Beruflich Dokumente
Kultur Dokumente
Name ____________________________
General Instructions:
Please follow the Stern School’s Code of Conduct requirements. The penalty for cheating is
an automatic grade of F for the course and appearance before the Student Disciplinary
Committee.
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Write your answers to each multiple-choice question in the table below (Do not
circle the answers).
Question Answer
1 (3 points) C
2 (3 points) D
3 (3 points) C
4 (3 points) A
5 (3 points) A
6 (3 points) D
7 (3 points) D
1. Which of the following would not be a cash flow from financing activities?
A. Issuance of common stock for cash.
B. Borrowing cash on a long-term note payable.
C. Collection of a cash dividend.
D. Repayment of principal on a long-term note payable.
2. Which of the following statements about bonds that were issued at par is incorrect?
A. The market rate of interest equals the coupon rate.
B. The interest expense over the life of the bonds will equal the cash interest payments.
C. The present value of the bonds' future cash flows equals the bonds' face value.
D. The book value of the bond payable decreases over the life of the bonds.
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3. Which of the following statements about the statement of cash flows is correct?
A. The statement of cash flow shows the cash change of a company on a specific date.
B. Cash received for interest from debt investing would be classified as an investment
cash flow.
C. The acquisition of land by issuing bonds payable would not appear on the statement of
cash flows.
D. Cash paid for interest would be classified as a financing cash flow.
How much was GJ's net cash inflow from operating activities?
A. $545,000
B. $607,000
C. $514,000
D. $463,000
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7. Atkins Corporation has provided the following information for the year ended
December 31, 2010:
Which of the following statements is correct with respect to cash flow from investing
activities determination? Assume that the equipment purchase and sale resulted in cash
flows.
A. A $60,000 cash inflow is reported from the equipment sale.
B. A $200,000 cash outflow is reported for equipment purchases.
C. A $50,000 cash outflow is reported for the equipment sale.
D. A $250,000 cash outflow is reported for equipment purchases.
Requirements:
1. Calculate the amount of each equal payment (round to the nearest dollar).
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Truck 17,000
Notes payable 17,000
3. Prepare the journal entry to record the first annual payment on the note (assume no
interest has been accrued during the year).
4. Prepare the journal entry to record the last annual payment on the note (assume no
interest has been accrued during the year).
5. Will the interest paid with the first annual payment be more or less than the interest
paid with the second annual payment? Explain your answer.
The interest paid on the first installment will be more than the interest on the second
payment because the book value of notes payable decreases over years.
Alethea Inc.
Comparative Balance Sheets
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Alethea Inc.
Income Statement
For year ended December 31, 2011
Revenues $800,000
Cost of Goods Sold 450,000
Gross Profit 350,000
Wages and Salaries 200,000
Depreciation Expense 48,000
Interest Expense 7,000
Total operating expense 255,000
Operating Profit 95,000
Plus: Gain on Sale of Equipment 5,000
Income before tax 100,000
Income Tax Expense 30,000
Net Income $70,000
Additional information:
During the year 2011, Alethea Inc. sold equipment costing $30,000 with $16,000 in
Accumulated Depreciation.
Dividends were declared and paid to common stockholders during the year. No
shares were repurchased during the year.
No new debt was issued during 2011.
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Required:
1. Prepare a Statement of Cash Flows for Alethea Inc. for the year ended December
31, 2011. Show the cash flows from operations using the indirect method. Check
whether the total change in cash can articulate with the beginning and the ending
balances of cash. Show your work for each part if you want partial credit.
Answers with no work (i.e. with only final numbers) will not be given full credit.
Change in A/R=166,000-160,000=6,000
Change in Inventory=214,000-210,000=4,000
Change in A/P=83,000-85,000= (2,000)
Change in Deferred Revenue= 15,000-12,000=3,000
Change in Interest Payable=9,000-8,000=1,000
Alethea Inc.
Statement of Cash flows
December 31, 2011
Cash received from the sale of PPE= BV of PPE sold + gain on sale of PPE
= 30,000-16,000+5,000=19,000
CFFI section:
Cash received from the sale of PPE 19,000
Cash spent to acquire PPE (60,000)
Net CFFI (41,000)
CFFF section:
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On January 1, 2010, AML company issues bonds maturing in 5 years. The par value of
the bonds is $100,000, the coupon rate is 8%, and the compounding period is semi-
annually. The market initially prices these bonds using market interest rate 10%
compounded semi-annually. The market interest rate on June 30, 2010 was 6%. On
Dec.31, 2012, the company had excess cash and purchased back all the bonds. The
market interest rate on Dec. 31, 2012 was 8%.
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At a discount
Issue price=4,000*[1/(1+5%)+1/(1+5%)2+….+1/(1+5%)10]+100,000/(1+5%)10
=4,000*7.7217+100,000*0.6139
=92,277
Cash 92,277
Discount on bonds payable 7,723
Bonds payable 100,000
Increase
7. What is the net book value of bonds payable on Dec 31, 2012?
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= 4,000*3.5460+100,000*0.8227
=96,454
10. Describe the effects of the journal entries in questions 3, 6, and 9 on CFFO, CFFI,
and CFFF. For example, “CFFF decreases by ** amount.”
Question II 18
Question III 31
Question IV 30
TOTAL 100
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Present Value of $1
Period 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%
1 0.9901 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091 0.9009 0.8929 0.8850 0.8772 0.8696 0.8621 0.8547 0.8475 0.8403 0.8333
2 0.9803 0.9612 0.9426 0.9246 0.9070 0.8900 0.8734 0.8573 0.8417 0.8264 0.8116 0.7972 0.7831 0.7695 0.7561 0.7432 0.7305 0.7182 0.7062 0.6944
3 0.9706 0.9423 0.9151 0.8890 0.8638 0.8396 0.8163 0.7938 0.7722 0.7513 0.7312 0.7118 0.6931 0.6750 0.6575 0.6407 0.6244 0.6086 0.5934 0.5787
4 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 0.6587 0.6355 0.6133 0.5921 0.5718 0.5523 0.5337 0.5158 0.4987 0.4823
5 0.9515 0.9057 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 0.6499 0.6209 0.5935 0.5674 0.5428 0.5194 0.4972 0.4761 0.4561 0.4371 0.4190 0.4019
6 0.9420 0.8880 0.8375 0.7903 0.7462 0.7050 0.6663 0.6302 0.5963 0.5645 0.5346 0.5066 0.4803 0.4556 0.4323 0.4104 0.3898 0.3704 0.3521 0.3349
7 0.9327 0.8706 0.8131 0.7599 0.7107 0.6651 0.6227 0.5835 0.5470 0.5132 0.4817 0.4523 0.4251 0.3996 0.3759 0.3538 0.3332 0.3139 0.2959 0.2791
8 0.9235 0.8535 0.7894 0.7307 0.6768 0.6274 0.5820 0.5403 0.5019 0.4665 0.4339 0.4039 0.3762 0.3506 0.3269 0.3050 0.2848 0.2660 0.2487 0.2326
9 0.9143 0.8368 0.7664 0.7026 0.6446 0.5919 0.5439 0.5002 0.4604 0.4241 0.3909 0.3606 0.3329 0.3075 0.2843 0.2630 0.2434 0.2255 0.2090 0.1938
10 0.9053 0.8203 0.7441 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 0.3855 0.3522 0.3220 0.2946 0.2697 0.2472 0.2267 0.2080 0.1911 0.1756 0.1615
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