Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 5: Q14BE. (page 239)

Martinez Corporation engaged in the following cash transactions during 2017.

Sale of land and building $191,000

Purchase of treasury stock 40,000

Purchase of land 37,000

Payment of cash dividend 95,000

Purchase of equipment 53,000

Issuance of common stock 147,000

Retirement of bonds 100,000

Compute the net cash provided (used) by investing activities.

Short Answer

Expert verified

The cash flow from investing activities is equal to $101,000.

Step by step solution

01

Definition of Investing activities

The cash flow statement reports all those activities as investing activities that include cash disbursement for purchase of a capital asset and cash receipt for sale of a capital asset.

02

Cash from investing activities

Particular

Amount $

Sale of land and building

$191,000

Purchase of land

(37,000)

Purchase of equipment

(53,000)

Cash from investing activities

$101,000

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

The net income for the year for Genesis, Inc. is \(750,000, but the statement of cash flows reports that the net cash provided by operating activities is \)640,000. What might account for the difference?

E5-10 (L02,3) (Current Liabilities) Norma Smith is the controller of Baylor Corporation and is responsible for the preparation of the year-end financial statements. The following transactions occurred during the year.

(a) On December 20, 2017, a former employee filed a legal action against Baylor for \(100,000 for wrongful dismissal. Management believes the action to be frivolous and without merit. The likelihood of payment to the employee is remote.

(b) Bonuses to key employees based on net income for 2017 are estimated to be \)150,000.

(c) On December 1, 2017, the company borrowed \(600,000 at 8% per year. Interest is paid quarterly.

(d) Accounts receivable at December 31, 2017, is \)10,000,000. An aging analysis indicates that Baylor’s expense provision for doubtful accounts is estimated to be 3% of the receivables balance.

(e) On December 15, 2017, the company declared a \(2.00 per share dividend on the 40,000 shares of common stock outstanding, to be paid on January 5, 2018.

(f) During the year, customer advances of \)160,000 were received; $50,000 of this amount was earned by December 31, 2017.

Instructions For each item above, indicate the dollar amount to be reported as a current liability. If a liability is not reported, explain why.

Case 4: Amazon.com The incredible growth of Amazon.com has put fear into the hearts of traditional retailers. Amazon’s stock price has soared to amazing levels. However, it is often pointed out in the financial press that it took the company several years to report its first profit. The following financial information is taken from a recent annual report.

(\( in millions)

Current year

Prior year

Current assets

\)31,327

$24,625

Total assets

54,505

40,159

Current liabilities

28,089

22,980

Total liabilities

43,764

30,413

Cash provided by operations

6,842

5,475

Capital expenditures

4,893

3,444

Dividend paid

0

0

Net income (loss)

(241)

274

Sales

88,988

74,452

Instructions

(a) Calculate free cash flow for Amazon for the current and prior years, and discuss its ability to finance expansion from internally generated cash. Thus far Amazon has avoided purchasing large warehouses. Instead, it has used those of others. It is possible, however, that in order to increase customer satisfaction, the company may have to build its own warehouses. If this happens, how might your impression of its ability to finance expansion change?

(b) Discuss any potential implications of the change in Amazon’s cash provided by operations from the prior year to the current year.

E5-6 (L02,3) (Corrections of a Balance Sheet) The bookkeeper for Geronimo Company has prepared the following balance sheet as of July 31, 2017.

GERONIMO COMPANY

Balance Sheet

As of July 31, 2017

Cash

\(69,000

Notes and accounts payable

\)44,000

Account receivable (net)

40,500

Long-term liabilities

75,000

Inventory

60,000

Stockholder’s equity

155,500

Equipment (net)

84,000

Patents

21,000

\(274,500

\)274,500

The following additional information is provided.

1. Cash includes \(1,200 in a petty cash fund and \)15,000 in a bond sinking fund.

2. The net accounts receivable balance is comprised of the following two items: (a) accounts receivable \(44,000 and (b) allowance for doubtful accounts \)3,500.

3. Inventory costing \(5,300 was shipped out on consignment on July 31, 2017. The ending inventory balance does not include the consigned goods. Receivables in the amount of \)5,300 were recognized on these consigned goods.

4. Equipment had a cost of \(112,000 and an accumulated depreciation balance of \)28,000.

5. Income taxes payable of $6,000 were accrued on July 31. Geronimo Company, however, had set up a cash fund to meet this obligation. This cash fund was not included in the cash balance but was offset against the income taxes payable amount.

Instructions

Prepare a corrected classified balance sheet as of July 31, 2017, from the available information, adjusting the account balances using the additional information.

Grant Wood Corporation’s balance sheet at the end of 2016 included the following items.

Current assets (\(Cash 82,000)

\)235,000

Current liabilities

\(150,000

Land

30,000

Bond payable

100,000

Building

120,000

Common stock

180,000

Equipment

90,000

Retained earnings

44,000

Accumulated depreciation – Building

(30,000)

Accumulated depreciation – Equipment

(11,000)

Patents

40,000

Total

\)474,000

Total

\(474,000

The following information is available for 2017.

1. Net income was \)55,000.

2. Equipment (cost \(20,000 and accumulated depreciation \)8,000) was sold for \(10,000.

3. Depreciation expense was \)4,000 on the building and \(9,000 on equipment.

4. Patent amortization was \)2,500.

5. Current assets other than cash increased by \(29,000. Current liabilities increased by \)13,000.

6. An addition to the building was completed at a cost of \(27,000.

7. A long-term investment in stock was purchased for \)16,000.

8. Bonds payable of \(50,000 were issued.

9. Cash dividends of \)30,000 were declared and paid.

10. Treasury stock was purchased at a cost of $11,000.

Instructions

(Show only totals for current assets and current liabilities.)

(a) Prepare a statement of cash flows for 2017.

(b) Prepare a balance sheet at December 31, 2017.
See all solutions

Recommended explanations on Business Studies Textbooks

Corporate Finance

Read Explanation

Change Management

Read Explanation

Human Resources

Read Explanation

Business Case Studies

Read Explanation

Managers

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