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Chapter 14: Q13SE (page 773)

Preparing the direct method statement of cash flows Use the data in Short Exercise S14A-12 and your results. Prepare the business’s complete statement of cash flows for the year ended June 30, 2018, using the direct method for operating activities.

Short Answer

Expert verified

Net increase in cash is $6,500 and cash balance as on 30 June, 2018 is $47,500.

Step by step solution

01

Step-by-Step SolutionStep 1: Cash flow from operating activities

Cash flows from operating activities

Receipts:

Collection from customers

$188,000

Payments:

To suppliers

($115,000)

To employees

($66,000)

Net cash provided by operating activities

$7,000

02

Statement of cash flows- direct method


Amy’s Learning Centre

Statement of cash flows

Year ended 30 June, 2018

Cash flows from operating activities

$7,000

Cash flows from investing activities

Cash purchase of equipment

($39,000)

Cash receipt from sale of land

$58,000

Net cash used for investing activities

$19,000

Cash flows from financing activities

Cash payment of dividends

($7,500)

Cash payment of notes payable

($34,000)

Cash receipt from issuance of stock

$22,000

Net cash provided by financing activities

($19,500)

Net Increase/(Decrease) in cash

$6,500

Cash balance, 30 June, 2017

$41,000

Cash balance, 30 June, 2018

$47,500

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Most popular questions from this chapter

The 2018 comparative balance sheet and income statement of Appleton Group, Inc. follow. Appleton disposed of a plant asset at book value during 2018

Prepare the spreadsheet for the 2018 statement of cash flows. Format cash flows from operating activities by the indirect method. A plant asset was disposed of for \(0. The cost and accumulated depreciation of the disposed asset was \)11,600. There were no sales of land, no retirement of common stock, and no treasury stock transactions. Assume plant asset and land acquisitions were for cash.

Question: How does the direct method differ from the indirect method when preparing the operating activities section of the statement of cash flows?

Question: If a company experienced a loss on disposal of long-term assets, how would this be reported in the operating activities section of the statement of cash flows when using the indirect method? Why?

Preparing the statement of cash flows—indirect method

Accountants for Morganson, Inc. have assembled the following data for the year ended December 31, 2018:

2018 2017 Current Assets: Cash \( 99,400 \) 25,000 Accounts Receivable 64,100 69,700 Merchandise Inventory 83,000 75,000 Current Liabilities: Accounts Payable 57,600 55,200 Income Tax Payable 14,800 16,800

Transaction Data for 2018:

Issuance of common stock for cash \( 38,000

Payment of notes payable \) 46,100

Depreciation expense 24,000

Payment of cash dividends 50,000

Purchase of equipment with cash 74,000

Issuance of notes payable to borrow cash 62,000

Acquisition of land by issuing long-term notes payable 119,000

Gain on sale of building 4,500 Book value of building sold 54,000

Net income 68,500

Prepare Morganton'sstatement of cash flows using the indirect method. Include an accompanying schedule of non-cash investing and financing activities.

Using a spreadsheet to complete the statement of cash flows— indirect method

Companies can use a spreadsheet to complete the statement of cash flows. Each item that follows is recorded in the transaction analysis columns of the spreadsheet.

  1. Net income
  2. Increases in current assets (other than Cash)
  3. Decreases in current liabilities
  4. Cash payment for acquisition of plant assets
  5. Cash receipt from issuance of common stock
  6. Depreciation expense

Identify each as being recorded by a Debit or Credit in the statement of cash flows section of the spreadsheet
See all solutions

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