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Use the following information for questions 4 and 5.
Napier Co. provided the following information on selected transactions during 2013:
Purchase of land by issuing bonds $500,000
Proceeds from issuing bonds 1,000,000
Purchases of inventory 1,900,000
Purchases of treasury stock 300,000
Loans made to affiliated corporations 700,000
Dividends paid to preferred stockholders 200,000
Proceeds from issuing preferred stock 800,000
Proceeds from sale of equipment 100,000
BALANCE SHEETS
12/31/13 12/31/12
Cash $306,000 $ 144,000
Accounts receivable 270,000 162,000
Merchandise inventory 288,000 360,000
Property, plant and equipment $456,000 $720,000
Less accumulated depreciation (240,000) 216,000 (228,000) 492,000
$1,080,000 $1,158,000
INCOME STATEMENT
For the Year Ended December 31, 2013
Sales $6,300,000
Cost of sales 5,364,000
Gross profit 936,000
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Selling expenses $450,000
Administrative expenses 144,000 594,000
Income from operations 342,000
Interest expense 54,000
Income before taxes 192,000
Income taxes 72,000
Net income $ 216,000
The following additional data were provided:
1. Dividends for the year 2013 were $144,000.
2. During the year, equipment was sold for $180,000. This equipment cost $264,000
originally and had a book value of $216,000 at the time of sale. The loss on sale was
incorrectly charged to cost of sales.
3. All depreciation expense is in the selling expense category.
Questions 6 through 10 relate to a statement of cash flows (direct method) for the year ended
December 31, 2013, for Harlan Mining Company.
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Use the following information for questions 11 and 12.
Equipment that cost $350,000 and had a book value of $156,000 was sold for $180,000. Data
from the comparative balance sheets are:
12/31/13 12/31/12
Equipment $2,160,000 $1,950,000
Accumulated Depreciation 660,000 570,000
13. Net cash flow from operating activities for 2013 for Spencer Corporation was $450,000.
The following items are reported on the financial statements for 2013:
Cash dividends paid on common stock 20,000
Depreciation and amortization 12,000
Increase in accounts receivables 24,000
Based on the information above, Spencer’s net income for 2013 was
a. $462,000.
b. $446,000.
c. $414,000.
d. $406,000.
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Chapter 23 Statement of Cash Flows-Solutions
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Loans to Affiliates (700,000)
Sale of Equipment 100,000
Net Cash Used in Investing Activities (600,000)
BALANCE SHEETS
12/31/13 12/31/12
Cash $306,000 $ 144,000
Accounts receivable 270,000 162,000
Merchandise inventory 288,000 360,000
Property, plant and equipment $456,000 $720,000
Less accumulated depreciation (240,000) 216,000 (228,000) 492,000
$1,080,000 $1,158,000
INCOME STATEMENT
For the Year Ended December 31, 2013
Sales $6,300,000
Cost of sales 5,364,000
Gross profit 936,000
Selling expenses $450,000
Administrative expenses 144,000 594,000
Income from operations 342,000
Interest expense 54,000
Income before taxes 192,000
Income taxes 72,000
Net income $ 216,000
The following additional data were provided:
1. Dividends for the year 2013 were $144,000.
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2. During the year, equipment was sold for $180,000. This equipment cost $264,000
originally and had a book value of $216,000 at the time of sale. The loss on sale was
incorrectly charged to cost of sales.
3. All depreciation expense is in the selling expense category.
Questions 6 through 10 relate to a statement of cash flows (direct method) for the year ended
December 31, 2013, for Harlan Mining Company.
Direct Method:
Cash received from Customers (See # 8) 6,192,000
Less Cash paid for Merchandise (5,196,000)
Less Cash spent Selling/Admin ( 534,000)
Less Cash paid for Interest ( 54,000)
Less Cash paid for Taxes(See # 9) ( 102,000)
Net Cash Provided by Operating Activities 306,000
Reconciliation/Indirect Method
Net Income 216,000
+Depreciation Expense 60,000
+Loss on Equipment Sale 36,000
Change in AR (108,000)
Change in Inventory 72,000
Change in AP 60,000
Change in Taxes Payable (30,000)
Net Cash Provided by Operating Activities 306,000
Beginning AR 162,000
Sales 6,300,000
Less Ending AR (270,000)
Cash received from customers 6,192,000
X = $284,000
X = $560,000
13. Net cash flow from operating activities for 2013 for Spencer Corporation was $450,000.
The following items are reported on the financial statements for 2013:
Cash dividends paid on common stock 20,000
Depreciation and amortization 12,000
Increase in accounts receivables 24,000
Based on the information above, Spencer’s net income for 2013 was
a. $462,000.
b. $446,000.
c. $414,000.
d. $406,000.
Net Income X
+ Depreciation/Amortization 12,000
-Increase in AR (24,000)
Net Cash Flows from Operating $450,000
X = $462,000
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