BUS142G

Financial Accounting
In-class exercises
Ch. 14
S14-1
a. The statement of cash flows helps predict future cash flows by reporting past
cash receipts and payments, which are good predictors of future cash flows.

b. The statement of cash flows helps evaluate management decisions by

reporting on managers’ investments. Good decisions will benefit the
company’s performance.

c. The statement of cash flows helps predict the ability to make debt payments
to lenders and pay dividends to stockholders by reporting where cash came
from and how it was spent.
S14-2
a. Operating f. Investing

b. Financing g. Financing

c. Investing h. Operating

d. Operating i. Financing

e. Non-cash j. Operating
S14-3

a. O+ f. O+

b. F− g. O+

c. O− h. O−

d. F+ i. O+

e. O− j. I−
S14-4
GDM EQUIPMENT, INC.
Statement of Cash Flows—Partial
Year Ended December 31, 2016

Cash Flows from Operating Activities:

Net Income $ 44,000
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:

Depreciation Expense $ 9,000

Increase in Accounts Receivable (9,000)
Decrease in Accounts Payable (4,000) (4,000)
Net Cash Provided by Operating Activities $ 40,000
S14-5
SMART CELLULAR
Statement of Cash Flows—Partial
Year Ended April 30, 2016

Cash Flows from Operating Activities:

Net Income $ 62,000
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:

Depreciation Expense $ 4,000

Increase in current assets other than cash (26,000)
Decrease in current liabilities (18,000) (40,000)
Net Cash Provided by Operating Activities $ 22,000
 SMART CELLULAR

S14-6
Statement of Cash Flows
Year Ended April 30, 2016

Cash Flows from Operating Activities:

Net Income $ 62,000
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation Expense $ 4,000
Increase in Current Assets other than Cash (26,000)
Decrease in Current Liabilities (18,000) (40,000)
Net Cash Provided by Operating Activities 22,000
Cash Flows from Investing Activities:
Cash Purchase of Equipment (36,000)
Cash Receipt from Sale of Land 26,000
Net Cash Used for Investing Activities (10,000)
Cash Flows from Financing Activities:
Cash Receipt from Issuance of Common Stock 25,000
Cash Payment of Dividends (5,600)
Net Cash Provided by Financing Activities 19,400
Net Increase (Decrease) in Cash 31,400
Cash Balance, April 30, 2015 23,300
Cash Balance, April 30, 2016 $ 54,700
S14-7
Requirement 1

Plant Assets

12/31/2015 88,250

Acquisitions 17,100
Disposals
0
12/31/2016 105,350
Requirement 2

Notes Payable

12/31/2015
16,000
Payment 9,400 Issuance
4,400
12/31/2016
11,000
S14-8
STENBACK MEDIA CORPORATION
Statement of Cash Flows
Year Ended December 31, 2016

Cash Flows from Operating Activities:

Net Income $ 13,900

Adjustments to Reconcile Net Income to Net Cash

Provided by Operating Activities:

Depreciation Expense—Plant Assets $ 16,100

Increase in Accounts Receivable (500)
Increase in Accounts Payable 1,500 17,100

Net Cash Provided by Operating Activities 31,000

Cash Flows from Investing Activities:

Cash Purchase of Plant Assets (17,100)
Net Cash Used for Investing Activities (17,100)
Cash Flows from Financing Activities:
Cash Receipt from Issuance of Common Stock 5,000

Cash Receipt from Issuance of Notes Payable 4,400

Cash Payment of Dividends (12,500)

Cash Payment of Notes Payable (9,400)

Net Cash Used for Financing Activities (12,500)
Net Increase (Decrease) in Cash 1,400

Cash Balance, December 31, 2015 3,900

Cash Balance, December 31, 2016 $ 5,300

 Common Stock

12/31/2015

23,000
Retirement 0 Issuance

5,000
12/31/2016

28,000

Retained earnings (let Dividends = X)

Beginning + − Dividends = Ending
Net Income
$36,000 + − X = $37,400
$13,900
X = $ 12,500

Retained Earnings
36,000 12/31/2015
13,900 Net Income
Dividend 12,500
37,400 12/31/2016
E14-16
a. Investing e. Investing & Operating (gain)

b. Financing f. Financing

c. Operating g. Non-cash investing and financing

d. Operating
E14-17
a. Financing g. Non-cash investing and financing

b. Financing h. Investing

c. Operating i. Financing

d. Investing j. Non-cash investing and financing

e. Operating k. Operating

f. Financing
E14-20

CD SALES, INC.
Statement of Cash Flows—Partial
For Month Ended July 31, 2016

Cash Flows from Operating Activities:

Net Income $ 81,000
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:

Depreciation Expense $ 3,500

Decrease in Accounts Receivable 4,000
Increase in Merchandise Inventory (14,000)
Increase in Accounts Payable 5,500 (1,000)
Net Cash Provided by Operating Activities $ 80,000
 DAILY PLUS, INC
Statement of Cash Flows
Year Ended September 30, 2016

E14-21 Cash Flows from Operating Activities:

Net Income
Adjustments to Reconcile Net Income to Net Cash
$ 64,000

Provided by Operating Activities:

Depreciation Expense—Plant Assets $ 24,000
Decrease in Accounts Receivable 14,000
Increase in Merchandise Inventory (4,000)
Increase in Accounts Payable 13,000
Decrease in Accrued Liabilities (9,000) 38,000
Net Cash Provided by Operating Activities 102,000
Cash Flows from Investing Activities:
Acquisition of Plant Asset (106,000)
Cash Receipt from Sale of Land 25,000
Net Cash Used for Investing Activities (81,000)
Cash Flows from Financing Activities:
Cash Receipt from Issuance of Common Stock 27,000
Cash Payment of Notes Payable (14,000)
Cash Payment of Dividends (11,000)
Net Cash Provided by Financing Activities 2,000
Net Increase (Decrease) in Cash 23,000
Cash Balance, September 30, 2015 11,000
Cash Balance, September 30, 2016 $ 34,000

Non-cash Investing and Financing Activities:

Acquisition of Plant Assets with Notes Payable $ 15,000
Total Non-cash Investing and Financing Activities $ 15,000
E14-23 Plant Assets
12/31/2015 222,800
Requirement 1 Requirement 3

Acquisitions 96,000
43,400 Disposed of
12/31/2016 275,400 Common Stock
36,000 12/31/2015
13,000 Issuance
Retireme 0
nt
Accumulated Depreciation—Plant Assets
49,000 12/31/2016
37,800 12/31/2015
54,000 Depreciation Expense
Disposed of 43,400
Requirement 4
48,400 12/31/2016

Retained Earnings
Notes Payable
Requirement 2 70,000 12/31/2015 227,000 12/31/2015

0 Issuance 117,000 Net Income

Payment 7,000 Dividend 65,000

63,000 12/31/2016 279,000 12/31/2016

E14-26

Net Cash provided by Operating Activities

$ 172,000
− Cash payments planned for Long-Term Assets

(153,000)
− Cash Dividends

(3,500)
= Free Cash Flow

$ 155,00