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Questions
1
Quick
Studies*
16-1, 16-2,
16-18
16-17
Exercises*
Problems*
16-1
Beyond the
Numbers
16-3, 16-4,
16-6, 16-7,
16-8, 16-9,
16-10
16-2
16-17
16-1
16-1, 16-2,
16-3, 16-4,
16-5, 16-6
16-1, 16-2,
16-4, 16-5,
16-7
16-1, 16-2,
16-3, 16-4,
16-5, 16-6
16-2, 16-5
16-3, 16-6,
16-8
16-1, 16-2,
16-3, 16-5,
16-6, 16-7,
16-8
16-6
16-6
2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
16-1
2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
16-2
Chapter Outline
I.
Notes
2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
16-3
Chapter Outline
Notes
2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
16-4
Chapter Outline
II.
Notes
2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
16-5
Chapter Outline
III.
IV.
Notes
2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
16-6
Chapter Outline
V.
VI.
Notes
2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
16-7
Chapter Outline
VII.
Notes
2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
16-8
Chapter Outline
VIII.
Notes
2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
16-9
VISUAL #16-1
OPERATING ACTIVITIES
Cash inflows from
Cash outflows to
Customers for cash sales
Salaries and wages
Collections on credit sales
Lenders for interest
Borrowers for interest
Charities
Dividends received
Suppliers of goods and services
Lawsuit settlements
Government for taxes and fines
INVESTING ACTIVITIES
Cash inflows from
Cash outflows to
Selling investments in securities
Make loans to others
Selling (discounting) notes
Purchase long-term productive assets
Collecting principal on notes
Purchase investments in securities
Selling long-term productive assets
FINANCING ACTIVITIES
Cash inflows from
Cash outflows to
Contributions by owners
Repay cash loans
Issuing notes and bonds
Pay withdrawals by owners
Issuing its own equity stock
Pay dividends to shareholders
Issuing short-term and long-term
Purchase treasury stock
debt
NONCASH INVESTING AND FINANCING ACTIVITIES
Retirement of debt by issuing equity stock
Conversion of preferred stock to common stock
Leasing of assets in a capital lease transaction
Purchase of a long-term asset by issuing a note or a bond
Exchange of noncash assets for other noncash assets
Purchase of noncash assets by issuing equity or debt
2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
16-10
VISUAL #16-2
A. Financing and
B. Investing
Procedure:
In real life: Using data from comparative balance sheets, trace
changes through ledgers and journals probably using a worksheet
to organize, analyze, and prove data disclosed.
In the classroom: Determine the changes in noncurrent accounts
and notes from comparative balance sheets. Use the relevant data
the text provides that comes from the ledgers and the journals to
systematically analyze the data using chart and/or reconstructing
journal entries.
4. Combine cash flows from all three activities (from 2 and 3) to find
net cash flow and prove change in cash. (Target number
determined in Step 1).
Note: Once the above information has been gathered, the statement
can be prepared following the required format. If the direct method
was used, GAAP requires a reconciliation of net income to cash
provided from operations.
2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
16-11
VISUAL #16-3
+ Decrease in
Accounts
Receivable
or
- Increase in
Accounts
Receivable
2. Cash
=
Payments
to Suppliers
Cost of
Goods Sold
+ Increase in
Inventory
or
- Decrease in
Inventory
+ Decrease in
Accounts
Payable
- Increase in
Accounts
Payable
3. Cash
=
Payments
for
Operating**
Expenses
Operating
Expenses
+ Increase in
Prepaid
Expenses
or
- Decrease in
Prepaid
Expenses
+ Decrease in
Accrued
Liabilities
or
- Increase in
Accrued
Liabilities
4. Cash
=
Payments
for
Income
Taxes
Income
Taxes
Expense
+ Decrease in
Income
Taxes
Payable
or
-Increase in
Income
Taxes
Payable
5. Cash
=
Payments
for
Interest
Interest
Expense
+ Decreases in
Interest Payable
- Increase in
Interest Payable
- Depreciation
and Other
Noncash
Expenses
2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
16-12
VISUAL #16-4
START WITH
NET INCOME OR (NET LOSS)
Add
Subtract
1. Write-offs or noncash
expenses
2. Losses
3. Decreases in current assets
4. Increases in current
liabilities.
1. Gains
2. Increases in current assets
3. Decreases in current
liabilities
RESULT
CASH FLOWS FROM
OPERATING ACTIVITIES
2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
16-13
$10,500
8,000
21,000
18,000
$57,500
$ 4,000
9,000
18,000
15,000
$46,000
Credits
Accumulated depreciation, equipment......................
Accounts payable.........................................................
Taxes payable...............................................................
Dividends payable........................................................
Common stock, $10 par value.....................................
Contributed capital in excess of par, common stock
Retained earnings........................................................
Totals...................................................................
$ 4,000
7,000
1,000
1,500
27,000
6,000
11,000
$57,500
$ 3,000
5,000
2,000
0
25,000
5,000
6,000
$46,000
Sales ..............................................................................
Cost of goods sold.......................................................
Wages and other operating expenses........................
Income taxes expense.................................................
Depreciation expense..................................................
Net income....................................................................
$61,000
$40,000
6,300
4,200
1,500
52,000
$ 9,000
2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
16-14
Required:
Prepare the statement of cash flows under both the direct method and the
indirect method for the year ended December 31, 2014. Additional
information includes the following:
a. Equipment costing $3,500 was purchased during the year.
b. Fully depreciated equipment that cost $500 was discarded and its
cost and accumulated depreciation were removed from the
accounts.
c. Two hundred shares of stock were sold and issued at $15 per share.
d. The company declared $4,000 of cash dividends and paid $2,500.
2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
16-15