The cash flow data of Calendar Company for the year ended December 31, 2004 are
ID: 2775485 • Letter: T
Question
The cash flow data of Calendar Company for the year ended December 31, 2004 are as follows:
Cash payment of dividends
$ 80,000
Purchase of land
$ 18,000
Cash payments for interest
$ 20,000
Cash payments for salaries
$ 90,000
Sale of equipment
$ 76,000
Retirement of common stock
$ 50,000
Purchase of equipment
$ 60,000
Cash payment to suppliers
$170,000
Cash collection from customers
$500,000
Cash at beginning of year
$100,000
o Prepare a statement of cash flows for Calendar Company using the direct method in accordance with SFAS 95.
o Discuss, from an analyst's viewpoint, the purpose of classifying cash flows into the categories required by SFAS 95.
Cash payment of dividends
$ 80,000
Purchase of land
$ 18,000
Cash payments for interest
$ 20,000
Cash payments for salaries
$ 90,000
Sale of equipment
$ 76,000
Retirement of common stock
$ 50,000
Purchase of equipment
$ 60,000
Cash payment to suppliers
$170,000
Cash collection from customers
$500,000
Cash at beginning of year
$100,000
Explanation / Answer
Statement of cash flows for Calendar Company using the direct method
Cash Flows from operating activities:
Cash payments for interest
$ (20,000)
Cash payments for salaries
$ (90,000)
Cash payment to suppliers
$ (170,000)
Cash collection from customers
$ 500,000
$ 220,000
Cash Flows from Investing activities:
Purchase of land
$ (18,000)
Sale of equipment
$ 76,000
Purchase of equipment
$ (60,000)
$ (2,000)
Cash Flows from Financing activities:
Cash payment of dividends
$ (80,000)
Retirement of common stock
$ (50,000)
$ (130,000)
Net Cash Flows
$ 88,000
Cash at beginning of year
$ 100,000
Cash at End of year
$ 188,000
The purpose of classifying cash flows into the categories is to see the cash flows from different streams. Like we see there are three categories so we can analyze the cash flows from operating, investing and financing activities.
Statement of cash flows for Calendar Company using the direct method
Cash Flows from operating activities:
Cash payments for interest
$ (20,000)
Cash payments for salaries
$ (90,000)
Cash payment to suppliers
$ (170,000)
Cash collection from customers
$ 500,000
$ 220,000
Cash Flows from Investing activities:
Purchase of land
$ (18,000)
Sale of equipment
$ 76,000
Purchase of equipment
$ (60,000)
$ (2,000)
Cash Flows from Financing activities:
Cash payment of dividends
$ (80,000)
Retirement of common stock
$ (50,000)
$ (130,000)
Net Cash Flows
$ 88,000
Cash at beginning of year
$ 100,000
Cash at End of year
$ 188,000
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