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Chapter 14: Q14-11RQ (page 769)
Question: What accounts on the balance sheet must be evaluated when completing the investing activities section of the statement of cash flows?
Answer
Investing activity records transactions related to long-term assets and long-term note receivables.
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A-One Mobile Homes reported the following in its financial statements for the year Ended December 31, 2018:
2018 2017
Income Statement
Net Sales Revenue \( 25,118 \) 21,893
Cost of Goods Sold 18,074 15,501
Depreciation Expense 271 234
Other Operating Expenses 4,632 4,277
Income Tax Expense 530 482
Net Income \( 1,611 \) 1,399
Balance Sheet
Cash \( 21 \) 19
Accounts Receivable 798 615
Merchandise Inventory 3,483 2,832
Property, Plant, and Equipment, net 4,351 3,437
Accounts Payable 1,547 1,364
Accrued Liabilities 938 851
Long-term Liabilities 477 461
Common Stock, no par 670 443
Retained Earnings 5,021 3,784
Requirements
1. Compute the collections from customers.
2. Compute payments for merchandise inventory.
3. Compute payments of other operating expenses.
4. Compute the acquisitions of property, plant, and equipment (no sales of property during 2018).
5. Compute the amount of borrowing, with A-One paying no long-term liabilities.
6. Compute the cash receipt from issuance of common stock.
7. Compute the payment of cash dividends.
Preparing the statement of cash flows—direct method The income statement and additional data of Value Corporation follow:
Preparing the statement of cash flows—indirect method with non-cash transactions the 2018 income statement and comparative balance sheet of Sweet Valley, Inc. follow:
Additionally, Sweet Valley purchased land of \(20,900 by financing it 100% with long-term notes payable during 2018. During the year, there were no sales of land, no retirements of stock, and no treasury stock transactions. A plant asset was disposed of for \)0. The cost and the accumulated depreciation of the disposed asset were $13,240. Plant asset was acquired for cash.
Requirements
1. Prepare the 2018 statement of cash flows, formatting operating activities by the indirect method.
2. How will what you learned in this problem help you evaluate an investment?
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.
Preparing the direct method statement of cash flows Red Toy Company reported the following comparative balance sheet:
Requirements
1. Compute the collections from customers during 2018 for Red Toy Company. Sales Revenue totaled \(134,000.
2. Compute the payments for inventory during 2018. Cost of Goods Sold was \)79,000.
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