Concept explainers
1.
Complete the T-account worksheet that is used to prepare the statement of
1.
Explanation of Solution
T-account:
T-account is the form of the ledger account, where the
Following are the changes in cash accounts:
Cash (A) | |||
Operating activities: | |||
(1) Net income | 20,200 | (3) Inventory | 7,000 |
(2) Depreciation expense | 3,000 | (4) Accounts payable | 3,000 |
(3) Income taxes payable | 1,500 | (5) Wages payable | 1,500 |
Net cash flow provided by operating activities | 13,700 | ||
Investing activities: | |||
(7) Sale of equipment | 6,000 | (8) Purchased investments | 15,000 |
Net cash flow provided by investing activities | 9,000 | ||
Financing activities: | |||
(9) Proceeds from stock issuance | 6,000 | (10) Payment of dividends | 12,000 |
Net cash flow used by financing activities | 6,000 | ||
Net decrease in cash and cash equivalents | 1,300 |
Following are the changes in non-cash accounts:
Beginning balance 22,000 | |||||
Ending balance 22,000 | |||||
Merchandise Inventory (A) | |||||
Beginning balance 68,000 | |||||
(3) Increase 7,000 | |||||
Ending balance 75,000 |
Accounts payable (L) | ||
Beginning balance | ||
(4) Decrease 7,000 | 17,000 | |
Ending balance | 14,000 |
Wages payable (L) | ||
Beginning balance | 2,500 | |
(5) Decrease 1,000 | ||
Ending balance | 1,500 |
Income taxes payable (L) | ||
Beginning balance | 3,000 | |
(6) Increase | 1,500 | |
Ending balance | 4,500 |
Equipment (A) | ||
Beginning balance 114,500 | ||
Purchases 0 | (7)Disposals | 21,000 |
Ending balance 93,500 |
Accumulated Depreciation (XA) | ||
Beginning balance | 32,000 | |
(7) Disposals | (2)Depreciation | 3,000 |
Ending balance | 20,000 |
Investments (A) | ||
Beginning balance 0 | ||
(8) Purchases 15,000 | Disposals | 0 |
Ending balance 15,000 |
Contributed Capital (SE) | ||
Beginning balance | 100,000 | |
Stock repurchased | (9)Stock issued | 6,000 |
Ending balance | 106,000 |
Beginning balance | 100,000 | |
Stock repurchased | (9) Stock issued | 6,000 |
Ending balance | 106,000 |
Note: L represents liabilities, XA represents contra-asset, A represents asset and SE represents
2.
Prepare the statement of cash flows for the current year.
2.
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.
Indirect method:
Indirect method uses the accrual basis of accounting, where the Net Income is adjusted to determine the net cash provided from operating activities.
Prepare the statement of cash flows for the current year of Company G.
Company G | ||
Statement of Cash Flows (Indirect Method) | ||
For the year ended December 31 | ||
Particulars | Amount ($) | Amount ($) |
Cash flows from operating activities: | ||
Net income | 20,200 | |
Add: Depreciation expenses | 3,000 | |
Changes in current assets and current liabilities | ||
Less: Increase in inventory | (7,000) | |
Less: Decrease in accounts payable | (3,000) | |
Less: Decrease in wages payable | (1,000) | |
Add: Increase in income taxes payable | 1,500 | |
Net cash flows from operating activities | 13,700 | |
Cash flows from Investing activities: | ||
Less: Purchase of fixed assets | (15,000) | |
Add: Proceeds from sale of equipment | 6,000 | |
Net cash flows from investing activities | (9,000) | |
Cash flows from Financing activities: | ||
Add: Sale of capital stock | 6,000 | |
Less: Dividends paid | (12,000) | |
Net cash flows from financing activities | (6,000) | |
Net increase (decrease) in cash | (1,300) | |
Cash balance at the beginning | 20,500 | |
Cash balance at the end | 19,200 |
Table (1)
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Chapter 12 Solutions
FINANCIAL ACCOUNTING 9TH
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