Classification of Cash Flows
Indicate whether each of the following items would be classified as (1) an operating activity, an investing activity,
or a financing activity or (2) as a noncash transaction or noncash item.
(a) Cash collected from customers.
(b) Cash paid to suppliers for inventory.
(c) Cash received for interest on a nontrade note receivable.
(d) Cash received from issuance of stock.
(e) Cash paid for dividends.
(f) Cash received from bank on a loan.
(g) Cash paid for interest on a loan.
(h) Cash paid to retire bonds.
(i) Cash paid to purchase stock of another company as a long-term investment.
(j) Cash received from the sale of a business segment.
(k) Cash paid for property taxes.
(l) Cash received for dividend revenue.
(m) Cash paid for wages.
(n) Cash paid for insurance.
(o) Preferred stock retired by issuing common stock.
(p) Depreciation expense for the year.
(q) Cash paid to purchase machinery.
(r) Cash received from the sale of land.
5-28
Preparing the Operating Activities Section of a Statement of Cash Flows
Norrington Trading Co. provides the following income statement for 2015:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $675,400
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243,500
Gross margin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $431,900
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,000
Salaries expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,600
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,300
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,700
Income taxes expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $102,300
In addition, the following balance sheet information is available:
Dec. 31, 2015 Dec. 31, 2014
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $52,000 $47,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,100 72,300
Prepaid other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,600 6,700
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,600 52,300
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800 1,200
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,200 3,400
Using the format presented in the chapter, prepare the Operating Activities section of the statement
of cash flows and present that information using (a) the direct method and (b) the indirect method.
5-34
Cash Computations
A comparative balance sheet, income statement, and additional information for Shillig Doors Inc. follow.
Shillig Doors Inc.
Condensed Comparative Income Statement
For the Years Ended December 31, 2015 and 2014
2015 2014
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,946,000 $3,112,000
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,385,000 2,364,000
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,561,000 $ 748,000
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 792,000 506,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 769,000 $ 242,000
Shillig Doors Inc.
Comparative Balance Sheet
December 31, 2015 and 2014
2015 2014
Assets
Current assets:
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 131,000 $ 102,000
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000 —
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409,000 372,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289,000 304,000
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000 24,000
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,265,000 $ 802,000
Property, plant, and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 656,000 $ 541,000
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (81,000) (42,000)
$ 575,000 $ 499,000
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,840,000 $1,301,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 191,000 $ 174,000
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,000 110,000
Dividends payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,000 100,000
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 480,000 $ 384,000
Notes payable—due 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,000 106,000
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 690,000 $ 490,000
Stockholders’ equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 625,000 $ 600,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525,000 211,000
Total stockholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,150,000 $ 811,000
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,840,000 $ 1,301,000
Exercise 5-33
3
Exercise 5-34
3 4
5 - 46 E O C P1 | Foundations of Financial Accounting
Additional information for Shillig:
(a) All accounts receivable and accounts payable relate to trade merchandise.
(b) The proceeds from the notes payable were used to finance plant expansion.
(c) Capital stock was sold to provide additional working capital.
Compute the following for 2015:
Cash collected from accounts receivable, assuming all sales are on account.
Cash payments made on accounts payable to suppliers, assuming that all purchases of inventory are
on account.
Cash payments for dividends.
Cash receipts that were not provided by operations.
Cash payments for assets that were not reflected in operations.
gymjunky
chp_5_excel.docx
0
