1 . Classify: Indicate whether each of the following items would be associated w
ID: 2472403 • Letter: 1
Question
1. Classify: Indicate whether each of the following items would be associated with a cash inflow (I), cash outflow (O), or noncash item (N) and under which category each would be reported on a statement of cash flows: Operating Activities (OA), Investing Activities (IA), Financing Activities (FA), or not on the statement (NOS).
ITEM
CLASSIFIED
AS
REPORTED UNDER
1. Interest paid on a bond
2. Proceeds from sale of equipment
3. Cash received from a bank on a long term note the firm took out from the bank
4. Purchase of Treasury Stock
5. Purchase of a bond issued by another firm
6. Cash dividends paid
7. Depreciation expense
8. Purchase of land with cash
9. Purchase of land by issuing common stock
10. Proceeds from issuing common stock
11. Dividends received
2. Determine cash receipts and/or payments involved with the data presented (I have supplied you the answer to part a in order to help you understand what I am asking):
Income Statement Balance Sheet
For year Beg year End year
a. Sales revenue (on credit) $250,000
Accounts Receivable (net) $30,000 $35,000
Cash receipts related to sales were $245,000. I figured this out by making a t-account of accounts receivable and solving for the cash collected. Note that by indicating that Accounts Receivable is net, you don’t need to worry about bad debts or the allowance for doubtful accounts in this setting.
Accounts Receivable (net)
Beginning Balance $30,000
Sales on account $250,000
$245,000 must be the cash collected
Ending Balance $35,000
Income Statement Balance Sheet
For year Beg year End year
b. Income taxes expense $ 42,000
Income taxes Payable $18,000 $17,000
Income Statement Balance Sheet
For year Beg year End year
c. Cost of goods sold $109,000
Inventory $34,000 $36,000
Accounts Payable $18,000 21,000
3. The Eppley Company reported a net income of $10,000 for the year just ended. Relevant data for the company follows:
Account
Beginning of year
End of year
Accounts receivable (net)
$80,000
$85,000
Inventory
123,000
133,000
Prepaid expense
7,000
8,000
Accounts payable
50,000
54,000
Accrued liabilities
10,000
14,000
Dividends payable
25,000
30,000
Long term debt payable 100,000 90,000
Other items:
Depreciation for the year $40,000
Gain on the sale of equipment $5,000
Determine the net cash flows provided by (used in) operating activities for the Eppley Company.
ITEM
CLASSIFIED
AS
REPORTED UNDER
1. Interest paid on a bond
2. Proceeds from sale of equipment
3. Cash received from a bank on a long term note the firm took out from the bank
4. Purchase of Treasury Stock
5. Purchase of a bond issued by another firm
6. Cash dividends paid
7. Depreciation expense
8. Purchase of land with cash
9. Purchase of land by issuing common stock
10. Proceeds from issuing common stock
11. Dividends received
Explanation / Answer
1) Item Classified as Reported under 1) Interest paid on bond Cash outflow (O) Operating activities (OA) 2) Proceeds from sale of equipment Cash Inflow ( I) Investing activities (IA) 3) Cash received from a bank on a long term note the firm took out from the Cash Inflow ( I) investing activity (IA) bank 4) Purchase of treasury stock Cash outflow (O) Financing activity ( FA) 5) Purchase of a bond issued by another firm Cash outflow (O) investing activity (IA) 6) Cash dividend paid Cash outflow (O) Financing activity ( FA) 7) Depriciation expense Non cash expense (N) Operating activity (OA0 8) Purchase of land with cash Cash outflow (O) investing activity (IA) 9) purchase of land by issuing common NOS stock 10) Proceeds from issuing common stock Cash Inflow ( I) Financing activity ( FA) 11) Dividends received Cash Inflow ( I) Operating activity (OA) 2) b) opening income tax payable 18000 Add : Income tax expense 42000 Less : closing income tax payable 17000 Income tax paid 43000 c) Cost of goods sold 109000 Less : opening stock 34000 Add : closing inventory 36000 Purchases 111000 opening accounts payable 18000 Add Purchases 111000 Less closing accounts payable 21000 Cash paid for purchases 108000 3) Net Income 10000 Add Depriciation 40000 Increase in accounts payable 4000 Increase in accrued liabilities 4000 48000 Less Gain on sale of equipment 5000 Increase on accounts receivable 5000 Increase in inventory 10000 Increase in prepaid expense 1000 21000 Net Cash flow from operating activities 37000
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