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					LO 2     EXERCISE 12-1 CASH EQUIVALENTS

Investments made during December 2004 that qualify as cash equivalents at
December 31, 2004:
  Certificate of deposit, due January 31, 2005                 $ 35,000
  Money Market fund                                              105,000
  90-day Treasury bills                                           75,000
Cash equivalents at December 31, 2004                          $ 215,000




LO 3     EXERCISE 12-2 CLASSIFICATION OF ACTIVITIES

1.   F                                    8.     F
2.   S                                    9.     S
3.   F                                   10.     I
4.   F                                   11.     I or O*
5.   O                                   12.     O
6.   O                                   13.     O
7.   O

*Investing activity if stock is classified as an available for-sale security, operating
  activity if it is classified as a trading security.




LO 6     EXERCISE 12-9 ADJUSTMENTS TO NET INCOME WITH
         THE INDIRECT METHOD

1.   A                                      6.   A
2.   D                                      7.   D
3.   A                                      8.   A
4.   A                                      9.   NR
5. NR                                     10. A

LO 6     EXERCISE 12-10 OPERATING ACTIVITIES SECTION—
         INDIRECT METHOD

1. Operating activities section of the statement of cash flows:

                            SUFFOLK COMPANY
                    PARTIAL STATEMENT OF CASH FLOWS
                 FOR THE YEAR ENDED DECEMBER 31, 2004

     Cash Provided by Operating Activities
     Net income                                                       $ 40,000
     Adjustments to reconcile net income to net cash
      provided by operating activities:
        Depreciation expense                                            20,000
        Increase in accounts receivable                                 (8,000)
        Decrease in inventory                                           10,000
        Increase in prepaid rent                                        (2,000)
        Increase in accounts payable                                     7,000
        Decrease in income taxes payable                                (4,000)
        Increase in interest payable                                     3,000
     Net cash inflow from operating activities                        $ 66,000

2. The primary reason that net cash inflow from operating activities of $66,000
   is more than net income of $40,000 is depreciation of $20,000. It is
   deducted on the income statement but it does not require the use of cash.
   Other reasons for the higher amount of net cash inflow from operating
   activities are the decrease in inventory (the company is not buying as much
   inventory) and the increase in accounts payable (the company is slowing
   down payments to its creditors).

                         MULTI-CONCEPT EXERCISES

LO 2,3     EXERCISE 12-11 CLASSIFICATION OF ACTIVITIES



1.   OI                                  6.   CE
2.   CE                                  7.   II
3.   IF                                  8.   OI
4.   OI                                  9.   IF
5.   OF                                 10.   OF




LO 3,5     EXERCISE 12-12 CLASSIFICATION OF ACTIVITIES



1. IO                                    7. OO
2. OO                                    8. OI
3. NR                                    9. OF
4. IF                                 10. NR
5. IO                                 11. OF
6. NR                                 12. II


LO 6    PROBLEM 12-1 STATEMENT OF CASH FLOWS—INDIRECT METHOD


1. Changes in account balances and explanations (in thousands of dollars):

                                 Net Change     Explanation
   Cash                              (2)
   Accounts receivable                5
   Inventory                        (10)
   Prepaid rent                       3
   Land                               0
   Plant and equipment             100          Purchase
   Accumulated depreciation         (35)        Depreciation expense
   Accounts payable                  (2)
   Income taxes payable               2
   Short-term notes payable         (10)        Issuance
   Bonds payable                     25         Retirement
   Common stock                     (50)        Issuance
   Retained earnings                (26)        Net income
   Total                              0

Note:      Decreases in assets and increases in liabilities and owners’ equity
           accounts are in parentheses.

   Statement of cash flows:
                         CHRISMAN COMPANY
                    STATEMENT OF CASH FLOWS
               FOR THE YEAR ENDED DECEMBER 31, 2004
                    (IN THOUSANDS OF DOLLARS)
   Cash Flows from Operating Activities
   Net income                                                          $       26
   Adjustments to reconcile net income to net cash provided
    by operating activities:
      Depreciation expense                                                     35
      Increase in accounts receivable                                          (5)
      Decrease in inventory                                                    10
      Increase in prepaid rent                                                 (3)
      Increase in accounts payable                                              2
      Decrease in income taxes payable                                         (2)
   Net cash provided by operating activities                               $   63
    Cash Flows from Investing Activities
       Acquisition of plant and equipment                                $ (100)
    Cash Flows from Financing Activities
       Retirement of bonds payable                                       $ (25)
       Issuance of short-term notes payable                                 10
       Issuance of common stock                                             50
    Net cash provided by financing activities                            $ 35
    Net increase (decrease) in cash                                      $ (2)
    Cash balance, December 31, 2003                                         10
    Cash balance, December 31, 2004                                      $   8

2. No, Chrisman did not generate enough cash from its operations to pay for its
   investing activities. Cash flow from operating activities amounted to only
   $63,000, while the company spent $100,000 to acquire plant and equipment.
   The additional cash needed to finance the acquisition was raised by issuing
   a note for $10,000 and issuing common stock for $50,000.

				
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