1.
Income Statement Data Selected Year-End Balance Sheet Data
Sales $72,000 Accounts receivable increase $8,000
Expenses Inventory decrease 3,000
Cost of goods sold 39,000 Salaries payable increase 600
Salaries expense 9,000
Depreciation expense 6,000
Net income $ 18,000
Prepare the operating activities section of the statement of cash flows for Hampton Company using the indirect method. (Amounts to
be deducted should be indicated with a minus sign.)
Cash flows from operating activities
Net income $18,000
Depreciation expense 6,000
Accounts receivable increase (8,000)
Inventory decrease 3,000
Salaries payable increase 600
Net cash provided by operating activities $19,600
Explanation Make accounts receivable increase a negative
2. Arundel Company disclosed the following information for its recent calendar year.
Income Statement Data Selected Year-End Balance Sheet Data
Revenues $105,000 Accounts receivable decrease $23,000
Expenses Purchased a machine for cash 20,000
Salaries expense 72,000 Salaries payable increase 24,000
Utilities expense 34,000 Other accrued liabilities decrease 15,000
Depreciation expense 31,200
Other expenses 8,600
Net loss $ (40,800)
Explanation Make other accrued liabilities negative
Net loss (40800)
Depreciation expense 31200
Decrease in accounts receivable 23000
Increase in salaries payable 24000
Decrease in other accrued liabilities 15000
Net cash provided by operating activities
3. a. Equipment with a book value of $82,000 and an original cost of $169,000 was sold at a loss of $31,000.
b. Paid $103,000 cash for a new truck.
c. Sold land costing $325,000 for $430,000 cash, yielding a gain of $105,000.
d. Long-term investments in stock were sold for $97,000 cash, yielding a gain of $16,250.
Use the above information to determine this company's cash flows from investing activities. (Amounts to be deducted should be
indicated with a minus sign.)
Cash flows from investing activities
Cash received from the sale of equipment $51,000
Cash paid for new truck (103,000)
Cash received from the sale of land 430,000
Cash received from the sale of long-term investments 97,000
Net cash provided by investing activities $475,000
Explanation: Cash received from sale of equipment = Book value − loss = $82,000 − $31,000 = $51,000
Make 103000 negative
4. a. Net income was $479,000.
b. Issued common stock for $77,000 cash.
c. Paid cash dividend of $14,000.
d. Paid $110,000 cash to settle a note payable at its $110,000 maturity value.
e. Paid $124,000 cash to acquire its treasury stock.
f. Purchased equipment for $92,000 cash.
Use the above information to determine this company's cash flows from financing activities. (Amounts to be deducted should be
indicated with a minus sign.)
Cash flows from financing activities
Cash received from issuance of common stock $77,000
Paid cash dividend (14,000)
Repaid note payable (110,000)
Purchased treasury stock (124,000)
Net cash used in financing activities $(171,000)
Explanation Make 14000 negative Make 110000 negative Make 124000 negative
Assets 2015 2014
Cash 96,600 55,400
Accounts receivable, net 69,100 52,000
Inventory 66,400 96,300
Prepaid expenses 4,700 6,200
Total current assets 236,800 209,900
Equipment 126,800 115,000
Accum. depreciation—Equipment (28,900) (10,900)
Total assets 334,700 314,000
Liabilities and Equity
Accounts payable 26,400 33,000
Wages payable 7,400 16,300
Income taxes payable 2,000 4,200
Total current liabilities 35,800 53,500
Notes payable (long term) 41,000 71,000
Total liabilities 76,800 124,500
Equity
Common stock, $5 par value 233,000 182,000
Retained earnings 24,900 7,500
Total liabilities and equity 334,700 314,000
Sales 676,000
Cost of goods sold 403,000
Gross profit 273,000
Operating expenses
Depreciation expense 58,000
Other expenses 66,300
Total operating expenses 124,300
148,700
Other gains (losses)
Gain on sale of
equipment
2,800
Income before taxes 151,500
Income taxes expense 60,600
Net income 90,900
a. A $30,000 note payable is retired at its $30,000 carrying (book) value in exchange for cash.
b. The only changes affecting retained earnings are net income and cash dividends paid.
c. New equipment is acquired for $60,800 cash.
d. Received cash for the sale of equipment that had cost $49,000, yielding a $2,800 gain.
e. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.
f. All purchases and sales of inventory are on credit.
Explanation
Simple math by deduction from 2014 to 2015 except for
Cash paid for dividends Net income 90900
Retained earnings (2014) + 7500
Total 98400
Retained earnings (2015) -
24900
Total 73500
Cash flow on total assets ratio
Explanation * total liabilities and equity from both years added together then divided by 2
2015 334700
2014 + 314000
648700
648700 / 2 = 324350
Numerator
Operating cash
/
flow
Denominator
Average total assets
Cash flow on total assets ratio
142700 / 324350* 44.0%
