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Chapter 23: Q15Q (page 1372)

Question: The net income for Fallon Company for 2017 was \(320,000. During 2017, depreciation on plant assets was \)124,000, amortization of patent was \(40,000, and the company incurred a loss on sale of plant assets of \)21,000. Compute net cash flow from operating activities.

Short Answer

Expert verified

Answer

The business entity generates$505,000as net cash flow from operation.

Step by step solution

01

Definition of Operating Activities

All the activities that are concerned with daily business operations are known as operating activities. It includes activities such as sales, production, and purchases.

02

Calculation of net cash flow from operating activities

Particular

Amount

Net income

$320,000

Add: Depreciation on plant assets

$124,000

Add: Loss on sale of plant assets

$21,000

Add: Amortization of patent

$40,000

Net cash flow from operating activities

$505,000

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Most popular questions from this chapter

Jobim Inc. had the following condensed balance sheet at the end of operations for 2016.

JOBIM INC.

BALANCE SHEET

DECEMBER 31, 2016

Cash \( 8,500 Current liabilities \) 15,000

Current assets other than cash 29,000 Long-term notes payable 25,500

Equity investments 20,000 Bonds payable 25,000

Plant assets (net) 67,500 Common stock 75,000

Land 40,000 Retained earnings 24,500

\(165,000 \)165,000

During 2017, the following occurred.

1. A tract of land was purchased for \(9,000.

2. Bonds payable in the amount of \)15,000 were redeemed at par.

3. An additional \(10,000 in common stock was issued at par.

4. Dividends totaling \)9,375 were paid to stockholders.

5. Net income was \(35,250 after allowing depreciation of \)13,500.

6. Land was purchased through the issuance of \(22,500 in bonds.

7. Jobim Inc. sold part of its investment portfolio for \)12,875. This transaction resulted in a gain of $2,000 for the company. No unrealized gains or losses were recorded on these investments in 2017.

8. Both current assets (other than cash) and current liabilities remained at the same amount.

Instructions

(a) Prepare a statement of cash flows for 2017 using the indirect method.

(b) Prepare the condensed balance sheet for Jobim Inc. as it would appear at December 31, 2017

For purposes of the statement of cash flows, under IFRS, income taxes paid are treated as:

  1. cash flows from operating activities unless they can be separately identified as part of investing or financing activities.
  2. an operating activity in all cases.
  3. an investing or operating activity, depending on whether a refund is received.
  4. either operating, financing, or investing activity, but treated consistently to other companies in the same industry.

Question: (Worksheet Preparation) Below is the comparative balance sheet for Stevie Wonder Corporation.

Particulars

Dec 31, 2017

Dec 31, 2016

Cash

\(16,500

\)21,000

Short-term investments

25,000

19,000

Accounts receivables

43,000

45,000

Allowance for doubtful accounts

(1,800)

(2,000)

Prepaid expenses

4,200

2,500

Inventory

81,500

65,000

Land

50,000

50,000

Buildings

125,000

73,500

Accumulated depreciation – Buildings

(30,000)

(23,000)

Equipment

53,000

46,000

Accumulated depreciation – equipment

(19,000)

(15,500)

Delivery equipment

39,000

39,000

Accumulated depreciation – delivery equipment

(22,000)

(20,500)

Patents

15,000

0

\(379,400

\)300,000

Accounts payable

\(26,000

\)16,000

Short-term note payable

4,000

6,000

Accrued payable

3,000

4,600

Mortgage payable

73,000

53,400

Bond payable

50,000

62,500

Common stock

140,000

102,000

Paid-in-capital in excess of par

10,000

4,000

Retained earnings

73,400

51,500

\(379,400

\)300,000

Dividends in the amount of $15,000 were declared and paid in 2017.

Instructions

From this information, prepare a worksheet for a statement of cash flows. Make reasonable assumptions as appropriate. The short-term investments are considered available-for-sale and no unrealized gains or losses have occurred on these securities

At January 1, 2017, Eikenberry Inc. had accounts receivable of \(72,000. At December 31, 2017, accounts receivable is \)54,000. Sales revenue for 2017 total $420,000. Compute Eikenberry’s 2017 cash receipts from customers.

Moxley Corporation had January 1 and December 31 balances as follows.

1/1/17 12/31/17

Inventory \(95,000 \)113,000

Accounts payable 61,000 69,000

For 2017, cost of goods sold was $500,000. Compute Moxley’s 2017 cash payments to suppliers.
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