquiredbylease

The McGraw-Hill Companies, Inc., 2013

21-8

$450

Intermediate Accounting, 7e

Problem213

A2ZIndustries

SpreadsheetfortheStatementofCashFlows

BalanceSheet
Assets:
Cash
Accountsreceivable
Inventory
Land
Building
Less:Acc.depreciation
Equipment
Less:Acc.depreciation
Patent
Liabilities:
Accountspayable
Accruedexpenses
Leaseliabilityland
Shareholders'Equity:
Commonstock
Paidincapitalex.ofpar
Retainedearnings

Dec.31
2012

1,125
1,350
1,575
1,800
2,700
(810)
6,750
(1,440)
4,500
17,550

Changes

Debits
Credits

(15) 675
(7) 450
(8) 1,125
(11) 450 X

(12) 2,700
(5) 810

(2) 225
(3)
90
(5) 900
(4) 945
(6) 900

Dec.31
2013

1,800
1,800
2,700
2,025
2,700
(900)
8,550
(1,575)
3,600
20,700

1,350
675
0

(9) 900
(10) 225
X (11) 450

2,250
900
450

9,000
2,025
4,500

17,550

(13) 450
(13) 225
(1) 2,925

9,450
2,250

(13) 675
(14) 1,350

5,400
20,700

XNoncashinvestingandfinancingactivity

Alternate Exercise and Problem Solutions

The McGraw-Hill Companies, Inc., 2013

21-9

Problem213(continued)

SpreadsheetfortheStatementofCashFlows

(continued)

Changes

Debits
Credits

Dec.31
2012

StatementofCashFlows
Operatingactivities:
Netincome
Adjustmentsfornoncasheffects:
Gainonsaleofland
Depreciationexpensebuild
Depreciationexpenseequip
Lossonsaleofequipment
Amortizationofpatent
Increaseinaccountsreceivable
Increaseininventory
Increaseinaccountspayable
Increaseinaccruedexpenses

Netcashflows
Investingactivities:
Purchaseofequipment
Saleofland
Saleofequipment
Netcashflows

Dec.31
2013

(1) 2,925
(2) 270
(3)
90
(4) 945
(5)
45
(6) 900

(7) 450
(8) 1,125

(9) 900
(10) 225

4,185
(12) 2,700
(2) 495
(5)
45

(2,160)

Financingactivities:
Paymentofcashdividends
Netcashflows
Netincreaseincash

Totals

14,805

Problem213(concluded)

(14) 1,350

(1,350)
(15)
675
675
14,805

A2ZIndustries

StatementofCashFlows
ForyearendedDecember31,2013($in000)
Cashflowsfromoperatingactivities:
The McGraw-Hill Companies, Inc., 2013
21-10

Intermediate Accounting, 7e

Netincome
Adjustmentsfornoncasheffects:
Gainonsaleofland
Depreciationexpensebuilding
Depreciationexpenseequipment
Lossonsaleofequipment
Amortizationofpatent
Increaseinaccountsreceivable
Increaseininventory
Increaseinaccountspayable
Increaseinaccruedexpenses
Netcashflowsfromoperatingactivities
Cashflowsfrominvestingactivities:
Purchaseofequipment
Saleofland
Saleofequipment
Netcashflowsfrominvestingactivities
Cashflowsfromfinancingactivities:
Paymentofcashdividends
Netcashflowsfromfinancingactivities
Netincreaseincash
Cashbalance,January1
Cashbalance,December31

$2,925
(270)
90
945
45
900
(450)
(1,125)
900
225
$4,185

$(2,700)
495
45
(2,160)

$(1,350

)
(1,350

)
$675
1,125
$1,800

Noncashinvestingandfinancingactivities:
Landacquiredbylease

Alternate Exercise and Problem Solutions

$450

The McGraw-Hill Companies, Inc., 2013

21-11