Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 14: Q28E (page 781)

Preparing the statement of cash flows—direct method The income statement and additional data of Value Corporation follow:

  1. Collections from customers are \(13,000 more than sales.
  2. Dividend revenue, interest expense, and income tax expense equal their cash amounts.
  3. Payments to suppliers are the sum of cost of goods sold plus advertising expense.
  4. Payments to employees are \)3,000 more than salaries expense.
  5. Cash payment for the acquisition of plant assets is \(102,000.
  6. Cash receipts from sale of land total \)29,000.
  7. Cash receipts from issuance of common stock total \(38,000.
  8. Payment of long-term notes payable is \)10,000.
  9. Payment of dividends is \(9,000.
  10. Cash balance at June 30, 2017, was \)21,000; at June 30, 2018, it was $43,000.
    Prepare Value Corporation’s statement of cash flows for the year ended June 30, 2018. Use the direct method.

Short Answer

Expert verified

Net cash provided by operating activities is $76,000.

Step by step solution

01

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

Cash flows from operating activities

Receipts:

Collection from customers

$246,000

Collection of dividend revenue

$7,000

Payments:

To suppliers

($116,000)

To employees

($51,000)

For income tax

($7,500)

For Interest

($2,500)

Net cash provided by operating activities

$76,000

02

Statement of cash flows- direct method


Value Corporation.

Statement of cash flows

Year ended 31st December, 2018

Cash flows from operating activities

$76,000

Cash flows from investing activities

Cash purchase of plant

($102,000)

Cash receipts from sale of land

$29,000

Net cash used for investing activities

($73,000)

Cash flows from financing activities

Cash receipts from issuance of common stock

$38,000

Cash payment of note payable

($10,000)

Cash payment of dividend

($9,000)

Net cash provided by financing activities

$19,000

Net Increase/(Decrease) in cash

$22,000

Cash balance, December 31, 2017

$21,000

Cash balance, December 31, 2018

$43,000

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Question: Computing cash flows from investing and financing activities Use the data in Short Exercise S14-5 to complete this exercise. Prepare Winding Road Cellular’s statement of cash flows using the indirect method for the year ended April 30, 2018. Assume beginning and ending Cash are \(48,000 and \)52,200, respectively.

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 was $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?

The comparative balance sheet of Jackson Educational Supply at December 31, 2018, reported the following:


20182017
Current

Assets:
Cash\( 87,700
\) 23,500
Accounts Receivable15,30022,000
Merchandise Inventory
62,600
60,400
Current

Liabilities:
Accounts Payable
28,100
26,100
Accrued Liabilities
10,600
11,300

Jackson’s transactions during 2018 included the following:

Payment of cash dividends \( 16,200

Depreciation expense \) 16,700

Purchase of equipment with cash 54,700

Purchase of building with cash 98,000

Issuance of long-term notes payable to borrow cash 48,000

Net income 57,600

Issuance of common stock for cash 105,000

Requirements

  1. Prepare the statement of cash flows of Jackson Educational Supply for the year ended December 31, 2018. Use the indirect method to report cash flows from operating activities.
  2. Evaluate Jackson’s cash flows for the year. Mention all three categories of cash flows, and give the reason for your evaluation.
  3. If Jackson plans similar activity for 2019, what is its expected free cash flow?

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

2018 2017 Current Assets: Cash \( 105,100 \) 18,000 Accounts Receivable 64,400 68,900 Merchandise Inventory 86,000 82,000 Current Liabilities: Accounts Payable 58,000 56,100 Income Tax Payable 14,700 16,900

Transaction Data for 2018:

Issuance of common stock for cash \( 37,000

Payment of notes payable \) 47,100

Depreciation expense 24,000

Payment of cash dividends 53,000

Purchase of equipment with cash 69,000

Issuance of notes payable to borrow cash 68,000

Acquisition of land by issuing long-term notes payable 123,000

Gain on sale of building 4,500

Book value of building sold 61,000

Net income 66,000

Prepare Benson’s statement of cash flows using the indirect method. Include an accompanying schedule of non-cash investing and financing activities

Preparing the statement of cash flows—indirect method, evaluating cash flows, and measuring free cash flows

The comparative balance sheet of Robeson Educational Supply at December 31, 2018, reported the following:

2018 2017 Current Assets: Cash \( 83,900 \) 20,500 Accounts Receivable 14,500 21,800 Merchandise Inventory 61,800 60,400 Current Liabilities: Accounts Payable 29,600 28,100 Accrued Liabilities 10,500 11,900 Robeson’s transactions during 2018 included the following:

Payment of cash dividends \( 21,200

Depreciation expense \) 17,400

Purchase of equipment with cash 54,400

Purchase of building with cash 103,000

Issuance of long-term notes payable to borrow cash 44,000

Net income 63,600

Issuance of common stock for cash 111,000

Requirements

1. Prepare the statement of cash flows of Robeson Educational Supply for the year ended December 31, 2018. Use the indirect method to report cash flows from operating activities.

2. Evaluate Robeson’s cash flows for the year. Mention all three categories of cash flows, and give the reason for your evaluation.

3. If Robeson plans similar activity for 2018, what is its expected free cash flow?
See all solutions

Recommended explanations on Business Studies Textbooks

Business Case Studies

Read Explanation

Influences On Business

Read Explanation

Corporate Finance

Read Explanation

Managerial Economics

Read Explanation

Human Resources

Read Explanation

Nature of Business

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free