FIANACIAL ACCOUNTING
FIANACIAL ACCOUNTING
5th Edition
ISBN: 9781266704444
Author: SPICELAND
Publisher: MCG
Question
Book Icon
Chapter 11, Problem 7PB
To determine

Prepare the cash flow statement of Incorporation V for the year ended December 31, 2021.

Expert Solution & Answer
Check Mark

Explanation of Solution

Statement of cash flows: This statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period. Statement of cash flows includes the changes in cash balance due to operating, investing, and financing activities. Operating activities include cash inflows and outflows from business operations. Investing activities includes cash inflows and cash outflows from purchase and sale of land or equipment, or investments. Financing activities includes cash inflows and outflows from issuance of common stock and debt, payment of debt and dividends.

Direct method: Under direct method, cash receipts from customers (cash inflows) and cash payments to suppliers (cash outflows) are reported under the operating activities.

Prepare the cash flow statement of Incorporation V for the year ended December 31, 2021.

Incorporation V
 Statement of cash flow- Direct method
 For the year ended December 31, 2021
 ParticularsAmount ($)Amount ($)
Cash flows from operating activities:
Cash collection:
Cash collection from customer (2) (A)2,616,000
Cash Payments:
Cash paid to supplier (4)(1,728,000)
Cash paid for income tax (5)(84,000)
Cash paid for interest (6)(32,900)
Operating expenses (3)(612,400)
Total Cash Payments (B)(2,457,300)
Net cash provided by operating activities (AB)158,700
Cash flows from investing activities:
Sale of land62,000
Purchase of Investments(95,000)
Net cash used for investing activities(33,000)
Cash used in financing activities:
Issuance of common stock120,000
Payment of dividends(60,000)
Net cash provided by financing activities (60,000)
Net increase (decrease) in cash         65,700
Beginning Cash balance343,800
Ending Cash balance409,500
Schedule of non-cash transaction:
Purchase of Equipment by issuing notes payable$30,000

Table (1)

Working note:

1. Calculate the increase or decreases of current assets and current liabilities:

Schedule in the changes of assets and liabilities
DetailsAmount
20212020Increase/
(decrease)
 Accounts receivable64,00080,000(16,000)
 Inventory160,000145,00015,000
 Prepaid rent4,6007,200(2,600)
 Accounts payable35,00098,000(63,000)
 Interest payable5,1004,0001,100
 Income tax payable25,00029,000(4,000)

Table (2)

(1)

2. Calculate the amount of cash receipt from customer:

Cashreceiptsfromcustomers}=(Salesrevenue+Decrease in accounts receivable (1))=$2,600,000+$16,000=$2,616,000 (2)

3. Calculate the amount of cash paid for operating expense:

Cash payments for operating expesnes}=Operating expenseDecrease in prepaid expenses (1)=$615,000$2,600=$612,400 (3)

4. Calculate the amount of cash paid to the suppliers:

Cash payments to suppliers}=(Cost of goods sold +Decrease in accounts payable + Increase in inventory)=$1,650,000+$63,000+$15,000=$1,728,000 (4)

5. Calculate the amount income tax expense:

Cash payments for income tax}=Income tax expense + Decrease in income tax payable=$80,000+$4,000 =$84,000 (5)

6. Calculate the amount cash payment for interest expense:

Cash payments for interest}=Interest expenseIncrease in interest payable=$34,000$1,100 =$32,900 (6)

Conclusion

Therefore, the net increases in cash of Incorporation V for the year ended December 31, 2021 is $65,700.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 11 Solutions

FIANACIAL ACCOUNTING

Ch. 11 - Prob. 11SSQCh. 11 - Prob. 12SSQCh. 11 - Prob. 13SSQCh. 11 - Prob. 14SSQCh. 11 - Prob. 15SSQCh. 11 - Applying Excel #11-1 A company reports net income...Ch. 11 - Prob. 2AECh. 11 - Prob. 1RQCh. 11 - Prob. 2RQCh. 11 - Prob. 3RQCh. 11 - 4. Why is it necessary to use an income statement,...Ch. 11 - Prob. 5RQCh. 11 - Prob. 6RQCh. 11 - Prob. 7RQCh. 11 - Prob. 8RQCh. 11 - Prob. 9RQCh. 11 - Prob. 10RQCh. 11 - Prob. 11RQCh. 11 - Prob. 12RQCh. 11 - Prob. 13RQCh. 11 - Prob. 14RQCh. 11 - Prob. 15RQCh. 11 - Prob. 16RQCh. 11 - Prob. 17RQCh. 11 - Prob. 18RQCh. 11 - Prob. 19RQCh. 11 - Prob. 20RQCh. 11 - BE11-1 Classify each of the following items as an...Ch. 11 - BE11-2 The following selected transactions occur...Ch. 11 - BE11-3 Place the following items in the correct...Ch. 11 - BE11-4 Laser World reports net income of $650,000....Ch. 11 - BE11-5 Macrosoft Company reports net income of...Ch. 11 - BE11-6 Hi-Tech, Inc., reports net income of $70...Ch. 11 - BE11-7 Engineering Wonders reports net income of...Ch. 11 - BE11-8 Creative Sound Systems sold investments,...Ch. 11 - Prob. 9BECh. 11 - BE11-10 Technologies Worldwide purchased land for...Ch. 11 - Prob. 11BECh. 11 - Prob. 12BECh. 11 - BE11-13 A-2-Z Design Services engaged in the...Ch. 11 - Prob. 14BECh. 11 - Prob. 15BECh. 11 - Prob. 16BECh. 11 - Prob. 17BECh. 11 - Prob. 18BECh. 11 - Prob. 19BECh. 11 - Prob. 20BECh. 11 - Prob. 1ECh. 11 - Prob. 2ECh. 11 - E11-3 Analysis of an income statement, balance...Ch. 11 - E11-4 Wi-Fi, Inc., has the following selected...Ch. 11 - Prob. 5ECh. 11 - Prob. 6ECh. 11 - Prob. 7ECh. 11 - Prob. 8ECh. 11 - E11-9 Software Distributors reports net income of...Ch. 11 - Prob. 10ECh. 11 - Prob. 11ECh. 11 - Prob. 12ECh. 11 - Prob. 13ECh. 11 - Prob. 14ECh. 11 - Prob. 15ECh. 11 - Calculate operating activities—direct method...Ch. 11 - Prob. 17ECh. 11 - Prob. 18ECh. 11 - Prob. 19ECh. 11 - Prob. 20ECh. 11 - Prob. 1PACh. 11 - Prob. 2PACh. 11 - Prob. 3PACh. 11 - Prob. 4PACh. 11 - Prob. 5PACh. 11 - Prob. 6PACh. 11 - Prob. 7PACh. 11 - Prob. 8PACh. 11 - Prob. 1PBCh. 11 - Prob. 2PBCh. 11 - Prob. 3PBCh. 11 - Prob. 4PBCh. 11 - Prob. 5PBCh. 11 - Prob. 6PBCh. 11 - Prob. 7PBCh. 11 - Prepare an income statement using operating cash...Ch. 11 - Great Adventures (This is a continuation of the...Ch. 11 - Prob. 2APCh. 11 - Prob. 3APCh. 11 - Prob. 4APCh. 11 - Prob. 5APCh. 11 - Prob. 7APCh. 11 - Prob. 8AP
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education