Professional Documents
Culture Documents
12-1
12-2
Cash receipts
Cash payments
LO 1
12-3
Evaluates
management
decisions
Determines ability to
pay dividends and
interest
Shows relationship
of net income to
cash flows
LO 1
12-4
Exhibit 12-1
LO 1
Learning Objective
2. Distinguish among operating, investing, and
financing activities
12-5
12-6
Operating
Investing
Financing
LO 2
12-7
LO 2
12-8
LO 2
Learning Objective
3. Prepare a statement of cash flows by the indirect
method
12-9
PREPARE A
STATEMENT OF
CASH FLOWS
BY THE INDIRECT
METHOD
LO 3
12-10
Copyright 2015 Pearson Education Inc. All rights reserved.
INDIRECT METHOD
Operating Activities
Positive Items
12-11
Negative Items
Net income
Net loss
Depreciation and
amortization
Decrease in current
liabilities
LO 3
INDIRECT METHOD
Investing Activities
Positive Items
12-12
Negative Items
Collections of loans
receivable
Purchase of investments
that are not cash
equivalents
LO 3
INDIRECT METHOD
Financing Activities
Positive Items
12-13
Negative Items
Issuing stock
Payment of dividends
Borrowing money
Payment of principal
amounts of debts
LO 3
12-14
LO 3
Exhibit 12-4
12-15
LO 3
Exhibit 12-5
12-16
LO 3
12-17
Net income
LO 3
12-18
Depreciation/depletion/amortization expense
LO 3
$50,000
12-19
LO 3
12-20
LO 3
$50,000
18,000
12-21
LO 3
12-22
LO 3
$50,000
18,000
(8,000)
12-23
LO 3
12-24
LO 3
$50,000
18,000
(8,000)
12-25
(15,000)
(1,000)
LO 3
12-26
LO 3
$50,000
18,000
(8,000)
(15,000)
(1,000)
Decrease in inventory
3,000
LO 3
12-28
LO 3
$50,000
18,000
(8,000)
(15,000)
(1,000)
Decrease in inventory
3,000
34,000
LO 3
12-30
LO 3
$50,000
18,000
(8,000)
(1,000)
Decrease in inventory
3,000
34,000
(2,000)
(2,000)
(15,000)
$77,000
LO 3
Decreases to cash
12-32
Increases to cash
LO 3
12-33
Loans to others
LO 3
219,000
18,000
Depreciation expense
Acquisitions
196,000
54,000
Ending balance
343,000
Gain
+ $8,000
loss
Proceeds
$0
$62,000
LO 3
100,000
Purchases
50,000
Ending balance
10,000
140,000
Notes Receivable
Beginning
21,000
Ending balance
21,000
12-35
Collections
LO 3
12-36
LO 3
12-37
Issuance of stock
Borrowing
Payment of dividends
LO 3
11,000
77,000
Beginning balance
94,000
160,000
Ending balance
12-38
LO 3
Beginning balance
4,000
162,000
Ending balance
Treasury Stock
Beginning balance
16,000
3,000
19,000
LO 3
12-40
86,000
Beginning balance
50,000
Net income
119,000
Ending balance
LO 3
Issuance of stock
Borrowing long-term
Sales revenue
Payment of dividends
Purchase of land with cash
Purchase of treasury stock
g.
h.
i.
j.
k.
l.
g.
h.
i.
j.
k.
l.
Financing
Operating
Investing
Operating
Investing
Investing
Answers
a.
b.
c.
d.
e.
f.
12-42
Financing
Financing
Operating
Financing
Investing
Financing
LO 3
12-42
$ 300
70
100
$ 470
LO 3
Illustration
Revenues:
Service revenue
$237,000
Dividend income
8,700
$245,700
Expenses:
Cost of goods sold
Salary expense
59,000
Depreciation expense
28,000
Advertising expense
2,900
Interest expense
2,100
100,000
14,000
206,000
$39,700
LO 3
Illustration
Additional data:
a. Acquisition of plant assets was $130,000. Of this amount,
$75,000 was paid in cash and $55,000 by signing a note
payable.
b. Proceeds from sale of land totaled $25,000.
c. Proceeds from issuance of common stock totaled $50,000.
d. Payment of long-term note payable was $16,000.
e. Payment of dividends was $11,000.
12-44
LO 3
Illustration
Balance sheet data of Mueller Travel Products, Inc., follow:
December 31,
2014
2013
Change
$125,000
$50,800
$74,200
Accounts receivable
41,000
57,000
(16,000)
Inventory
94,000
73,000
21,000
9,200
8,700
500
Accounts payable
32,000
18,000
14,000
Accrued liabilities
82,000
57,000
25,000
Current assets:
Cash
Prepaid expenses
Current liabilities:
12-45
LO 3
$ 39,700
28,000
16,000
Increase in inventory
(21,000)
14,000
25,000
12-46
(500)
$101,200
LO 3
$ 39,700
28,000
16,000
Increase in inventory
(21,000)
14,000
25,000
12-47
(500)
$101,200
LO 3
$ 39,700
28,000
16,000
Increase in inventory
(21,000)
14,000
25,000
12-48
(500)
$101,200
LO 3
$ 25,000
(75,000)
($50,000)
50,000
(16,000)
Payment of dividends
(11,000)
12-49
$23,000
LO 3
$ 25,000
(75,000)
($50,000)
50,000
(16,000)
Payment of dividends
(11,000)
12-50
$23,000
LO 3
$ 25,000
(75,000)
($50,000)
50,000
(16,000)
Payment of dividends
(11,000)
12-51
$23,000
LO 3
$ 25,000
(75,000)
($50,000)
50,000
(16,000)
Payment of dividends
(11,000)
12-52
$23,000
LO 3
$ 25,000
(75,000)
($50,000)
50,000
(16,000)
Payment of dividends
(11,000)
12-53
$23,000
LO 3
12-54
$101,200
(50,000)
23,000
74,200
50,800
$125,000
LO 3
Learning Objective
4. Prepare a statement of cash flows by the direct
method
12-55
12-56
LO 4
DIRECT METHOD
Operating Activities
Positive Items
Negative Items
Payments to suppliers
Payments to employees
Other operating
payments
LO 4
Exhibit 12-15 | Direct Method of Computing Cash Flows from Operating Activities
12-58
LO 4
12-59
Interest received
Payments to suppliers
Payments to employees
LO 4
a. Not reported
b. Payment of dividends
b. Financing
c.
c.
Borrowing long-term
Financing
d. Operating
e. Making a loan
e. Investing
f.
f.
Financing
g. Depreciation expense
g. Not reported
h. Investing
12-60
LO 4
Issuance of stock
i.
Financing
j.
j.
Investing
k.
k.
Financing
l.
l.
Operating
m. Operating
n. Not reported
o. Not reported
p. Operating
12-61
LO 4
81,000
303,000
Ending balance
288,000
Collections
96,000
12-62
LO 4
Inventory
Beginning balance
Purchases
Ending balance
38,000
147,000
150,000
35,000
Accounts Payable
57,000
Payments
113,000
147,000
91,000
12-63
Beginning balance
Purchases
Ending balance
LO 4
Accrual
7,000 Expired costs
End.
8,000balance
8,000
Accrued Liabilities
3,000
Payments
1,000
Beg. balanceAccrual
3,000
1,000
12-64
End. balance
Expired costs
1,000
Payments
7,000
9,000balance
End.
17,000
LO 4
Payments to Employees
Salary and Wages Payable
Payments
58,000
6,000
Beginning balance
56,000
Expense
4,000
Ending balance
12-65
LO 4
Cash payments
earmarked for investment
in plant assets
12-66
LO 4
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