Statement of cash flows : It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company. Indirect method: Under this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities. Cash flows from operating activities: These are the cash produced by the normal business operations. The below table shows the way of calculation of cash flows from operating activities: Cash flows from operating activities (Indirect method) Add: Decrease in current assets Increase in current liability Depreciation expense and amortization expense Loss on sale of plant assets Deduct: Increase in current assets Decrease in current liabilities Gain on sale of plant assets Net cash provided from or used by operating activities Table (1) Cash flows from investing activities: Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations. The below table shows the way of calculation of cash flows from investing activities: Cash flows from investing activities Add: Proceeds from sale of fixed assets Sale of marketable securities / investments Interest received Dividend received Deduct: Purchase of fixed assets/long-lived assets Purchase of marketable securities Net cash provided from or used by investing activities Table (2) Cash flows from financing activities: Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations. The below table shows the way of calculation of cash flows from financing activities: Cash flows from financing activities Add: Issuance of common stock Proceeds from borrowings Proceeds from issuance of debt Issuance of bonds payable Deduct: Payment of dividend Repayment of debt Interest paid Redemption of debt Repurchase of stock Net cash provided from or used by financing activities Table (3) To Prepare: A statement of cash flows using the indirect method for presenting cash flows from operating activities.

Question

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Answer 1

Question

Chapter 14, Problem 14.1BPR

To determine

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

Indirect method: Under this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities.

Cash flows from operating activities: These are the cash produced by the normal business operations.

The below table shows the way of calculation of cash flows from operating activities:

Cash flows from operating activities (Indirect method)

Add: Decrease in current assets

         Increase in current liability

         Depreciation expense and amortization expense

         Loss on sale of plant assets

Deduct: Increase in current assets

              Decrease in current liabilities

              Gain on sale of plant assets

Net cash provided from or used by operating activities

Table (1)

Cash flows from investing activities: Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations.

The below table shows the way of calculation of cash flows from investing activities:

Cash flows from investing activities

Add: Proceeds from sale of fixed assets

         Sale of marketable securities / investments

         Interest received

         Dividend received

Deduct: Purchase of fixed assets/long-lived assets

              Purchase of marketable securities

Net cash provided from or used by investing activities

Table (2)

Cash flows from financing activities: Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations.

The below table shows the way of calculation of cash flows from financing activities:

Cash flows from financing activities

Add: Issuance of common stock

          Proceeds from borrowings

          Proceeds from issuance of debt

          Issuance of bonds payable

Deduct: Payment of dividend

              Repayment of debt

              Interest paid

              Redemption of debt

              Repurchase of stock

Net cash provided from or used by financing activities

Table (3)

To Prepare: A statement of cash flows using the indirect method for presenting cash flows from operating activities.

Expert Solution & Answer

Explanation of Solution

M Equipment Company
Statement of Cash Flows - Indirect Method
For the Year Ended December 31, 2016
Details	Amount ($)	Amount ($)
Cash flows from operating activities:
Net income		141,680
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	14,790
Loss on sale of investments	10,200
Changes in current operating assets and liabilities:
Increase in accounts receivable	(19,040)
Increase in inventory	(8,670)
Increase in accounts payable	11,560
Increase in accrued expense payable	3,740	(12,580)
Net cash provided by operating activities		$154,260

Cash flows from investing activities:
Cash received from sale of investment	91,800
Cash used for purchase of land	(295,800)
Cash used for purchase of equipment	(80,580)
Net cash used for investing activities		($284,580)

Cash flows from financing activities:
Cash received from sale of common stock	250,000
Cash used for dividends	(96,900)
Net cash provided by financing activities		$153,100
Increase (decrease) in cash		$22,780
Cash at the beginning of the year		47,940
Cash at the end of the year		$70,720

Table (4)

Working notes:

Prepare the schedule in the changes of current assets and liabilities.

Schedule in the Change of Current Assets and Liabilities
Details	Amount ($)			Effect on Operating Activities
Details	Beginning Balance	Ending Balance	Increase/ (Decrease)	Effect on Operating Activities
Accounts receivable	188,190	207,230	19,040	Deduct
Inventories	289,850	298,520	8,670	Deduct
Accounts payable	194,1400	205,700	11,560	Add
Accrued expenses payable	26,860	30,600	3,740	Add

Table (5)

Calculate the amount of depreciation expense:

Amount of depreciation expense = (Ending balance−Beginning balance)= ($99,110−$84,320)=$14,790

Calculate the amount of loss on sale of investments:

Amount of loss on sale of investments = (Investments balance−Sale value)= ($102,000−$91,800)=$10,200

Calculate the amount of dividends:

Amount of dividends = (Cash dividend declared+Beginning balance of dividend payable−Ending balance of dividend payable)= ($102,000+$20,400−$25,500)=$96,900

Conclusion

Therefore, the ending cash balance is $70,720

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Students have asked these similar questions

Statement of Cash Flows—Direct Method applied to PR 16-1A The comparative balance sheet of Navaria Inc. for December 31, 20Y3 and 20Y2, is as follows: Dec. 31, 20Y3 Dec. 31, 20Y2 Assets Cash $ 251,860 $ 238,290 Accounts receivable (net) 92,610 84,960 Inventories 261,030 250,990 Investments 0 97,660 Land 133,790 0 Equipment 285,270 224,620 Accumulated depreciation-equipment (67,800) (60,500) Total assets $956,760 $836,020 Liabilities and Stockholders' Equity Accounts payable $ 172,940 $ 164,700 Accrued expenses payable 17,390 21,740 Dividends payable 9,400 7,500 Common stock, $1 par 51,100 39,290 Paid-in capital: Excess of issue price over par-common stock 194,400 113,700 Retained earnings 511,530 489,090 Total liabilities and stockholders’ equity $956,760 $836,020 The income statement for the year ended December 31, 20Y3, is as…

Statement of Cash Flows—Direct Method The comparative balance sheet of Canace Products Inc. for December 31, 20Y6 and 20Y5, is as follows: Dec. 31, 20Y6 Dec. 31, 20Y5 Assets Cash $234,050 $216,220 Accounts receivable (net) 84,790 77,660 Inventories 239,340 229,910 Investments 0 89,080 Land 122,770 0 Equipment 264,080 203,280 Accumulated depreciation-equipment (61,820) (54,820) Total assets $883,210 $761,330 Liabilities and Stockholders' Equity Accounts payable $159,860 $149,980 Accrued expenses payable 15,900 19,790 Dividends payable 8,830 6,850 Common stock, $10 par 47,690 37,310 Excess of paid-in capital over par 179,290 103,540 Retained earnings 471,640 443,860 Total liabilities and stockholders’ equity $883,210 $761,330 The income statement for the year ended December 31, 20Y6, is as follows: Sales $1,406,850 Cost of merchandise sold 579,300 Gross…

Statement of Cash Flows—Direct Method The comparative balance sheet of Canace Products Inc. for December 31, 20Y6 and 20Y5, is as follows: Dec. 31, 20Y6 Dec. 31, 20Y5 Assets Cash $277,770 $258,990 Accounts receivable (net) 100,630 93,020 Inventories 284,060 275,390 Investments 0 106,700 Land 145,700 0 Equipment 313,410 243,490 Accumulated depreciation-equipment (73,370) (65,660) Total assets $1,048,200 $911,930 Liabilities and Stockholders' Equity Accounts payable $189,720 $179,650 Accrued expenses payable 18,870 23,710 Dividends payable 10,480 8,210 Common stock, $10 par 56,600 44,680 Paid-in capital: Excess of issue price over par-common stock 212,780 124,020 Retained earnings 559,750 531,660 Total liabilities and stockholders’ equity $1,048,200 $911,930 The income statement for the year ended December 31, 20Y6, is as follows: Sales $1,566,470 Cost of…

Answer 2

Question

Chapter 14, Problem 14.1BPR

To determine

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

Indirect method: Under this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities.

Cash flows from operating activities: These are the cash produced by the normal business operations.

The below table shows the way of calculation of cash flows from operating activities:

Cash flows from operating activities (Indirect method)

Add: Decrease in current assets

         Increase in current liability

         Depreciation expense and amortization expense

         Loss on sale of plant assets

Deduct: Increase in current assets

              Decrease in current liabilities

              Gain on sale of plant assets

Net cash provided from or used by operating activities

Table (1)

Cash flows from investing activities: Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations.

The below table shows the way of calculation of cash flows from investing activities:

Cash flows from investing activities

Add: Proceeds from sale of fixed assets

         Sale of marketable securities / investments

         Interest received

         Dividend received

Deduct: Purchase of fixed assets/long-lived assets

              Purchase of marketable securities

Net cash provided from or used by investing activities

Table (2)

Cash flows from financing activities: Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations.

The below table shows the way of calculation of cash flows from financing activities:

Cash flows from financing activities

Add: Issuance of common stock

          Proceeds from borrowings

          Proceeds from issuance of debt

          Issuance of bonds payable

Deduct: Payment of dividend

              Repayment of debt

              Interest paid

              Redemption of debt

              Repurchase of stock

Net cash provided from or used by financing activities

Table (3)

To Prepare: A statement of cash flows using the indirect method for presenting cash flows from operating activities.

Expert Solution & Answer

Explanation of Solution

M Equipment Company
Statement of Cash Flows - Indirect Method
For the Year Ended December 31, 2016
Details	Amount ($)	Amount ($)
Cash flows from operating activities:
Net income		141,680
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	14,790
Loss on sale of investments	10,200
Changes in current operating assets and liabilities:
Increase in accounts receivable	(19,040)
Increase in inventory	(8,670)
Increase in accounts payable	11,560
Increase in accrued expense payable	3,740	(12,580)
Net cash provided by operating activities		$154,260

Cash flows from investing activities:
Cash received from sale of investment	91,800
Cash used for purchase of land	(295,800)
Cash used for purchase of equipment	(80,580)
Net cash used for investing activities		($284,580)

Cash flows from financing activities:
Cash received from sale of common stock	250,000
Cash used for dividends	(96,900)
Net cash provided by financing activities		$153,100
Increase (decrease) in cash		$22,780
Cash at the beginning of the year		47,940
Cash at the end of the year		$70,720

Table (4)

Working notes:

Prepare the schedule in the changes of current assets and liabilities.

Schedule in the Change of Current Assets and Liabilities
Details	Amount ($)			Effect on Operating Activities
Details	Beginning Balance	Ending Balance	Increase/ (Decrease)	Effect on Operating Activities
Accounts receivable	188,190	207,230	19,040	Deduct
Inventories	289,850	298,520	8,670	Deduct
Accounts payable	194,1400	205,700	11,560	Add
Accrued expenses payable	26,860	30,600	3,740	Add

Table (5)

Calculate the amount of depreciation expense:

Amount of depreciation expense = (Ending balance−Beginning balance)= ($99,110−$84,320)=$14,790

Calculate the amount of loss on sale of investments:

Amount of loss on sale of investments = (Investments balance−Sale value)= ($102,000−$91,800)=$10,200

Calculate the amount of dividends:

Amount of dividends = (Cash dividend declared+Beginning balance of dividend payable−Ending balance of dividend payable)= ($102,000+$20,400−$25,500)=$96,900

Conclusion

Therefore, the ending cash balance is $70,720

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Answer 3

Question

Chapter 14, Problem 14.1BPR

To determine

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

Indirect method: Under this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities.

Cash flows from operating activities: These are the cash produced by the normal business operations.

The below table shows the way of calculation of cash flows from operating activities:

Cash flows from operating activities (Indirect method)

Add: Decrease in current assets

         Increase in current liability

         Depreciation expense and amortization expense

         Loss on sale of plant assets

Deduct: Increase in current assets

              Decrease in current liabilities

              Gain on sale of plant assets

Net cash provided from or used by operating activities

Table (1)

Cash flows from investing activities: Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations.

The below table shows the way of calculation of cash flows from investing activities:

Cash flows from investing activities

Add: Proceeds from sale of fixed assets

         Sale of marketable securities / investments

         Interest received

         Dividend received

Deduct: Purchase of fixed assets/long-lived assets

              Purchase of marketable securities

Net cash provided from or used by investing activities

Table (2)

Cash flows from financing activities: Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations.

The below table shows the way of calculation of cash flows from financing activities:

Cash flows from financing activities

Add: Issuance of common stock

          Proceeds from borrowings

          Proceeds from issuance of debt

          Issuance of bonds payable

Deduct: Payment of dividend

              Repayment of debt

              Interest paid

              Redemption of debt

              Repurchase of stock

Net cash provided from or used by financing activities

Table (3)

To Prepare: A statement of cash flows using the indirect method for presenting cash flows from operating activities.

Expert Solution & Answer

Explanation of Solution

M Equipment Company
Statement of Cash Flows - Indirect Method
For the Year Ended December 31, 2016
Details	Amount ($)	Amount ($)
Cash flows from operating activities:
Net income		141,680
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	14,790
Loss on sale of investments	10,200
Changes in current operating assets and liabilities:
Increase in accounts receivable	(19,040)
Increase in inventory	(8,670)
Increase in accounts payable	11,560
Increase in accrued expense payable	3,740	(12,580)
Net cash provided by operating activities		$154,260

Cash flows from investing activities:
Cash received from sale of investment	91,800
Cash used for purchase of land	(295,800)
Cash used for purchase of equipment	(80,580)
Net cash used for investing activities		($284,580)

Cash flows from financing activities:
Cash received from sale of common stock	250,000
Cash used for dividends	(96,900)
Net cash provided by financing activities		$153,100
Increase (decrease) in cash		$22,780
Cash at the beginning of the year		47,940
Cash at the end of the year		$70,720

Table (4)

Working notes:

Prepare the schedule in the changes of current assets and liabilities.

Schedule in the Change of Current Assets and Liabilities
Details	Amount ($)			Effect on Operating Activities
Details	Beginning Balance	Ending Balance	Increase/ (Decrease)	Effect on Operating Activities
Accounts receivable	188,190	207,230	19,040	Deduct
Inventories	289,850	298,520	8,670	Deduct
Accounts payable	194,1400	205,700	11,560	Add
Accrued expenses payable	26,860	30,600	3,740	Add

Table (5)

Calculate the amount of depreciation expense:

Amount of depreciation expense = (Ending balance−Beginning balance)= ($99,110−$84,320)=$14,790

Calculate the amount of loss on sale of investments:

Amount of loss on sale of investments = (Investments balance−Sale value)= ($102,000−$91,800)=$10,200

Calculate the amount of dividends:

Amount of dividends = (Cash dividend declared+Beginning balance of dividend payable−Ending balance of dividend payable)= ($102,000+$20,400−$25,500)=$96,900

Conclusion

Therefore, the ending cash balance is $70,720

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Answer 4

Question

Chapter 14, Problem 14.1BPR

To determine

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

Indirect method: Under this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities.

Cash flows from operating activities: These are the cash produced by the normal business operations.

The below table shows the way of calculation of cash flows from operating activities:

Cash flows from operating activities (Indirect method)

Add: Decrease in current assets

         Increase in current liability

         Depreciation expense and amortization expense

         Loss on sale of plant assets

Deduct: Increase in current assets

              Decrease in current liabilities

              Gain on sale of plant assets

Net cash provided from or used by operating activities

Table (1)

Cash flows from investing activities: Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations.

The below table shows the way of calculation of cash flows from investing activities:

Cash flows from investing activities

Add: Proceeds from sale of fixed assets

         Sale of marketable securities / investments

         Interest received

         Dividend received

Deduct: Purchase of fixed assets/long-lived assets

              Purchase of marketable securities

Net cash provided from or used by investing activities

Table (2)

Cash flows from financing activities: Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations.

The below table shows the way of calculation of cash flows from financing activities:

Cash flows from financing activities

Add: Issuance of common stock

          Proceeds from borrowings

          Proceeds from issuance of debt

          Issuance of bonds payable

Deduct: Payment of dividend

              Repayment of debt

              Interest paid

              Redemption of debt

              Repurchase of stock

Net cash provided from or used by financing activities

Table (3)

To Prepare: A statement of cash flows using the indirect method for presenting cash flows from operating activities.

Expert Solution & Answer

Explanation of Solution

M Equipment Company
Statement of Cash Flows - Indirect Method
For the Year Ended December 31, 2016
Details	Amount ($)	Amount ($)
Cash flows from operating activities:
Net income		141,680
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	14,790
Loss on sale of investments	10,200
Changes in current operating assets and liabilities:
Increase in accounts receivable	(19,040)
Increase in inventory	(8,670)
Increase in accounts payable	11,560
Increase in accrued expense payable	3,740	(12,580)
Net cash provided by operating activities		$154,260

Cash flows from investing activities:
Cash received from sale of investment	91,800
Cash used for purchase of land	(295,800)
Cash used for purchase of equipment	(80,580)
Net cash used for investing activities		($284,580)

Cash flows from financing activities:
Cash received from sale of common stock	250,000
Cash used for dividends	(96,900)
Net cash provided by financing activities		$153,100
Increase (decrease) in cash		$22,780
Cash at the beginning of the year		47,940
Cash at the end of the year		$70,720

Table (4)

Working notes:

Prepare the schedule in the changes of current assets and liabilities.

Schedule in the Change of Current Assets and Liabilities
Details	Amount ($)			Effect on Operating Activities
Details	Beginning Balance	Ending Balance	Increase/ (Decrease)	Effect on Operating Activities
Accounts receivable	188,190	207,230	19,040	Deduct
Inventories	289,850	298,520	8,670	Deduct
Accounts payable	194,1400	205,700	11,560	Add
Accrued expenses payable	26,860	30,600	3,740	Add

Table (5)

Calculate the amount of depreciation expense:

Amount of depreciation expense = (Ending balance−Beginning balance)= ($99,110−$84,320)=$14,790

Calculate the amount of loss on sale of investments:

Amount of loss on sale of investments = (Investments balance−Sale value)= ($102,000−$91,800)=$10,200

Calculate the amount of dividends:

Amount of dividends = (Cash dividend declared+Beginning balance of dividend payable−Ending balance of dividend payable)= ($102,000+$20,400−$25,500)=$96,900

Conclusion

Therefore, the ending cash balance is $70,720

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Answer 5

Chapter 14, Problem 14.1BPR

To determine

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

Indirect method: Under this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities.

Cash flows from operating activities: These are the cash produced by the normal business operations.

The below table shows the way of calculation of cash flows from operating activities:

Cash flows from operating activities (Indirect method)

Add: Decrease in current assets

         Increase in current liability

         Depreciation expense and amortization expense

         Loss on sale of plant assets

Deduct: Increase in current assets

              Decrease in current liabilities

              Gain on sale of plant assets

Net cash provided from or used by operating activities

Table (1)

Cash flows from investing activities: Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations.

The below table shows the way of calculation of cash flows from investing activities:

Cash flows from investing activities

Add: Proceeds from sale of fixed assets

         Sale of marketable securities / investments

         Interest received

         Dividend received

Deduct: Purchase of fixed assets/long-lived assets

              Purchase of marketable securities

Net cash provided from or used by investing activities

Table (2)

Cash flows from financing activities: Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations.

The below table shows the way of calculation of cash flows from financing activities:

Cash flows from financing activities

Add: Issuance of common stock

          Proceeds from borrowings

          Proceeds from issuance of debt

          Issuance of bonds payable

Deduct: Payment of dividend

              Repayment of debt

              Interest paid

              Redemption of debt

              Repurchase of stock

Net cash provided from or used by financing activities

Table (3)

To Prepare: A statement of cash flows using the indirect method for presenting cash flows from operating activities.

Expert Solution & Answer

Explanation of Solution

M Equipment Company
Statement of Cash Flows - Indirect Method
For the Year Ended December 31, 2016
Details	Amount ($)	Amount ($)
Cash flows from operating activities:
Net income		141,680
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	14,790
Loss on sale of investments	10,200
Changes in current operating assets and liabilities:
Increase in accounts receivable	(19,040)
Increase in inventory	(8,670)
Increase in accounts payable	11,560
Increase in accrued expense payable	3,740	(12,580)
Net cash provided by operating activities		$154,260

Cash flows from investing activities:
Cash received from sale of investment	91,800
Cash used for purchase of land	(295,800)
Cash used for purchase of equipment	(80,580)
Net cash used for investing activities		($284,580)

Cash flows from financing activities:
Cash received from sale of common stock	250,000
Cash used for dividends	(96,900)
Net cash provided by financing activities		$153,100
Increase (decrease) in cash		$22,780
Cash at the beginning of the year		47,940
Cash at the end of the year		$70,720

Table (4)

Working notes:

Prepare the schedule in the changes of current assets and liabilities.

Schedule in the Change of Current Assets and Liabilities
Details	Amount ($)			Effect on Operating Activities
Details	Beginning Balance	Ending Balance	Increase/ (Decrease)	Effect on Operating Activities
Accounts receivable	188,190	207,230	19,040	Deduct
Inventories	289,850	298,520	8,670	Deduct
Accounts payable	194,1400	205,700	11,560	Add
Accrued expenses payable	26,860	30,600	3,740	Add

Table (5)

Calculate the amount of depreciation expense:

Amount of depreciation expense = (Ending balance−Beginning balance)= ($99,110−$84,320)=$14,790

Calculate the amount of loss on sale of investments:

Amount of loss on sale of investments = (Investments balance−Sale value)= ($102,000−$91,800)=$10,200

Calculate the amount of dividends:

Amount of dividends = (Cash dividend declared+Beginning balance of dividend payable−Ending balance of dividend payable)= ($102,000+$20,400−$25,500)=$96,900

Conclusion

Therefore, the ending cash balance is $70,720

Answer 6

Chapter 14, Problem 14.1BPR

To determine

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

Indirect method: Under this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities.

Cash flows from operating activities: These are the cash produced by the normal business operations.

The below table shows the way of calculation of cash flows from operating activities:

Cash flows from operating activities (Indirect method)

Add: Decrease in current assets

         Increase in current liability

         Depreciation expense and amortization expense

         Loss on sale of plant assets

Deduct: Increase in current assets

              Decrease in current liabilities

              Gain on sale of plant assets

Net cash provided from or used by operating activities

Table (1)

Cash flows from investing activities: Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations.

The below table shows the way of calculation of cash flows from investing activities:

Cash flows from investing activities

Add: Proceeds from sale of fixed assets

         Sale of marketable securities / investments

         Interest received

         Dividend received

Deduct: Purchase of fixed assets/long-lived assets

              Purchase of marketable securities

Net cash provided from or used by investing activities

Table (2)

Cash flows from financing activities: Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations.

The below table shows the way of calculation of cash flows from financing activities:

Cash flows from financing activities

Add: Issuance of common stock

          Proceeds from borrowings

          Proceeds from issuance of debt

          Issuance of bonds payable

Deduct: Payment of dividend

              Repayment of debt

              Interest paid

              Redemption of debt

              Repurchase of stock

Net cash provided from or used by financing activities

Table (3)

To Prepare: A statement of cash flows using the indirect method for presenting cash flows from operating activities.

Expert Solution & Answer

Explanation of Solution

M Equipment Company
Statement of Cash Flows - Indirect Method
For the Year Ended December 31, 2016
Details	Amount ($)	Amount ($)
Cash flows from operating activities:
Net income		141,680
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	14,790
Loss on sale of investments	10,200
Changes in current operating assets and liabilities:
Increase in accounts receivable	(19,040)
Increase in inventory	(8,670)
Increase in accounts payable	11,560
Increase in accrued expense payable	3,740	(12,580)
Net cash provided by operating activities		$154,260

Cash flows from investing activities:
Cash received from sale of investment	91,800
Cash used for purchase of land	(295,800)
Cash used for purchase of equipment	(80,580)
Net cash used for investing activities		($284,580)

Cash flows from financing activities:
Cash received from sale of common stock	250,000
Cash used for dividends	(96,900)
Net cash provided by financing activities		$153,100
Increase (decrease) in cash		$22,780
Cash at the beginning of the year		47,940
Cash at the end of the year		$70,720

Table (4)

Working notes:

Prepare the schedule in the changes of current assets and liabilities.

Schedule in the Change of Current Assets and Liabilities
Details	Amount ($)			Effect on Operating Activities
Details	Beginning Balance	Ending Balance	Increase/ (Decrease)	Effect on Operating Activities
Accounts receivable	188,190	207,230	19,040	Deduct
Inventories	289,850	298,520	8,670	Deduct
Accounts payable	194,1400	205,700	11,560	Add
Accrued expenses payable	26,860	30,600	3,740	Add

Table (5)

Calculate the amount of depreciation expense:

Amount of depreciation expense = (Ending balance−Beginning balance)= ($99,110−$84,320)=$14,790

Calculate the amount of loss on sale of investments:

Amount of loss on sale of investments = (Investments balance−Sale value)= ($102,000−$91,800)=$10,200

Calculate the amount of dividends:

Amount of dividends = (Cash dividend declared+Beginning balance of dividend payable−Ending balance of dividend payable)= ($102,000+$20,400−$25,500)=$96,900

Conclusion

Therefore, the ending cash balance is $70,720

Answer 7

Chapter 14, Problem 14.1BPR

To determine

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

Indirect method: Under this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities.

Cash flows from operating activities: These are the cash produced by the normal business operations.

The below table shows the way of calculation of cash flows from operating activities:

Cash flows from operating activities (Indirect method)

Add: Decrease in current assets

         Increase in current liability

         Depreciation expense and amortization expense

         Loss on sale of plant assets

Deduct: Increase in current assets

              Decrease in current liabilities

              Gain on sale of plant assets

Net cash provided from or used by operating activities

Table (1)

Cash flows from investing activities: Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations.

The below table shows the way of calculation of cash flows from investing activities:

Cash flows from investing activities

Add: Proceeds from sale of fixed assets

         Sale of marketable securities / investments

         Interest received

         Dividend received

Deduct: Purchase of fixed assets/long-lived assets

              Purchase of marketable securities

Net cash provided from or used by investing activities

Table (2)

Cash flows from financing activities: Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations.

The below table shows the way of calculation of cash flows from financing activities:

Cash flows from financing activities

Add: Issuance of common stock

          Proceeds from borrowings

          Proceeds from issuance of debt

          Issuance of bonds payable

Deduct: Payment of dividend

              Repayment of debt

              Interest paid

              Redemption of debt

              Repurchase of stock

Net cash provided from or used by financing activities

Table (3)

To Prepare: A statement of cash flows using the indirect method for presenting cash flows from operating activities.

Answer 8

Expert Solution & Answer

Explanation of Solution

M Equipment Company
Statement of Cash Flows - Indirect Method
For the Year Ended December 31, 2016
Details	Amount ($)	Amount ($)
Cash flows from operating activities:
Net income		141,680
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	14,790
Loss on sale of investments	10,200
Changes in current operating assets and liabilities:
Increase in accounts receivable	(19,040)
Increase in inventory	(8,670)
Increase in accounts payable	11,560
Increase in accrued expense payable	3,740	(12,580)
Net cash provided by operating activities		$154,260

Cash flows from investing activities:
Cash received from sale of investment	91,800
Cash used for purchase of land	(295,800)
Cash used for purchase of equipment	(80,580)
Net cash used for investing activities		($284,580)

Cash flows from financing activities:
Cash received from sale of common stock	250,000
Cash used for dividends	(96,900)
Net cash provided by financing activities		$153,100
Increase (decrease) in cash		$22,780
Cash at the beginning of the year		47,940
Cash at the end of the year		$70,720

Table (4)

Working notes:

Prepare the schedule in the changes of current assets and liabilities.

Schedule in the Change of Current Assets and Liabilities
Details	Amount ($)			Effect on Operating Activities
Details	Beginning Balance	Ending Balance	Increase/ (Decrease)	Effect on Operating Activities
Accounts receivable	188,190	207,230	19,040	Deduct
Inventories	289,850	298,520	8,670	Deduct
Accounts payable	194,1400	205,700	11,560	Add
Accrued expenses payable	26,860	30,600	3,740	Add

Table (5)

Calculate the amount of depreciation expense:

Amount of depreciation expense = (Ending balance−Beginning balance)= ($99,110−$84,320)=$14,790

Calculate the amount of loss on sale of investments:

Amount of loss on sale of investments = (Investments balance−Sale value)= ($102,000−$91,800)=$10,200

Calculate the amount of dividends:

Amount of dividends = (Cash dividend declared+Beginning balance of dividend payable−Ending balance of dividend payable)= ($102,000+$20,400−$25,500)=$96,900

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Conclusion

Therefore, the ending cash balance is $70,720

Answer 12

Ch. 14 - Prob. 1DQ Ch. 14 - Prob. 2DQ Ch. 14 - A corporation issued 2,000,000 of common stock in...Ch. 14 - A retail business, using the accrual method of...Ch. 14 - If salaries payable was 100,000 at the beginning...Ch. 14 - Prob. 6DQ Ch. 14 - A corporation issued 2,000,000 of 20-year bonds...Ch. 14 - Fully depreciated equipment costing 50,000 was...Ch. 14 - Prob. 9DQ Ch. 14 - Name five common major classes of operating cash...

Explanation of Solution

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