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The Statement of Cash Flows _complete with solutions_

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The Statement of Cash Flows _complete with solutions_ Powered By Docstoc
					Acct 592 – Spring 2005


                                   The Statement of
                                     Cash Flows
Purpose of a statement of cash flows:
          To provide information about the cash inflows and outflows of an entity during a
          period.
          To summarize the operating, investing, and financing activities of the business.


          The cash flow statement helps users to assess a company’s liquidity,
          financial flexibility, operating capabilities, and risk.
          The statement of cash flows is useful because it provides answers to the
          following important questions:
                    Where did cash come from?
                    What was cash used for?
                    What was the change in the cash balance?


          Specifically, the information in a statement of cash flows, if used with
          information in the other financial statements, helps external users to
          assess:
                              1.        A company’s ability to generate positive future net cash flows,
                              2.        A company’s ability to meet its obligations and pay dividends,
                              3.        A company’s need for external financing,
                              4.        The reasons for differences between a company’s net income
                                        and associated cash receipts and payments, and
                              5.        Both the cash and noncash aspects of a company’s financing
                                        and investing transactions.




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What can we learn from SCF that is not already available in
the other financial statements?
          It provides answers to important questions like:
                    Where did cash come from?
                    What was cash used for?
                    What was the change in the cash balance?Couldn’t we just look the
                    balance sheet?

                              The change in cash could be determined, but the statement of cash
                              flows provides detailed information about a company’s cash receipts
                              and cash payments during the period.
                    Many things you want to know about a company is summarized in this one
                    statement

                              Operating, financing and investing cash flows
          Net income does not always tell the whole story about operating
          performance.
          A statement of cash flows is an excellent forecasting tool.

Review of terms
          Cash and cash equivalents
                    It is a short-term, highly liquid investment.
                    It must be readily convertible to cash and it must be so near to maturity that
                    there is insignificant risks of changes in value due to changes in interest rate.




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Noncash revenues and expenses
Net income includes items that were neither cash inflow nor cash outflows:

          Depreciation expense
          Accretion expense on asset retirement obligation
          Amortization of intangibles
          Impairment loss on goodwill and intangibles
          Earnings of affiliated companies accounted for using the equity method
          Impairment losses on other noncurrent assets
          Compensation expense related to stock options

Net income also includes gains and losses from investing and financing activities
       Gain ≠ cash received (unless carrying value was zero)
       Even when there is a loss, cash might have been received

Net income must be adjusted for these items to get the cash provided by operations – part of the reconciling
schedule or “indirect method”

For other items, there are revenues/expenses as well as cash flows but the amounts are different:

          Bond interest expense ≠ bond interest paid (if bonds were sold at premium or discount)
          Sales were not all collected in cash (bad debts, other changes in Accounts Receivable)
          Purchases were not necessarily paid for during period (change in Accounts Payable)
          Income tax expense ≠ income taxes paid due to deferred tax assets/liabilities as well as income taxes
                 refunds receivable or unpaid taxes owed




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                                                             Company, Inc.
                                                        Statement of Cash Flows
                                                 For the year ended December 31, 199X

          Cash Flows from Operating Activities
                 Cash received from customers
                 Cash received as interest income *
                 Cash received as dividend income
                 Cash paid for cost of goods sold *
                 Cash paid for selling expenses
                 Cash paid for general & administrative expenses
                 Cash paid for interest (including interest on capital leases)
                 Cash paid for income taxes
                 Cash that would have been paid for taxes except for “excess tax deduction” related to stock based
                         compensation
                            Net cash provided by (or used by) operating activities

          Cash Flows from Investing Activities
                 Cash received from sale of property, plant, & equipment
                 Cash received from sale of investments
                 Cash received from repayment of note receivables
                 Cash paid to acquire property, plant, and equipment
                 Cash paid to acquire investments
                 Cash paid out as a loan
                         Net cash provided by (or used by) investing activities

          Cash Flows from Financing Activities
                 Cash received as proceeds from issuance of debt
                 Cash received as proceeds from issuance of stock
                 Cash received as proceeds from reissuance of treasury stock
                 Cash paid to repay debt (principal payment)
                 Cash paid on principal related to capital leases
                 Cash paid to reacquire stock (purchase treasury stock)
                 Cash paid as dividends
                 Cash retained due to “excess tax deduction” related to stock options
                         Net cash provided by (or used by) financing activities

          Net increase (decrease) in cash
          Beginning cash and cash equivalents balance
          =Ending cash and cash equivalents balance

          Schedule of Noncash Investing and Financing Activities
                 Assets for Liabilities &/or Equity
                 Liabilities &/or Equity for Assets
                 Liabilities for Equity and Equity for Liabilities
                 Capital lease (acquisition of asset and obligation for lessee)
          A reconciliation of net income to cash provided by operations

*Brackets indicate items that are normally combined




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Operating Activities
          (Usually associated with working capital accounts like Accounts
          receivable, inventory, salaries payable, etc.)
                    Inflows:
                              From sale of goods and services
                              From receiving dividends investments
                              From receiving interest from investments or loans
                              From sale of trading securities
                              From reduced income taxes due to “excess tax deduction” related to
                                    stock options

                    Outflows:
                              To suppliers for inventory and other materials
                              To employees for services
                              To other entities for services (insurance, etc.)
                              To government for taxes
                              To lenders for interest
                              To purchase trading securities

Interest expense is an operating item! Investment earnings (dividends & interest) is an operating item!
Buying and selling trading securities are operating activities! These things may not make sense to you – so
“memorize.”




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Investing Activities

          (Usually associated with long-term assets)

                    Inflows:

                              From sale of property, plant and equipment

                              From sale of debt or equity investments of other entities*

                              From collections of principal on loans to other entities
                    Outflows:

                              To purchase property, plant and equipment

                              To purchase debt or equity securities of other entities

                              To make loans to other entities


*except investments classified as trading securities which are included in operating activities




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Financing Activities
          (Usually associated with long-term liability and equity items)
                    Inflows:

                              From issuance of debt (bonds and notes)
                              From issuance of equity securities
                                        Common stock
                                        Preferred stock
                                        Re-issuance of treasury stock
                    Outflows:

                              To stockholders as dividends
                              To repay or retire long-term debt, including capital leases for
                              lessee (interest on leases is classified as operating)
                              To reacquire capital stock (treasury stock)



An “anomaly” on SCF
          Dividends are paid to stockholders and interest is paid to bondholders.
          Dividends paid are shown as outflows under financing activities
          However, FASB defined interest expense to be an operating activity
          Interest & dividend revenue are defined to be operating activities, too.




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Direct versus Indirect Presentations
          FASB Statement No. 95 allows two ways to calculate and report a
          company’s net cash flow from operating activities on its statement of
          cash flows.


The Direct Method
          Under the direct method, operating cash outflows are deducted from
          operating cash inflows to determine the net cash flow from operating
          activities.
                    If you choose the direct method, a reconciliation of cash provided by
                    operations to net income is a required disclosure.
                    This is the same schedule that appears in a statement prepared using the
                    indirect method


                    The required information items on a direct method statement of cash flow (per
                    FASB)

                              Operating Inflows
                                        Cash collected from customers (including lessees, tenants, licensees,
                                        and the like)
                                        Interest and dividends received
                                        Other operating cash receipts, if any
                              Operating outflows
                                        Cash paid to employees and other suppliers of goods or services
                                        (including insurance, advertising and the like)
                                        Interest paid
                                        Income taxes paid
                                        Other operating cash payments, if any

The Indirect Method
          Under the indirect method, net income is adjusted for noncash items
          related to operations to compute the net cash flow from operating
          activities.
                    If you choose to use the indirect method, you must also disclose interest paid
                    and income taxes paid during the year.


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Other disclosures
          Under both methods (direct & indirect), you must disclose noncash
          financing and investing activities
                    This can be on face of the statement or in the notes to the financial statements.
                    Examples:

                              Trade common stock for land
                              Convertible bonds converted to common stock


Noncash Items
          Some financing and investing activities do not affect an entity’s cash
          flow.
                    Examples:

                              Trade common stock for land
                              Issue bonds in exchange for a building
                              Convertible bonds converted to common stock
          Significant transactions should be disclosed separately.
          The disclosure of significant noncash financing and investing activities
          are required under both methods (direct & indirect)
          The disclosure can be on face of the statement or in the notes to the
          financial statements.

Theoretical Considerations

          The direct method has the advantage of reporting operating cash inflows separately from operating
          cash outflows, which may be useful in estimating future cash flows.

          The direct method is more meaningful to most financial statement users and the “tie in” to net
          income is also provided in a separate schedule which is the same as the indirect method
          presentation.


          Under the indirect method, adjustments are made to net income to arrive at cash flow from
          operating activities. Thus, cash from operating activities is “tied” to net income.

          An advantage of the indirect method is that income flows are converted from an accrual basis to a
          cash flow basis. In this manner, the indirect method shows the “quality of earnings” by providing
          information about intervals of leads and lags between income flows and operating cash flows.




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                                      Example 1 - Statement of Cash Flow – DIRECT METHOD
                                         Year ending                                                        Year ending
Palouse Pottery                           12/31/06 Ref             Debit      Ref             Credit         12/31/07      Target
Cash                                          15,000 X                 27,000                                    42,000      27,000

Accounts Receivable                           40,000                                                             37,500       (2,500)
Allowance for doubtful accounts               (3,000)                                                            (4,500)      (1,500)
Merchandise Inventory                         25,000                                                             43,000       18,000
Prepaid Expenses                                3,000                                                              6,000        3,000

Plant, property & equipment                 215,000                                                             236,000       21,000
Accumulated Depreciation                   (80,000)                                                             (82,000)      (2,000)
                                            215,000                                                             278,000
Accounts Payable                           (23,000)                                                             (31,000)     (8,000)
Salaries Payable                             (2,000)                                                             (9,000)     (7,000)
Interest payable                             (2,000)                                                             (1,500)         500
Income Taxes Payable                         (1,500)                                                             (5,500)     (4,000)
Dividends Payable                                  0                                                             (8,000)     (8,000)
Long term liabilities                      (25,000)                                                             (15,000)      10,000
Common stock, $1 par                      (100,000)                                                           (145,000)     (45,000)
Retained Earnings                          (61,500)                                                             (63,000)     (1,500)
                                          (215,000)                                                           (278,000)            0
                                           1997                                                                1997
Closing entry for                        Rev/(Exp)                                                          Rec/(Disb)
Sales                                        93,000
Gain/(loss) on sale of PP&E                  (4,000)
Realized gain/(loss) - land                  20,000
Cost of goods sold                         (35,000)
Salaries & other operating                 (37,000)
expenses
Bad debt expense                              (2,000)
Depreciation & amortization                  (11,000)
Interest expense                              (2,500)
Income taxes expense                          (7,000)
Net income (accrual basis)                     14,500
Statement of Cash Flows                                         (INFLOWS)                  (OUTFLOWS)
Operating Activities

Investing Activities




Financing Activities




Noncash Financing/Investing

    CHANGE IN CASH                                                                    X            27,000
                                Totals

Additional information:
a. Wrote off $500 accounts receivable as uncollectible                    d.   Sold land for $30,000 that had been acquired for $10,000
b. Sold operational assets for $4,000 cash that had cost                  e.   Paid a $10,000 long-term note installment
   $17,000 and had a book value of $8,000                                 f.   Purchase plant, property & equipment for $48,000 cash.
c. Declared a cash dividend of $13,000                                    g.   Issued common stock for $45,000 cash.



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                                    Example 1 - Statement of Cash Flow – INDIRECT METHOD
                                         Year ending                                                        Year ending
Palouse Pottery                           12/31/06 Ref             Debit      Ref             Credit         12/31/07      Target
Cash                                          15,000 X                 27,000                                    42,000      27,000

Accounts Receivable                           40,000                                                            37,500        (2,500)
Allowance for doubtful accounts               (3,000)                                                           (4,500)       (1,500)
Merchandise Inventory                         25,000                                                            43,000        18,000
Prepaid Expenses                                3,000                                                             6,000         3,000

Plant, property & equipment                  215,000                                                            236,000       21,000
Accumulated Depreciation                    (80,000)                                                           (82,000)       (2,000)
                                             215,000                                                            278,000
Accounts Payable                            (23,000)                                                           (31,000)      (8,000)
Salaries Payable                              (2,000)                                                            (9,000)     (7,000)
Interest payable                              (2,000)                                                            (1,500)         500
Income Taxes Payable                          (1,500)                                                            (5,500)     (4,000)
Dividends Payable                                   0                                                            (8,000)     (8,000)
Long term liabilities                       (25,000)                                                           (15,000)       10,000
Common stock, $1 par                       (100,000)                                                          (145,000)     (45,000)
Retained Earnings                           (61,500)                                                           (63,000)      (1,500)
                                           (215,000)                                                          (278,000)            0
Statement of Cash Flows                                         (INFLOWS)                  (OUTFLOWS)
Operating Activities




Investing Activities




Financing Activities




Noncash Financing/Investing

    CHANGE IN CASH                                                                    X            27,000
                                Totals

Additional information:
a. Wrote off $500 accounts receivable as uncollectible                    d.   Sold land for $30,000 that had been acquired for $10,000
b. Sold operational assets for $4,000 cash that had cost                  e.   Paid a $10,000 long-term note installment
   $17,000 and had a book value of $8,000                                 f.   Purchase plant, property & equipment for $48,000 cash.
c. Declared a cash dividend of $13,000                                    g.   Issued common stock for $45,000 cash.

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                                                   Example 2 - Statement of Cash Flow
                                         Year ending                                                  Year ending
Moscow Moving & Storage                   12/31/06 Ref              Debit         Ref      Credit      12/31/07      Target
Cash                                          15,000                                                        5,000     (10,000)

Accounts Receivable                            30,000                                                      28,500       (1,500)
Allowance for doubtful accounts                (1,500)                                                     (2,000)        (500)
Merchandise Inventory                          10,000                                                      17,000         7,000
Prepaid Expenses                                 4,500                                                         500      (4,000)

Plant, property & equipment                  220,100                                                      289,100       69,000
Accumulated Depreciation                     (20,000)                                                     (16,000)       4,000
                                             258,100                                                      322,100
Accounts Payable                             (10,000)                                                     (13,000)      (3,000)
Salaries Payable                              (3,000)                                                      (1,000)        2,000
Interest payable                                    0                                                      (1,000)      (1,000)
Long term liabilities                        (30,000)                                                     (10,000)      20,000

Common stock, $1 par                       (100,000)                                                     (181,000)     (81,000)
Retained Earnings                          (115,100)                                                     (116,100)      (1,000)
                                           (258,100)                                                     (322,100)            0
                                            1997                                                          1997
Closing entry for                         Rev/(Exp)                                                        Receipt/(Disb)
Sales                                          80,000
Gain/(loss) on sale of PP&E                   (2,000)
Cost of goods sold                           (35,000)
Salaries & other operating                   (26,000)
expenses
Bad debt expense                               (1,000)
Depreciation & amortization                    (5,000)
Interest expense                               (2,000)
Income taxes expense                           (3,000)
Net income (accrual basis)                       6,000
Statement of Cash Flows                                          (INFLOWS)              (OUTFLOWS)
Operating Activities

Investing Activities




Financing Activities




Noncash Financing/Investing


    CHANGE IN CASH
                                Totals

Additional Information
a. Wrote off $500 accounts receivable as uncollectible                      d. Issued common stock for $36,000 cash
b. Sold operational assets for $4,000 cash                                  e. Paid a $20,000 long-term note installment
   (cost $15,000, acc'd depreciation $9,000)                                f. Purchased operational assets, $39,000 cash
c. Declared and paid a cash dividend, $5,000                                g. Acquired land in exchange for 1,000 shares of
                                                                            common stock worth $45 each




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               Reconciliation of Net Income to Cash Provided by Operations
                                 or – “the Indirect Method”
Example 2
Moscow Moving & Storage
Statement of Cash Flow Worksheet
Reconciliation Schedule (Indirect method)                          Ref
Net income




Cash provided by operations




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                                                       Example 3
                                               Avery Slings & Arrows, Inc.
Avery Slings & Arrows
Income Statement
                                               For year ending                          12/31/04

Sales                                                                                 6,600,000
Earnings of affiliates (equity method)                                                  150,000
Realized loss on sale of equipment                                                      (65,000)
Realized gain on sale of investments                                                      53,000
Interest and dividend revenue                                                             15,000
     Total revenues                                                                   6,753,000

Cost of goods sold                                                        3,490,000
Salaries and wages                                                          632,000
Other operating expenses                                                    421,000
Bad debt expense                                                             45,000
Depreciation expense                                                        757,000
Amortization of intangibles                                                   5,000
Accretion expense                                                            25,000
Interest expense                                                            935,000
Income tax expense                                                          177,000   6,487,000
Net income                                                                              266,000

Prepare a statement of cash flows (direct method) including the required reconciling schedule and any other required
disclosures for Avery Slings & Arrows, Inc. Information from the balance sheet and income statement have been
entered into a worksheet for your convenience. In addition to completing the worksheet, you MUST prepare a formal
statement with headings, subtotals, etc. for full credit.

ADDITIONAL INFORMATION
a.    During the year, ASA paid $2,767,000 in cash for land, building, and equipment.
b.    On August 5, 2004, ASA issued 25,000 shares of common stock for $42 per share.
c.    ASA purchased $273,000 in marketable securities during the year.
d.    Equipment costing $500,000 was sold during the year for $59,000. The book value was $124,000.
e.    During the year, AAS declared cash dividends in the amount of $203,000.
f.    On April 1, 2004, the holders of $1,500,000 in convertible bonds elected to convert their bonds to common
      stock. The conversion ratio was 25 shares of common stock for each share $1,000 face value bond.
g.    The noncurrent investment represents 30% of the outstanding securities of the investee. This investment is
      accounted for on the equity method. During 2004, ASA received $29,000 in dividends from the investment.
h.    On May 1, 2004, ASA acquired equipment under a capital lease. At the inception of the lease, the present
      value of the minimum lease payments was $648,000.
i.    ASA acquired a patent on a new process for $500,000 on October 15, 2004.
j.    During 2004, ASA sold marketable securities which it had acquired for $222,000 for $275,000.
k.    In February, ASA issued 150,000 shares of common stock in a 50% stock dividend.
l.    ASA issued $3,000,000 in bonds at face value on August 1, 2004.
m.    ASA sold 500 shares of treasury stock which it had acquired for $20 per share for $46 per share on January 18,
      2004.
n.    In October, ASA acquired 1,000 shares of treasury stock at $38 per share.
o.    Bad debts in the amount of $33,000 were written off during the year.




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Avery Slings & Arrows
Balance Sheet
                                                                            12/31/04      12/31/03
Current Assets
Cash                                                                       2,261,000     2,850,000
Securities Available for Sale (at market)                                    258,000       100,000
Accounts Receivable (net)                                                  1,947,000     1,900,000
Merchandise Inventory                                                        602,000       900,000
Prepaid Expenses                                                               4,000        50,000
                                                                           5,072,000     5,800,000
Noncurrent Assets
Investments in affiliated companies (equity method)                         2,121,000     2,000,000
Land, building & equipment                                                20,715,000    17,800,000
Less Accumulated Depreciation                                             (2,181,000)   (1,800,000)
Intangible Assets                                                             568,000        73,000
   Total assets                                                           26,295,000    23,873,000

Current Liabilities
Accounts Payable                                                             347,000       650,000
Salaries Payable                                                              18,000        21,000
Interest payable                                                             156,000        55,000
Income Taxes Payable                                                          45,000        32,000
Dividends Payable                                                            128,000        60,000
                                                                             694,000       818,000
Noncurrent Liabilities
Bonds Payable                                                              7,000,000     4,000,000
Premium/Discount on Bonds Payable                                            642,000       656,000
Convertible Bonds Payable                                                  1,500,000     3,000,000
Lease obligation                                                           2,108,000     1,825,000
Asset retirement obligation                                                  275,000       250,000
Deferred Income Taxes                                                        122,000        75,000
Other long term liabilities                                                  590,000     2,590,000
                                                                          12,237,000    12,396,000

Stockholder's Equity
Common stock, $10 par                                                      5,125,000     3,000,000
Additional paid in capital - common                                        3,525,000     1,600,000
Other paid in capital                                                          13,000             0
Unrealized (gain)/loss AFS invest                                              27,000      (80,000)
Treasury stock (at cost)                                                     (38,000)      (10,000)
Retained Earnings                                                          4,712,000     6,149,000
                                                                          13,364,000    10,659,000

Total liabilities and equity                                              26,295,000    23,873,000




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Avery Slings & Arrows                    Year ending                                              Year ending
                                        12/31/03     Ref Debit             Ref Credit             12/30/04    Target
Cash                                         2,850,000       x                          589,000      2,261,000    (589,000)
Securities Available for Sale                   180,000                                                231,000      51,000

Allowance to adjust to market                  (80,000)                                                 27,000     107,000

Accounts receivable (net)                    1,900,000                                               1,947,000      47,000

Merchandise Inventory                           900,000                                                602,000    (298,000)

Prepaid Expenses                                 50,000                                                  4,000     (46,000)

Investments in affiliated
                                             2,000,000                                               2,121,000     121,000
companies (equity method)

Land, building & equipment
                                            17,800,000                                              20,715,000 2,915,000


Accumulated Depreciation                    (1,800,000)                                             (2,181,000)   (381,000)

Intangible Assets                                73,000                                                568,000     495,000

Total assets                                23,873,000                                              26,295,000



Accounts Payable                              (650,000)                                              (347,000)     303,000

Salaries Payable                               (21,000)                                                (18,000)      3,000

Interest payable                               (55,000)                                              (156,000)    (101,000)

Income Taxes Payable                           (32,000)                                                (45,000)    (13,000)

Dividends Payable                              (60,000)                                              (128,000)     (68,000)

Bonds Payable                               (4,000,000)                                             (7,000,000) (3,000,000)

(Premium)/Discount on Bonds
                                              (656,000)                                              (642,000)      14,000
Payable

Convertible Bonds Payable                   (3,000,000)                                             (1,500,000) 1,500,000

Lease obligation                            (1,825,000)                                             (2,108,000)   (283,000)

Asset retirement obligation                   (250,000)                                              (275,000)     (25,000)

Deferred Income Taxes                          (75,000)                                              (122,000)     (47,000)

Other long term liabilities                 (2,590,000)                                              (590,000)    2,000,000


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Avery Slings & Arrows                    Year ending                                     Year ending
                                        12/31/03     Ref Debit              Ref Credit   12/30/04    Target
Common stock, $10 par                       (3,000,000)                                    (5,125,000) (2,125,000)

Additional paid in capital –
                                            (1,600,000)                                    (3,525,000) (1,925,000)
common

Unrealized (gain)/loss AFS invest                 80,000                                      (27,000)   (107,000)

Treasury stock (at cost)                          10,000                                       38,000      28,000

Other paid in capital                                    0                                    (13,000)    (13,000)

Retained Earnings                           (6,149,000)                                    (4,712,000)   1,437,000

                                           (23,873,000)                                   (26,295,000)

Closing entry for                                2004                                                       2004
                                            Revenue/ Re                                       Operating Cash
                                           (Expense) f                      Ref             Inflows/(Outflows)
Sales                                         6,600,000
Earnings of affiliated companies                 150,000
Gain/(loss) on sale of equipment                (65,000)
Gain/(loss) sale of patent                               0
Realized gain/(loss) sale of land                        0
Realized gain/(loss) on
investments                                       53,000
Interest and dividend revenue                     15,000
Cost of goods sold                          (3,490,000)

Salaries and wages                             (632,000)
Other operating expenses                       (421,000)
Bad debt expense                                (45,000)
Depreciation expense                           (757,000)
Amortization of intangibles                       (5,000)
Accretion expense                               (25,000)
Interest expense                               (935,000)

Income taxes expense                           (177,000)

Net income (accrual basis)                       266,000




  6be199c6-02bc-4bc6-8926-151844cb324a.doc created by T. Gordon 10/2/2012
                                                        Page 17
Acct 592 – Spring 2005



Avery Slings & Arrows                                                     INFLOWS   OUTFLOWS
Cash provided by operations:


Reconciling schedule:
Net income                                           266,000




Cash provided by operations



Investing Activities                                                                           0




6be199c6-02bc-4bc6-8926-151844cb324a.doc created by T. Gordon 10/2/2012
                                                      Page 18
 Acct 592 – Spring 2005



Avery Slings & Arrows                                                      INFLOWS        OUTFLOWS


Financing Activities                                                                                 0




Noncash Financing/Investing




    CHANGE IN CASH                                                            589,000 x
Totals                                                                                               0




 6be199c6-02bc-4bc6-8926-151844cb324a.doc created by T. Gordon 10/2/2012
                                                       Page 19
Acct 592 – Spring 2005



                                                Avery Slings & Arrows
                                               Statement of Cash Flows
                                          For year ended December 31, 2004

                                                                          Inflows     Outflows       Net
Cash provided by operations
Cash collected from customers                                             6,508,000
Interest & dividends received                                                44,000
Cash paid for merchandise                                                             (3,495,000)
Cash paid to employees                                                                  (635,000)
Other operating disbursements                                                           (375,000)
Interest paid                                                                           (848,000)
Income taxes paid                                                                       (117,000)
                                                                          6,552,000   (5,470,000)    1,082,000


Cash provided by investing activities
Proceeds from sale of equipment                                              59,000
Cash outlay to acquire equipment                                                      (2,767,000)
Cash outlay to acquire patent                                                           (500,000)
Proceeds from sale of securities                                            275,000
Cash outlay to buy securities                                                           (273,000)
                                                                            334,000   (3,540,000)   (3,206,000)


Cash provided by financing activities
Dividends paid                                                                          (135,000)
Sold treasury stock                                                          23,000
Purchased treasury stock                                                                 (38,000)
Payments on long term debt                                                            (2,000,000)
Payments on capital leases                                                              (365,000)
Common stock issued                                                       1,050,000
Proceeds from issuing nonconvertible bonds                                3,000,000
                                                                          4,073,000   (2,538,000)    1,535,000


Change in cash                                                                                       (589,000)
Beginning balance - Cash                                                                             2,850,000
Ending balance - Cash                                                                                2,261,000




6be199c6-02bc-4bc6-8926-151844cb324a.doc created by T. Gordon 10/2/2012
                                                      Page 20
Acct 592 – Spring 2005

                                                Avery Slings & Arrows
                                               Statement of Cash Flows
                                          For year ended December 31, 2004

Non-cash financing and investing activities
Capital lease                                                                 648,000
Preferred bonds converted to common stock                                    1,500,000



Schedule to reconcile net income to cash provided by operations
Net Income                                                                    266,000
Depreciation                                                                  757,000
Amortization & impairment of intangibles                                        5,000
Accretion expense                                                              25,000
Amortization of bond premium                                                  (14,000)
Realized loss on sale of equipment                                             65,000
Realized gain on sale of investments                                          (53,000)
Equity method investments – earnings in excess of dividends                  (121,000)
Increase in deferred income taxes                                              47,000
Change in working capital accounts:
          Net accounts receivable                                             (47,000)
          Merchandise Inventory                                               298,000
          Prepaid Expenses                                                     46,000
          Accounts Payable                                                   (303,000)
          Salaries Payable                                                     (3,000)
          Interest Payable                                                    101,000
          Income Taxes Payable                                                 13,000
Cash provided by operations:                                                 1,082,000




6be199c6-02bc-4bc6-8926-151844cb324a.doc created by T. Gordon 10/2/2012
                                                      Page 21
Acct 592 – Spring 2005


                         Acct. 301 - Statement of Cash Flows - Homework 4
                                     Wenatchee Whirlpool World
                                           Balance Sheet
                                                                            12/31/96     12/31/95
Current Assets
Cash                                                                       2,837,600    2,000,000
Securities Available for Sale (at market)                                    390,000      150,000
Accounts Receivable                                                        1,752,000    1,900,000
Allowance for doubtful accounts                                            (120,500)    (110,000)
Merchandise Inventory                                                      1,145,000      875,000
Prepaid Operating Expenses                                                    84,000       62,000
                                                                           6,088,100    4,877,000

Noncurrent Assets
Investments (equity method)                                                3,097,000    3,000,000
Plant, property & equipment                                               16,420,000   10,800,000
Accumulated Depreciation                                                   (829,000)    (600,000)
Intangible Assets                                                             71,500      128,000
TOTAL ASSETS                                                              24,847,600   18,205,000

Current Liabilities
Accounts Payable                                                            880,000      750,000
Salaries Payable                                                             20,000       15,000
Income Taxes Payable                                                         13,400       27,000
Dividends Payable                                                            35,000       60,000
Current portion long term debt                                               29,000       21,000
                                                                            977,400      873,000
Noncurrent Liabilities
Bonds Payable                                                             10,000,000    5,000,000
Discount on Bonds                                                          (247,000)    (270,000)
Deferred Income Taxes                                                        180,000       88,000
Other long term liabilities                                                  562,000    3,000,000
                                                                          10,495,000    7,818,000

Stockholder's Equity
Convertible preferred, $100 par                                              500,000    2,000,000
Common stock, $10 par                                                      3,100,000    1,500,000
Additional paid in capital                                                 3,950,000    1,200,000
Unrealized (gain)/loss investments                                            27,000       78,000
Retained Earnings                                                          5,798,200    4,736,000
                                                                          13,375,200    9,514,000
Total liabilities and equity                                              24,847,600   18,205,000




6be199c6-02bc-4bc6-8926-151844cb324a.doc created by T. Gordon 10/2/2012
                                                      Page 22
Acct 592 – Spring 2005



                                                Wenatchee Whirlpool World
                                                    Income Statement
                                                 For year ending 12/31/96

Sales                                                                                      6,200,000
Earnings of affiliated company (equity method)                                               115,000
Gain/(loss) on sale of PP&E                                                                  (40,000)
Realized gain/(loss) on investments                                                          108,000
Realized gain on sale of patent                                                              950,000
Interest and dividend revenue                                                                  13,000
     Total revenues                                                                        7,346,000

Cost of goods sold                                                        3,600,000
Salaries and wages                                                          590,000
Other operating expenses                                                    345,000
Bad debt expense                                                             38,500
Depreciation & amortization expense                                         250,500
Interest expense                                                            669,400
Income taxes expense                                                        740,400        6,233,800

Net income                                                                                 1,112,200

Additional information:

a.        On February 25, WWW sold an internally developed patent for $1,000,000. The patent was carried on the
          books at unamortized legal fees amounting to $50,000 at date of sale.
b.        On March 31, WWW issued $5,000,000 in bonds at face value. The semi-annual bonds have a coupon rate
          of 10% per annum.
c.        During the year, WWW disposed of various items of equipment with a total book value of $65,000 and
          original cost of $80,000. The amount received was $25,000 in cash.
d.        During the third quarter, shareholders holding 15,000 shares of the preferred stock converted them into
          common stock. The conversion ratio was 6 shares of common for each share of preferred.
e.        On July 20, WWW sold 50,000 shares of its common stock for $41 per share.
f.        By the end of the year, WWW had written off as uncollectible a total of $28,000 in accounts receivable.
g.        An existing factory with equipment was acquired during the year. The acquisition cost was allocated as
          follows: $772,000 to land, $3,450,000 to building and 678,000 to equipment.
h.        WWW acquired a parcel of land adjoining the new factory by giving the owner 20,000 shares of its
          common stock. At the date of the transaction, the market value of the stock was $40 per share.
i.        During the year WWW purchased $875,000 in marketable securities and sold securities which had cost
          $584,000. The market value of the portfolio at the end of the year was $390,000.
j.        WWW owns 30% of a company which manufactures parts that WWW uses in its production process.
          WWW received $18,000 in dividends from this partially owned company during 1996.
k.        Dividends declared during the year totaled $50,000.




6be199c6-02bc-4bc6-8926-151844cb324a.doc created by T. Gordon 10/2/2012
                                                      Page 23
Acct 592 – Spring 2005


Homework 4 - Acct 315
Worksheet                                        Year ending                                        Year ending
Wenatchee Whirlpool World                            12/31/95 Ref         Debit      Ref   Credit       12/31/96   Target
Cash                                                 2,000,000             837,600                     2,837,600    837,600
Securities Available for Sale (at                      150,000                                          390,000     240,000
market)
Accounts Receivable                                  1,900,000                                         1,752,000   (148,000)


Allowance for doubtful accounts                      (110,000)                                         (120,500)    (10,500)


Merchandise Inventory                                  875,000                                         1,145,000    270,000


Prepaid Operating Expenses                               62,000                                          84,000       22,000


Investments in affiliated companies                  3,000,000                                         3,097,000      97,000
(equity method)
Plant, property & equipment                        10,800,000                                         16,420,000   5,620,000


Accumulated Depreciation                             (600,000)                                         (829,000)   (229,000)


Intangible Assets                                      128,000                                           71,500     (56,500)


                                                   18,205,000                                         24,847,600
Accounts Payable                                     (750,000)                                         (880,000)   (130,000)


Salaries Payable                                       (15,000)                                         (20,000)      (5,000)


Income Taxes Payable                                   (27,000)                                         (13,400)      13,600


Dividends Payable                                      (60,000)                                         (35,000)      25,000


Current portion long term debt                         (21,000)                                         (29,000)      (8,000)


Bonds Payable                                      (5,000,000)                                      (10,000,000) (5,000,000)


Premium/Discount on Bonds Payable                      270,000                                          247,000     (23,000)


Deferred Income Taxes                                  (88,000)                                        (180,000)    (92,000)


Other long term liabilities                        (3,000,000)                                         (562,000)   2,438,000




6be199c6-02bc-4bc6-8926-151844cb324a.doc created by T. Gordon 10/2/2012                                     Page 24
Acct 592 – Spring 2005
Wenatchee Whirlpool World
                                                       12/31/95 ref       Debit   ref   Credit       12/31/96   Target
Convertible preferred, $100 par                    (2,000,000)                                      (500,000)   1,500,000


Common stock, $10 par                              (1,500,000)                                    (3,100,000) (1,600,000)


Additional paid in capital                         (1,200,000)                                    (3,950,000) (2,750,000)


Unrealized (gain)/loss investments                     (78,000)                                      (27,000)       51,000

Retained Earnings                                  (4,736,000)                                    (5,798,200) (1,062,200)


                                              0 (18,205,000)                                     (24,847,600)


Closing entry for                                          1996                                         1996
                                                  Rev/(Exp)                                      Receipt/(Dis
                                                                                                     b)
Sales                                                6,200,000


Earnings of affiliated companies                       115,000
(equity method)
Gain/(loss) on sale of PP&E                            (40,000)

Realized gain/(loss) on investments                    108,000

Realized gain on sale of patent                        950,000

Interest and dividend revenue                            13,000


Cost of goods sold                                 (3,600,000)


Salaries and wages                                   (590,000)


Other operating expenses                             (345,000)


Bad debt expense                                       (38,500)


Depreciation expense                                 (244,000)

Amortization of intangible assets                        (6,500)

Interest expense                                     (669,400)


Income taxes expense                                 (740,400)




6be199c6-02bc-4bc6-8926-151844cb324a.doc created by T. Gordon 10/2/2012                                   Page 25
Acct 592 – Spring 2005
Net income (accrual basis)                           1,112,200




6be199c6-02bc-4bc6-8926-151844cb324a.doc created by T. Gordon 10/2/2012   Page 26
Acct 592 – Spring 2005
Wenatchee Whirlpool World
Statement of Cash Flows                                                   INFLOWS   OUTFLOWS     (Subtotals)
Operating Activities




Investing Activities




Financing Activities




Noncash Financing/Investing




    CHANGE IN CASH                                                                     837,600
Totals


6be199c6-02bc-4bc6-8926-151844cb324a.doc created by T. Gordon 10/2/2012                                Page 27
Acct 592 – Spring 2005



Statement of Cash Flow – Easy Practice Problems 5 & 6
5.        Ulliman Company
          Prepare a statement of cash flow – direct method including the reconciliation schedule. Most
          information is provided on the attached workpaper.

          Additional information:
          a.     Dividends declared and paid totaled $700.
          b.     On January 1, 1999 the 10% convertible bonds that had originally been issued at face value
                 were converted into 500 shares of common stock. The book value method was used to
                 account for the conversion.
          c.     Long-term nonmarketable investments that cost $1,600 were sold for $2,300.
          d.     The long-term note payable was paid by issuing 250 shares of common stock at the
                 beginning of the year.
          e.     Equipment with a cost of $2,000 and a book value of $300 was sold for $100.
          f.     Equipment was purchased at a cost of $16,200.
          g.     The 12% bonds payable were issued on September 1, 1999 at 97. They mature on
                 September 1, 2009. The company uses the straight-line method to amortize the discount.
          h.     Taxable income was less than pretax accounting income, resulting in a $396 increase in
                 deferred taxes payable.
          i.     Short-term marketable securities were purchased at a cost of $1,300. The portfolio was
                 increased by $300 to a $3,800 fair value at year end by adjusting the related allowance
                 account.

6.        Driskoll Company
          Prepare a statement of cash flow – direct method including the reconciliation schedule. Most
          information is provided on the attached workpaper.

          Additional information:
          a.     Dividends were declared in the amount of $2,100.
          b.     Bonds payable with a face value, book value, and market value of $14,000 were retired on
                 June 30, 1999.
          c.     Bonds payable with a face value of $8,000 were issued at 90.25 on July 31, 1999, They
                 mature on July 31, 2004. The company uses the straight-line method to amortize the bond
                 discount.
          d.     Equipment with a cost of $4,000 and a book value of $1,400 was exchanged for an acre of
                 land valued at $2,700. No cash was exchanged. The transaction was properly considered to
                 be a dissimilar asset exchange.
          e.     Long-term investments in bonds being held to maturity with a cost of $1,000 were sold for
                 $800.
          f.     Sixty-five shares of common stock were exchanged for a patent. The common stock was
                 selling for $20 per share at the time of the exchange.
          g.     A tornado completely destroyed a small building that had an original cost of $8,000 and a
                 book value of $4,800. Settlement with the insurance company resulted in after-tax proceeds
                 of $2,200 and an extraordinary loss (net of income taxes) of $2,600.




6be199c6-02bc-4bc6-8926-151844cb324a.doc created by T. Gordon 10/2/2012
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Acct 592 – Spring 2005


5.        Homework Assignment – Ulliman Company
Uliman Company                             Year ending                    Worksheet     Year ending
                                            01/01/99 Ref         Debit     Ref Credit    12/31/99 Target
Cash                                           1,400                                         2,400     1,000
Accounts receivable (net)                      2,800                                         2,690     (110)
Marketable securities (at cost)                1,700                                         3,000     1,300
Allowance for change in value                    500                                           800       300
Merchandise Inventory                          8,100                                         7,910     (190)
Prepaid Expenses                               1,300                                         1,710       410
Investments (long-term)                        7,000                                         5,400   (1,600)
Land                                          15,000                                        15,000         0
Buildings and equipment                       32,000                                        46,200   14,200
Accumulated depreciation                    (16,000)                                      (16,400)     (400)
                                                   0                                             0         0
                                              53,800                                        68,710

Accounts Payable                               (3,800)                                     (4,150)      (350)
Income Taxes Payable                           (2,400)                                     (2,504)      (104)
Wages payable                                  (1,100)                                       (650)        450
Interest payable                                     0                                       (400)      (400)
12% bonds payable                                    0                                    (10,000)   (10,000)
Premium/Discount on Bonds                            0                                         290        290
Payable
Notes payable (long term)                     (3,500)                                            0      3,500
10% Convertible bonds                         (9,000)                                            0      9,000
Deferred Income Taxes                           (800)                                      (1,196)      (396)
Convertible preferred, $100 par                     0                                            0          0
Common stock, $10 par                        (14,000)                                     (21,500)    (7,500)
Additional paid in capital                    (8,700)                                     (13,700)    (5,000)
Unrealized (gain)/loss                          (500)                                        (800)      (300)
investments
Retained Earnings                            (10,000)                                     (14,100)     (4,100)
                                             (53,800)                                     (68,710)
Closing entry for                               1999                                         1999
                                           Rev/                                         Receipt/(Disb)
                                           (Exp)
Sales                                          39,930
Other revenue                                       0
Gain/(loss) on sale of PP&E                     (200)
Realized gain/(loss) on                           700
investments
Interest and dividend revenue                     820
Cost of goods sold                           (19,890)
Salaries & other operating                   (11,000)
expenses
Other operating expense                       (1,000)
Depreciation & amortization                   (2,100)
Interest expense                                (410)
Income taxes expense                          (2,050)
Net income (accrual basis)                      4,800
                                             (53,800)



6be199c6-02bc-4bc6-8926-151844cb324a.doc created by T. Gordon 10/2/2012
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Acct 592 – Spring 2005


5.        Ulliman Company, continued
Statement of Cash Flows                                           INFLOWS   OUTFLOWS   Subtotals
Operating Activities

Reconciliation Schedule:




Investing Activities




Financing Activities




Noncash Financing/Investing



   CHANGE IN CASH
Totals



6be199c6-02bc-4bc6-8926-151844cb324a.doc created by T. Gordon 10/2/2012
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Acct 592 – Spring 2005


6.        Homework Problem – Driskoll Company
Driskoll Company                           Year ending                    Worksheet     Year ending
                                            12/31/99 Ref         Debit     Ref Credit    12/31/99 Target
Cash                                            2,700                                        3,520       820
Accounts receivable (net)                       5,900                                        6,215       315
Inventories                                    15,300                                       15,530       230
Prepaid Expenses                                1,400                                        1,000     (400)
Investments (long-term)                         8,300                                        7,300   (1,000)
Land                                           16,300                                       19,000     2,700
Buildings                                      68,700                                       60,700   (8,000)
Acc'd depreciation - Bldg                    (35,000)                                     (34,500)       500
Equipment                                      29,600                                       25,600   (4,000)
Acc'd depreciation - Equip                   (14,200)                                     (14,700)     (500)
Patents                                         8,700                                        9,185       485
                                             107,700                                        98,850

Accounts Payable                               (8,900)                                     (9,195)    (295)
Interest payable                                 (630)                                       (300)      330
Wages payable                                  (2,500)                                     (2,600)    (100)
Bonds payable                                 (23,000)                                    (17,000)    6,000
Discount on bonds                                    0                                         715      715
Common stock, $10 par                         (22,000)                                    (22,650)    (650)
Additional paid in capital                    (15,320)                                    (15,970)    (650)
Unrealized (gain)/loss                               0                                           0        0
investments
Retained Earnings                   (35,350)                                              (31,850)     3,500
                                   (107,700)                                              (98,850)
                                  ok                                                    ok
Closing entry for                      1999                                                  1999
                                  Rev/(Exp)                                             Receipt/(Disb)
Sales                                 49,550
Gain/(loss) on exchange of assets      1,300
Realized gain/(loss) on                (200)
investments
Interest and dividend revenue            790
Cost of goods sold                  (23,800)
Salaries & other operating          (16,510)
expenses
Other operating expense              (1,100)
Depreciation - buildings             (2,700)
Depreciation - equipment             (3,100)
Patent amortization                    (815)
Interest expense                     (1,715)
Income taxes expense                   (500)
Extraordinary loss (net of taxes)    (2,600)
Net income (accrual basis)           (1,400)




6be199c6-02bc-4bc6-8926-151844cb324a.doc created by T. Gordon 10/2/2012
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6.        Driskoll Company, continued
Statement of Cash Flows                                           INFLOWS   OUTFLOWS   Subtotals
Operating Activities

Reconciliation Schedule:




Investing Activities




Financing Activities




Noncash Financing/Investing




   CHANGE IN CASH
Totals




6be199c6-02bc-4bc6-8926-151844cb324a.doc created by T. Gordon 10/2/2012
                                                      Page 32
Acct 592 – Spring 2005
7.   Statement of Cash Flow Problem
      from final exam, Spring 1998
Albion Altimeters Inc.                                                                                             Albion Altimeters Inc.
Balance Sheet                                          12/31/97            12/31/96                                 Income Statement
Current Assets                                                                                                      For year ending                        12/31/97
Cash                                                    310,200             400,000
Securities Available for Sale (at market)             1,112,000             500,000    Sales                                                             3,600,000
Accounts Receivable                                     781,000             900,000    Gain/(loss) on sale of PP&E                                         (30,000)
Allowance for doubtful accounts                         (33,200)            (27,000)   Interest and dividend revenue                                         15,000
Merchandise Inventory                                   829,000             850,000         Total revenues                                               3,585,000
Prepaid Operating Expenses                                38,800              25,000
                                                      3,037,800           2,648,000    Cost of goods sold                               2,100,000
                                                                                       Salaries and wages                                 650,000
Noncurrent Assets                                                                      Other operating expenses                           230,000
                                                                                       Bad debt expense                                    17,200
Plant, property & equipment                           3,562,000           1,880,000
                                                                                       Depreciation & amortization expense                 30,000
Accumulated Depreciation                              (355,000)           (350,000)
                                                                                       Interest expense                                    87,700
TOTAL ASSETS                                          6,244,800           4,178,000
                                                                                       Income taxes expense                               180,200        3,295,100

Current Liabilities                                                                    Net income                                                          289,900
Accounts Payable                                        413,000            350,000
Salaries Payable                                          7,200              8,500
                                                                                       Required:
Income Taxes Payable                                     23,500             27,000
                                                                                       Use the additional information (below) and the worksheet provided to
Dividends Payable                                             0             25,000
                                                                                       prepare the statement of cash flow using the direct method. For full credit,
                                                        443,700            410,500
                                                                                       use the pages provided to prepare the formal statement in addition to the
Noncurrent Liabilities
                                                                                       worksheet.
Bonds Payable                                         1,000,000           1,000,000
Premium/Discount on Bonds Payable                       118,000             124,000
                                                                                       Additional information:
Deferred Income Taxes                                   103,700              88,000
                                                                                       a.     AA declared dividends of $75,000 on June 30, 1997.
                                                      1,221,700           1,212,000    b.     On Sept. 3, AA sold equipment with a book value of $65,000 for
                                                                                              $35,000 in cash. The original cost of the item was $90,000.
Stockholder's Equity                                                                   c.     AA purchased for cash plant, property & equipment for $1,740,000.
Common stock, $10 par                                 1,510,000           1,000,000    d.     On May 15, AA issued 50,000 shares of common stock at $35 each.
Additional paid in capital                            1,972,000             700,000    e.     AA wrote off $11,000 of bad debts during 1997.
Acc'd other comprehensive income*                        13,000             (14,000)   f.     AA purchased for cash $585,000 in marketable securities on Apr. 1.
Retained Earnings                                     1,084,400             869,500    g.     On Oct. 10, AA issued 1,000 shares of stock in exchange for a
                                                      4,579,400           2,555,500           parcel of land. At that date, the market price of the stock was $32.
Total liabilities and equity                          6,244,800           4,178,000


* Other comprehensive income is composed of the holding gains/losses
related to available for sale securities.



6be199c6-02bc-4bc6-8926-151844cb324a.doc created by T. Gordon 10/2/2012                                                Page 33
Acct 592 – Spring 2005

7. Statement of Cash Flow Problem
Worksheet                                         Year ending                                              Year ending
Albion Altimeters Inc.                                12/31/96 Ref        Debit    Ref         Credit          12/31/97       Target
Cash                                                    400,000                                   89,800        310,200         (89,800)
Securities Available for Sale (at market)               500,000                                               1,112,000         612,000

Accounts Receivable                                     900,000                                                 781,000        (119,000)

Allowance for doubtful accounts                         (27,000)                                               (33,200)          (6,200)
Merchandise Inventory                                   850,000                                                 829,000         (21,000)
Prepaid Operating Expenses                                25,000                                                 38,800          13,800
Plant, property & equipment                           1,880,000                                               3,562,000       1,682,000

Accumulated Depreciation                              (350,000)                                               (355,000)          (5,000)

                                                      4,178,000                                               6,244,800
Accounts Payable                                      (350,000)                                               (413,000)         (63,000)
Salaries Payable                                         (8,500)                                                 (7,200)             1,300
Income Taxes Payable                                    (27,000)                                               (23,500)              3,500
Dividends Payable                                       (25,000)                                                      0          25,000
Bonds Payable                                       (1,000,000)                                              (1,000,000)                0
Premium/Discount on Bonds Payable                     (124,000)                                               (118,000)              6,000
Deferred Income Taxes                                   (88,000)                                              (103,700)         (15,700)
Common stock, $10 par                               (1,000,000)                                              (1,510,000)       (510,000)

Additional paid in capital                            (700,000)                                              (1,972,000)     (1,272,000)

Acc'd other comprehensive income                          14,000                                               (13,000)         (27,000)
Retained Earnings                                     (869,500)                                              (1,084,400)       (214,900)
                                              0     (4,178,000)                                              (6,244,800)     (2,066,800)

Closing entry for 1997                             Rev/(Exp)       Ref     Debit         Ref     Credit      Receipt/(Disb)
Sales                                                 3,600,000
Gain/(loss) on sale of PP&E                             (30,000)
Interest and dividend revenue                             15,000
Cost of goods sold                                  (2,100,000)

Salaries and wages                                    (650,000)
Other operating expenses                              (230,000)
Bad debt expense                                        (17,200)
Depreciation expense                                    (30,000)
Interest expense                                        (87,700)
Income taxes expense                                  (180,200)

Net income (accrual basis)                              289,900



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7. Albion Altimeters
Statement of Cash Flows                                                   INFLOWS      OUTFLOWS   (Subtotals)
Operating Activities




Investing Activities




Financing Activities




Noncash Financing/Investing




    CHANGE IN CASH                                                            89,800
Totals

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                                                  Albion Altimeters
                                                Statement of Cash Flow
                                                For year ended 12-31-97

Cash provided by operations




Cash provided by investing activities




Cash provided by financing activities




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                                                  Albion Altimeters
                                                Statement of Cash Flow
                                                For year ended 12-31-97

Reconciling schedule




Notes:




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                          Acct 315 - Statement of Cash Flow
                               Homework Problem # 8

Instructions:
Prepare the statement of cash flow for Endicott Engines Inc. (attached) using the direct method.
Show all your work on clearly labeled and well-organized worksheet (provided) or equivalent
printout. Label your work and answers clearly. You must submit a worksheet if you want me to
be able to follow your thought process (in case your answer is wrong). If the problem doesn’t
“balance”, you may “plug” something (clearly labeled as a plug) and still obtain most of the
available points. If you are using spreadsheet software, please explain your computations since I
cannot tell what formulas you incorporated into the cells from looking at the printout. The Excel
worksheet is available on the course web page: http://www.academic.uidaho.edu/Acct301.

NOTE: For full credit, you must prepare the statement of cash flow in good form (direct
method) with all necessary disclosures including a reconciling schedule and disclosures about
noncash financing and investing activities.

                                                 Endicott Engines Inc.
                                                   Income Statement
                                                For year ending 12/31/02

Sales                                                                                  6,500,000
Earnings of affiliated companies (equity method)                                         125,000
Gain/(loss) on sale of PP&E                                                             (30,000)
Realized gain/(loss) on investments                                                      192,000
Realized gain on sale of patent                                                          450,000
Interest and dividend revenue                                                             15,000
     Total revenues                                                                    7,252,000

Cost of goods sold                                                         3,800,000
Salaries and wages                                                           610,000
Other operating expenses                                                     354,000
Bad debt expense                                                              47,200
Depreciation & amortization expense                                          261,000
                                                                             692,100
Income taxes expense                                                         572,700   6,337,000

Net income                                                                              915,000




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Acct 592 – Spring 2005


                                                  Endicott Engines Inc.

Additional information:

a.        On February 19, EEI sold an internally developed patent for $500,000.
b.        On April 3, EEI issued $6,000,000 in bonds at face value. The semi-annual bonds have a
          coupon rate of 10% per annum.
c.        During the year, EEI disposed of various items of equipment with a total book value of
          $60,000 and original cost of $80,000. The amount received was $30,000 in cash.
d.        During the third quarter, shareholders holding 10,000 shares of the preferred stock
          converted them into common stock. The conversion ratio was 8 shares of common for
          each share of preferred.
e.        On July 20, EEI sold 25,000 shares of its common stock for $43 per share.
f.        By the end of the year, EEI had written off as uncollectible a total of $35,000 in accounts
          receivable.
g.        An existing factory with equipment was acquired during the year. The acquisition cost
          was allocated as follows: $750,000 to land, $4,000,000 to building and 600,000 to
          equipment.
h.        EEI acquired a parcel of land adjoining the new factory by giving the owner 10,000
          shares of its common stock. At the date of the transaction, the market value of the stock
          was $45 per share.
i.        New equipment for the factory was obtained under a capital lease. The present value of
          the minimum lease payments was $722,000.
j.        During the year EEI purchased $900,000 in marketable securities and sold securities
          which had cost $600,000. The market value of the portfolio at the end of the year was
          $536,000.
k.        EEI owns 40% of a company that manufactures parts that EEI uses in its production
          process. EEI received $20,000 in dividends from this partially owned company during
          2002.
l.        Dividends declared during the year totaled $100,000.




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Endicott Engines Inc.
Balance Sheet                                                               12/31/02     12/31/01

Current Assets
Cash                                                                       1,308,200    1,500,000
Securities Available for Sale                                                536,000      300,000
Accounts Receivable                                                        2,145,000    2,000,000
Allowance for doubtful accounts                                            (122,200)    (110,000)
Merchandise Inventory                                                      1,165,000      975,000
Prepaid Operating Expenses                                                    63,000       50,000
                                                                           5,095,000    4,715,000

Noncurrent Assets
Investments (partially owned companies)                                    2,605,000    2,500,000
Plant, property & equipment                                               17,142,000   10,700,000
Accumulated Depreciation                                                   (934,000)    (700,000)
Intangible Assets                                                             93,000      150,000
TOTAL ASSETS                                                              24,001,000   17,365,000

Current Liabilities
Accounts Payable                                                           1,050,000     800,000
Salaries Payable                                                              43,000      18,000
Income Taxes Payable                                                          24,000      35,000
Dividends Payable                                                             85,000      60,000
                                                                           1,202,000     913,000
         Noncurrent Liabilities
Bonds Payable                                                             11,000,000    5,000,000
Discount on Bonds                                                          (277,000)    (300,000)
Deferred Income Taxes                                                        142,000       90,000
Lease obligations                                                            749,000      323,000
Other long term liabilities                                                  570,000    3,000,000
                                                                          12,184,000    8,113,000

Stockholder's Equity
Convertible preferred, $100 par                                            1,000,000    2,000,000
Common stock, $10 par                                                      2,150,000    1,000,000
Additional paid in capital                                                 2,575,000    1,200,000
Unrealized (gain)/loss investments                                            27,000       91,000
Retained Earnings                                                          4,863,000    4,048,000
                                                                          10,615,000    8,339,000
Total liabilities and equity                                              24,001,000   17,365,000




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                                                   Endicott Engines Inc.
                                                Year ending                                           Year
                    Worksheet
                                                                                                     ending
Endicott Engines Inc.                                   12/31/01 Ref      Debit   Ref   Credit          12/31/02    Target
Cash                                                   1,500,000                           191,800     1,308,200     (191,800)
Securities Available for Sale                            300,000                                         536,000       236,000


Accounts Receivable                                    2,000,000                                       2,145,000       145,000


Allowance for doubtful accounts                        (110,000)                                       (122,200)      (12,200)


Merchandise Inventory                                    975,000                                       1,165,000       190,000


Prepaid Operating Expenses                                50,000                                          63,000        13,000


Investments (equity method)                            2,500,000                                       2,605,000       105,000


Plant, property & equipment                          10,700,000                                       17,142,000     6,442,000


Accumulated Depreciation                               (700,000)                                       (934,000)     (234,000)


Intangible Assets                                        150,000                                          93,000      (57,000)


                                                     17,365,000                                       24,001,000
Accounts Payable                                       (800,000)                                      (1,050,000)    (250,000)


Salaries Payable                                        (18,000)                                         (43,000)     (25,000)


Income Taxes Payable                                    (35,000)                                         (24,000)       11,000


Dividends Payable                                       (60,000)                                         (85,000)     (25,000)


Bonds Payable                                        (5,000,000)                                     (11,000,000)   (6,000,000)


Premium/Discount on Bonds Payable                        300,000                                         277,000      (23,000)


Deferred Income Taxes                                   (90,000)                                       (142,000)      (52,000)


Lease obligations                                      (323,000)                                       (749,000)     (426,000)




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Acct 592 – Spring 2005
                                                      Endicott Engines Inc.
                                                              12/31/01 Ref    Debit    Ref    Credit          12/31/02   Target
Other long term liabilities                                (3,000,000)                                       (570,000)   2,430,000


Convertible preferred, $100 par                            (2,000,000)                                     (1,000,000)   1,000,000


Common stock, $10 par                                      (1,000,000)                                     (2,150,000) (1,150,000)


Additional paid in capital                                 (1,200,000)                                     (2,575,000) (1,375,000)


Unrealized (gain)/loss investments                            (91,000)                                        (27,000)     64,000

Retained Earnings                                          (4,048,000)                                     (4,863,000)   (815,000)


                                               0         (17,365,000)                                     (24,001,000)
Closing entry for 2002:                               Rev/(Exp)                                        Receipt/(Disb)
Sales                                                        6,500,000


Earnings of affiliated company (equity                         125,000
method)
Gain/(loss) on sale of PP&E                                   (30,000)

Realized gain/(loss) on investments                            192,000

Realized gain on sale of patent                                450,000

Interest and dividend revenue                                   15,000


Cost of goods sold                                         (3,800,000)


Salaries and wages                                           (610,000)

Other operating expenses                                     (354,000)

Bad debt expense                                              (47,200)

Depreciation expense                                         (254,000)

Amortization of intangible assets                               (7,000)

Interest expense                                             (692,100)


Income taxes expense                                         (572,700)


Net income (accrual basis)                                     915,000
                                                      Endicott Engines Inc.
Statement of Cash Flows                                                      INFLOWS         OUTFLOW
                                                                                                S
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Operating Activities




Investing Activities




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                                                      Endicott Engines Inc.
Financing Activities




Noncash Financing/Investing




   CHANGE IN CASH                                                         191,800
Totals




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                                      Statement of Cash Flow Examples - Solutions
Example 1 - completed worksheet         Year ending                                                      Year ending
Palouse Pottery                           12/31/96          Ref     Debit         Ref     Credit          12/31/97          Target
Cash                                           15,000        x        27,000                                   42,000           27,000
                                                                                   i          2,000
Accounts Receivable                            40,000                             a                500         37,500           (2,500)
Allowance for doubtful accounts                (3,000)      a               500    j          2,000            (4,500)          (1,500)
Merchandise Inventory                          25,000        k        18,000                                   43,000           18,000
Prepaid Expenses                                 3,000      L          3,000                                     6,000           3,000
                                                                                  d          10,000
Plant, property & equipment                   215,000        f        48,000      b          17,000          236,000            21,000
Accumulated Depreciation                     (80,000)       b          9,000      m          11,000          (82,000)           (2,000)
                                              215,000                                                        278,000
Accounts Payable                             (23,000)                             n           8,000          (31,000)           (8,000)
Salaries Payable                               (2,000)                            o           7,000            (9,000)          (7,000)
Interest payable                               (2,000)      p               500                                (1,500)               500
Income Taxes Payable                           (1,500)                            q           4,000            (5,500)          (4,000)
Dividends Payable                                      0    h          5,000       c         13,000            (8,000)          (8,000)
Long term liabilities                        (25,000)       e         10,000                                 (15,000)           10,000
Common stock, $1 par                        (100,000)                             g          45,000         (145,000)         (45,000)
Retained Earnings                            (61,500)        c        13,000       x         14,500          (63,000)           (1,500)
                                                (215,000)                          x                            (278,000)              0
                                             1997                                                            1997
Closing entry for                        Rev/(Exp)                                                             Receipt/(Disb)
Sales                                          93,000        i         2,000                                   95,000
Gain/(loss) on sale of PP&E                    (4,000)      b          4,000                                           0
Realized gain/(loss) - land                    20,000                             d          20,000                    0
Cost of goods sold                           (35,000)       n          8,000       k         18,000          (45,000)
Salaries & other operating expenses          (37,000)       o          7,000      L           3,000          (33,000)
Bad debt expense                               (2,000)       j         2,000                                           0
Depreciation & amortization                  (11,000)       m         11,000                                           0
Interest expense                               (2,500)                            p                500         (3,000)
Income taxes expense                           (7,000)      q          4,000                                   (3,000)
Net income (accrual basis)                     14,500       X         14,500      X          11,000            11,000 Operating
                                                                                                                      Cash
Statement of Cash Flows                                           (INFLOWS)             (OUTFLOWS)
Operating Activities                                        X         11,000                                   11,000


Investing Activities                                                                                         (14,000)
Sold operational asset                                      b          4,000
Sold land                                                   d         30,000
Purchased Plant, Property &                                                        f         48,000
Equipment

Financing Activities                                                                                           30,000
Paid long-term debt                                                               e          10,000
Issued common stock                                         g         45,000
Paid cash dividend                                                                h           5,000
Noncash Financing/Investing


    CHANGE IN CASH                                                                X          27,000            27,000
Totals                                                               276,500                276,500
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Acct 592 – Spring 2005
Solutions for Example Problems
            Example 1 for Acct 301
                  Solution:
Palouse Pottery
Statement of Cash Flows
For year ended                                                  31-Dec-97
                                                                            Inflows     Outflows     Net
Cash provided by operations
Cash collected from customers                                                  95,000
Interest & dividends received                                                       0
Cash paid for merchandise                                                                 (45,000)
Cash paid to employees                                                                    (20,000)
Other operating disbursements                                                             (13,000)
Interest paid                                                                              (3,000)
Income taxes paid                                                                          (3,000)
                                                Subtotals                      95,000     (84,000)    11,000

Cash provided by investing activities
Purchase plant, property & equipment                                                      (48,000)
Sale of plant, property & equipment                                             4,000
Sale of land                                                                   30,000
                                                Subtotals                      34,000     (48,000)   (14,000)

Cash provided by financing activities
Dividends paid                                                                             (5,000)
Long-term debt retired                                                                    (10,000)
Common stock issued                                                            45,000
                                                Subtotals                      45,000     (15,000)    30,000

Change in cash                                                                                        27,000
Beginning balance - Cash                                                                              15,000
Ending balance - Cash                                                                                 42,000


Schedule to reconcile net income to cash provided by operations
Net Income                                         14,500
Depreciation & amortization                        11,000
Realized gains/losses PP&E                          4,000
Realized gain/loss - land sale                   (20,000)
Change in working capital accounts:
Net accounts receivable                             4,000
Merchandise Inventory                            (18,000)
Prepaid Expenses                                  (3,000)
Accounts Payable                                    8,000
Salaries Payable                                    7,000
Income Taxes Payable                                4,000
Interest Payable                                    (500)
Cash provided by operations:                       11,000

Non-cash financing and investing activities
None




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Acct 592 – Spring 2005

Example 1 for Acct 301 – INDIRECT METHOD SOLUTION
Statement of Cash Flow Worksheet
                                      Year ending                                                            Year ending
Palouse Pottery                        12/31/96       Ref                   Debit    Ref      Credit          12/31/97       Target
Cash                                         15,000 x                         27,000                               42,000      27,000
Accounts Receivable                          40,000                                               2,500            37,500      (2,500)
Allowance for doubtful accounts              (3,000)                                              1,500            (4,500)     (1,500)
Merchandise Inventory                        25,000                            18,000                              43,000      18,000
Prepaid Expenses                               3,000                            3,000                                6,000       3,000
Plant, property & equipment                 215,000 f                          48,000 b,d        27,000           236,000      21,000
Accumulated Depreciation                   (80,000) b                           9,000            11,000          (82,000)      (2,000)
                                            215,000                                                               278,000
Accounts Payable                           (23,000)                                               8,000          (31,000)     (8,000)
Salaries Payable                             (2,000)                                              7,000            (9,000)    (7,000)
Interest payable                             (2,000)                             500                               (1,500)        500
Income Taxes Payable                         (1,500)                                              4,000            (5,500)    (4,000)
Dividends Payable                                  0c                           5,000 c          13,000            (8,000)    (8,000)
Long term liabilities                      (25,000) e                          10,000                            (15,000)      10,000
Common stock, $1 par                      (100,000)                                   g          45,000         (145,000)    (45,000)
Retained Earnings                          (61,500) c                          13,000 h          14,500          (63,000)     (1,500)
                                          (215,000)                                                             (278,000)           0
                                                                                            (OUTFLOWS
Statement of Cash Flows                                                   (INFLOWS)              )
Operating Activities                                                                                               11,000
Net income                                                       h             14,500
Add back loss on sale of equipment                               b              4,000
Minus gain on sale of land                                                              d        20,000
depreciation                                                                   11,000

Change in working capital accounts:
A/R (net)                                                                       4,000
Inventory                                                                                        18,000
Prepaid expenses                                                                                  3,000
A/P                                                                             8,000
Salaries payable                                                                7,000
Interest payable                                                                                       500
Income taxes payable                                                            4,000

Investing Activities
Sold equipment                                                   b              4,000
Sold land                                                        d             30,000
Purchase PP&E                                                                           f        48,000

Financing Activities
Dividends paid                                                                          c         5,000
Payment on LT debt                                                                      e        10,000
Issued common stock                                              g             45,000
Noncash Financing/Investing

   CHANGE IN CASH                                                                       X        27,000
Totals
                                                                              265,000          265,000




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Acct 592 – Spring 2005
                   Example 2 for Acct 301 - S97
                Statement of Cash Flow Worksheet
                                             Year ending                                                  Year ending
      Moscow Moving & Storage                 12/31/96        Ref       Debit       Ref     Credit         12/31/97       Target
      Cash                                          15,000                          x         10,000            5,000      (10,000)
                                                                                     j         1,000
      Accounts Receivable                           30,000                          a            500           28,500       (1,500)
      Allowance for doubtful accounts               (1,500)    a             500    h          1,000           (2,000)        (500)
      Merchandise Inventory                         10,000     k           7,000                               17,000        7,000
      Prepaid Expenses                               4,500                          L          4,000              500       (4,000)
                                                               g          45,000
      Plant, property & equipment                  220,100     f          39,000    b         15,000          289,100       69,000
      Accumulated Depreciation                     (20,000)    b           9,000    i          5,000          (16,000)       4,000
                                                   258,100                                                    322,100
      Accounts Payable                             (10,000)                         m          3,000          (13,000)      (3,000)
      Salaries Payable                              (3,000)    n           2,000                               (1,000)       2,000
      Interest payable                                   0                          o          1,000           (1,000)      (1,000)
      Long term liabilities                        (30,000)    e          20,000                              (10,000)      20,000
                                                                                    g         45,000
      Common stock, $1 par                      (100,000)                           d         36,000         (181,000)     (81,000)
      Retained Earnings                         (115,100)      c           5,000     x         6,000         (116,100)      (1,000)
                                                (258,100)                                                    (322,100)           0
                                                1997                                                         1997
      Closing entry for                       Rev/(Exp)                                                  Receipt/(Disb)
      Sales                                         80,000     j           1,000                               81,000
      Gain/(loss) on sale of PP&E                   (2,000)    b           2,000                                    0
      Cost of goods sold                           (35,000)    m           3,000    k          7,000          (39,000)
      Salaries & other operating expenses          (26,000)    L           4,000    n          2,000          (24,000)
      Bad debt expense                              (1,000)    h           1,000                                    0
      Depreciation & amortization                   (5,000)    i           5,000                                    0
      Interest expense                              (2,000)    o           1,000                               (1,000)
      Income taxes expense                          (3,000)                                                    (3,000)
      Net income (accrual basis)                     6,000     x          6,000     x         14,000           14,000 Operating Cash
      Statement of Cash Flows                                        (INFLOWS)            (OUTFLOWS)
      Operating Activities                                     x         14,000                                14,000


      Investing Activities
      Sold operational assets                                  b           4,000                              (35,000)
      Purchased operational assets                                                   f        39,000



      Financing Activities                                                                                     11,000
      Paid cash dividend                                                             c         5,000
      Issued common stock                                      d          36,000
      Paid long term debt                                                           e         20,000
      Noncash Financing/Investing
      Acquired land in exchange for stock                      g          45,000    g         45,000
         CHANGE IN CASH                                        x         10,000     x                         (10,000)
      Totals                                                            259,500              259,500
                                                                                0                    0
      Additional Information                                                    0                    0
      a. Wrote off $500 accounts receivable as uncollectible        d. Issued common stock for $36,000 cash
      b. Sold operational assets for $4,000 cash                    e. Paid a $20,000 long-term note installment
         (cost $15,000, acc'd depreciation $9,000)                  f. Purchased operational assets, $39,000 cash
      c. Declared and paid a cash dividend, $5,000                 g. Acquired land in exchange for 1000 shares worth $45 each
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Example 2 for Acct 301 - Solution:
Moscow Moving & Storage
Statement of Cash Flows
For year ended                                                     31-Dec-97
                                                                               Inflows     Outflows     Net
Cash provided by operations
Cash collected from customers                                                     81,000
Interest & dividends received                                                          0
Cash paid for merchandise                                                                    (39,000)
Cash paid to employees                                                                       (14,000)
Other operating disbursements                                                                (10,000)
Interest paid                                                                                 (1,000)
Income taxes paid                                                                             (3,000)
                                                   Subtotals                      81,000     (67,000)    14,000

Cash provided by investing activities
Purchase plant, property & equipment                                                         (39,000)
Sale of plant, property & equipment                                                4,000
Sale of land
                                                   Subtotals                       4,000     (39,000)   (35,000)

Cash provided by financing activities
Dividends paid                                                                                (5,000)
Long-term debt retired                                                                       (20,000)
Common stock issued                                                               36,000
                                                   Subtotals                      36,000     (25,000)    11,000

Change in cash                                                                                          (10,000)
Beginning balance – Cash                                                                                  15,000
Ending balance – Cash                                                                                      5,000


Schedule to reconcile net income to cash provided by operations
Net Income                                             6,000
Depreciation & amortization                            5,000
Realized gains/losses PP&E                             2,000
Change in working capital accounts:
Net accounts receivable                                2,000
Merchandise Inventory                                (7,000)
Prepaid Expenses                                       4,000
Accounts Payable                                       3,000
Salaries Payable                                     (2,000)
Interest Payable                                       1,000
Cash provided by operations:                         14,000

Non-cash financing and investing activities
Acquired land in exchange for common stock




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Example 3 – workpaper solution
Avery Slings & Arrows                Year ending                                                      Year ending
                                    0 12/31/03            Ref        Debit          Ref   Credit        12/30/04     Target
Cash                                    2,850,000         x                                 589,000      2,261,000    (589,000)
Securities Available for Sale             180,000         c               273,000 J         222,000        231,000       51,000
Allowance to adjust to market            (80,000)         r               107,000                           27,000      107,000
Accounts Receivable                     2,000,000         s                92,000 o         33,000       2,059,000       59,000
Allowance for doubtful accounts         (100,000)         o                33,000 o         45,000       (112,000)     (12,000)
Merchandise Inventory                     900,000                                 s        298,000         602,000    (298,000)
Prepaid Expenses                           50,000                                 s         46,000           4,000     (46,000)
Investments in affiliated companies     2,000,000         g               150,000 g         29,000       2,121,000      121,000
(equity method)
Land, building & equipment             17,800,000         a         2,767,000 d            500,000      20,715,000    2,915,000

                                                        g                 648,000
Accumulated Depreciation                    (1,800,000) d                 376,000 p        757,000     (2,181,000)    (381,000)
Intangible Assets                                73,000 I                 500,000 p          5,000         568,000      495,000
Total assets                                 23,873,000                                                 26,295,000


Accounts Payable                              (650,000)   t               303,000                        (347,000)       303,000
Salaries Payable                               (21,000)   t                 3,000                         (18,000)         3,000
Interest payable                               (55,000)                       t             101,000      (156,000)     (101,000)
Income Taxes Payable                           (32,000)                       t              13,000       (45,000)      (13,000)
Dividends Payable                              (60,000)   e           135,000 e             203,000      (128,000)      (68,000)
Bonds Payable                               (4,000,000)                       L           3,000,000    (7,000,000)   (3,000,000)
Premium/Discount on Bonds Payable             (656,000)   u            14,000                            (642,000)        14,000
Convertible Bonds Payable                   (3,000,000)   f         1,500,000                          (1,500,000)     1,500,000
Lease obligation                            (1,825,000)   v           365,000 g            648,000     (2,108,000)     (283,000)
Asset retirement obligation                   (250,000)                       q             25,000       (275,000)      (25,000)
Deferred Income Taxes                          (75,000)                       w             47,000       (122,000)      (47,000)
Other long term liabilities                 (2,590,000)   y         2,000,000                            (590,000)     2,000,000
Convertible preferred, $100 par                       0                                                          0             0
Common stock, $10 par                       (3,000,000)                             b       250,000    (5,125,000)   (2,125,000)
                                                                                    f       375,000
                                                                                    k     1,500,000

Additional paid in capital - common         (1,600,000)                             b       800,000    (3,525,000)   (1,925,000)
                                                                                    f     1,125,000

Unrealized (gain)/loss AFS invest                80,000                       r            107,000        (27,000)    (107,000)
Treasury stock (at cost)                         10,000 n              38,000 m             10,000          38,000       28,000
Other paid in capital                                 0                       m             13,000        (13,000)     (13,000)
                                                        k           1,500,000
Retained Earnings                           (6,149,000) e             203,000 X            266,000     (4,712,000)    1,437,000
                                           (23,873,000)                                               (26,295,000)




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Avery Slings & Arrows
Closing entry for                               2004           Ref    Debits        Ref    Credits           2004
                                           Rev/(Exp)                                                   Receipt/
                                                                                                        (Disb)
Sales                                         6,600,000                             s         92,000     6,508,000
Earnings of affiliates (equity method)          150,000                             g        150,000             0
Gain/(loss) on sale of PP&E                    (65,000)    d               65,000                                0
Realized gain/(loss) on investments               53,000                            J         53,000             0
Interest and dividend revenue                     15,000   g               29,000                           44,000
Cost of goods sold                          (3,490,000)    s              298,000 t          303,000   (3,495,000)
Salaries and wages                            (632,000)                           t            3,000     (635,000)
Other operating expenses                      (421,000) s                  46,000                        (375,000)
Bad debt expense                               (45,000) o                  45,000                                0
Depreciation expense                          (757,000) p                 757,000                                0
Amortization of intangibles                      (5,000)p                   5,000                                0
Accretion expense                              (25,000) q                  25,000                                0
Interest expense                              (935,000) t                 101,000 u           14,000     (848,000)
                                                        w                  47,000
Income taxes expense                          (177,000) t                  13,000                       (117,000)
Net income (accrual basis)                      266,000 X             266,000 X            1,082,000    1,082,000
                                                                     INFLOWS              OUTFLOWS
Cash provided by operations:                               X          1,082,000                         1,082,000

Reconciling schedule:
Net income                                      266,000
Depreciation                                    757,000
Amortization & impairment of                      5,000
intangibles
Accretion expense                                25,000
Bond premiums/discounts                        (14,000)
Realized gains/losses PP&E                       65,000
Realized gain/loss investments                 (53,000)
Equity method investments                     (121,000)
Deferred income taxes                            47,000
Change in working capital:
Net accounts receivable                        (47,000)
Merchandise Inventory                           298,000
Prepaid Expenses                                  46,000
Accounts Payable                              (303,000)
Salaries Payable                                 (3,000)
Interest payable                                101,000
Income Taxes Payable                              13,000




Cash provided by operations                   1,082,000
off by                                                0



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Avery Slings & Arrows                                      Ref        Inflows           Ref   Outflows

Investing Activities                                                                                         (3,206,000)
Purchased PP&E                                                                      a          2,767,000
Purchased marketable securities                                                     c            273,000
Sold equipment                                            d                59,000
Purchased patent                                                                    I           500,000
Sold investments                                          J               275,000




Financing Activities                                                                                          1,535,000
Issued common stock                                       b            1,050,000
Paid dividends                                                                      e           135,000
Issued bonds                                              L            3,000,000
Sold treasury stock                                       m               23,000
Purchased treasury stock                                                            n             38,000
Payments on capital leases                                                          v            365,000
Payments on long-term debt                                                          y          2,000,000

Noncash Financing/Investing
Bonds converted into stock                                f            1,500,000 f             1,500,000
Capital lease                                             h              648,000                 648,000
Stock dividend                                            K

    CHANGE IN CASH                                                       589,000 x
Totals                                                                20,930,000              20,930,000      (589,000) Change in
                                                                                                                        Cash
                                                                 ok                                      0            0 half
                                                                                                                      0 double
                                                                                                                      0 divide by 9




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                                                                Solution
Example 4- Acct 315
Worksheet                                        Year ending                                             Year ending
Wenatchee Whirlpool World                              12/31/95 Ref       Debit       Ref   Credit           12/31/96       Target
Cash                                                  2,000,000     X       837,600                         2,837,600          837,600
                                                                                      o        51,000
Securities Available for Sale (at market)               150,000     I       875,000    I      584,000         390,000          240,000
                                                                                      p       120,000
Accounts Receivable                                   1,900,000                        f       28,000       1,752,000        (148,000)
Allowance for doubtful accounts                       (110,000)     f        28,000   m        38,500       (120,500)         (10,500)
Merchandise Inventory                                   875,000     p       270,000                         1,145,000          270,000
Prepaid Operating Expenses                               62,000     p        22,000                            84,000           22,000
Investments (equity method)                           3,000,000     l       115,000    j       18,000       3,097,000           97,000


                                                                    h       800,000
Plant, property & equipment                         10,800,000      g     4,900,000    c       80,000      16,420,000        5,620,000
Accumulated Depreciation                              (600,000)     c        15,000   n       244,000       (829,000)        (229,000)
                                                                                      n         6,500
Intangible Assets                                       128,000                        a       50,000          71,500         (56,500)
                                                    18,205,000                                             24,847,600
Accounts Payable                                      (750,000)                       p       130,000       (880,000)        (130,000)
Salaries Payable                                       (15,000)                       p         5,000         (20,000)          (5,000)
Income Taxes Payable                                   (27,000)     q        13,600                           (13,400)          13,600
Dividends Payable                                      (60,000)     k        75,000   k        50,000         (35,000)          25,000
Current portion long term debt                         (21,000)                        s        8,000         (29,000)          (8,000)
Bonds Payable                                       (5,000,000)                       b      5,000,000    (10,000,000)      (5,000,000)
Premium/Discount on Bonds Payable                       270,000                        r       23,000         247,000         (23,000)
Deferred Income Taxes                                  (88,000)                       q        92,000       (180,000)         (92,000)
                                                                    s     2,430,000
Other long term liabilities                         (3,000,000)     s         8,000                         (562,000)        2,438,000
                                                       12/31/95 ref       Debit       ref   Credit           12/31/96       Target
Convertible preferred, $100 par                     (2,000,000)     d     1,500,000                         (500,000)        1,500,000
                                                                                      h       200,000
                                                                                       e      500,000
Common stock, $10 par                               (1,500,000)                       d       900,000      (3,100,000)      (1,600,000)
                                                                                      h       600,000
                                                                                       e     1,550,000
Additional paid in capital                          (1,200,000)                       d       600,000      (3,950,000)      (2,750,000)
Unrealized (gain)/loss investments                     (78,000)     o        51,000                           (27,000)          51,000
Retained Earnings                                   (4,736,000)     k        50,000   X      1,112,200     (5,798,200)      (1,062,200)
                                             0     (18,205,000)                                           (24,847,600)



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Wenatchee Whirlpool World

Closing entry for                                          1996                                                   1996
                                                  Rev/(Exp)                                              Receipt/(Disb)
Sales                                                 6,200,000     p        120,000                          6,320,000
Earnings of affiliated company (equity                  115,000                         l      115,000                  0
method)
Gain/(loss) on sale of PP&E                            (40,000)     c         40,000                                    0
Realized gain/(loss) on investments                     108,000                         I      108,000                  0
Realized gain on sale of patent                         950,000                         a      950,000                  0
Interest and dividend revenue                            13,000     j         18,000                            31,000
Cost of goods sold                                  (3,600,000)     p        130,000    p      270,000      (3,740,000)
Salaries and wages                                    (590,000)     p          5,000                          (585,000)
Other operating expenses                              (345,000)                         p       22,000        (367,000)
Bad debt expense                                       (38,500)     m         38,500                                    0
Depreciation expense                                  (244,000)     n        244,000                                    0
Amortization of intangible assets                        (6,500)    n          6,500                                    0
Interest expense                                      (669,400)     r         23,000                          (646,400)
Income taxes expense                                  (740,400)     q         92,000    q       13,600        (662,000)
Net income (accrual basis)                            1,112,200     X       1,112,200   X      350,600         350,600
Statement of Cash Flows                                                   INFLOWS           OUTFLOWS      (Subtotals)
Operating Activities                                                X        350,600


Reconciling schedule:
Net Income                                            1,112,200
Depreciation & amortization                             250,500
Bond premiums/discounts                                  23,000
Realized gains/losses PP&E                               40,000
Realized gain/loss investments                        (108,000)
Gain on sale of patent                                (950,000)
Undistributed Earnings of Investees                    (97,000)
Deferred income taxes                                    92,000
Change in working capital accounts:
Net accounts receivable                                 158,500
Merchandise Inventory                                 (270,000)
Prepaid Operating Expenses                             (22,000)
Accounts Payable                                        130,000
Salaries Payable                                           5,000
Income Taxes Payable                                   (13,600)
Cash provided by operations:                            350,600



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Investing Activities
Sale of patent                                                      a      1,000,000
Sale of equipment                                                   c        25,000
Purchase factory                                                                       g    4,900,000
Purchase investment securities                                                         I     875,000
Sold investment securities                                          I       692,000



Financing Activities
Issued bonds                                                        b      5,000,000
Issued common stock                                                 e      2,050,000
Dividends paid                                                                         k      75,000
Long-term debt repaid                                                                  s    2,430,000



Noncash Financing/Investing
Preferred converted to common stock                                 d      1,500,000   d    1,500,000
Swap common stock for land                                          h       800,000    h     800,000


    CHANGE IN CASH                                                                     X     837,600
Totals                                                                    25,237,000       25,237,000




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Solution
Working through the additional items of information:
a.         On February 25, WWW sold an internally developed patent for $1,000,000. The patent was carried on the
           books at unamortized legal fees amounting to $50,000 at date of sale.

Cash [Investing - inflow]                                         1,000,000
    Intangible Assets                                                                      50,000
    Realized gain on sale of patent                                                       950,000
b.         On March 31, WWW issued $5,000,000 in bonds at face value. The semi-annual bonds have a coupon rate
           of 10% per annum.

Cash [Financing - inflow]                                         5,000,000
    Bonds payable                                                                       5,000,000
c.         During the year, WWW disposed of various items of equipment with a total book value of $65,000 and
           original cost of $80,000. The amount received was $25,000 in cash. Accumulated depreciation would be
           $15,000 (80,000 - 65,000)

Cash [Investing - inflow]                                             25,000
Accumulated depreciation                                              15,000
Loss on sale of plant, property & equipment                           40,000
    Plant, property and equipment                                                           80,000
d.         During the third quarter, shareholders holding 15,000 shares of the preferred stock converted them into
           common stock. The conversion ratio was 6 shares of common for each share of preferred. Therefore 90,000
           shares of common stock would be issues (6 * 15,000) with a par value of $900,000 ($10 par each). The book
           value of the preferred was 1,500,000. Therefore, additional paid in capital to balance the journal entry
           would be 600,000.

Convertible Preferred Stock, $100 par                             1,500,000
   Common stock, $10 par                                                                  900,000
   Additional paid-in capital                                                             600,000
e.         On July 20, WWW sold 50,000 shares of its common stock for $41 per share. The proceeds would be
           $2,050,000 (41 * 50,000) and the par value portion would be $500,000 with the rest as additional paid in
           capital.

Cash [Financing - inflow]                                         2,050,000
    Common stock, $10 par                                                                 500,000
    Additional paid in capital                                                          1,550,000
f.         By the end of the year, WWW had written off as uncollectible a total of $28,000 in accounts receivable.

Allowance for doubtful accounts                                       28,000
    Accounts receivable                                                                     28,000
g.         An existing factory with equipment was acquired during the year. The acquisition cost was allocated as
           follows: $772,000 to land, $3,450,000 to building and 678,000 to equipment. This totals to $4,900,000.

Plant, property and equipment                                     4,900,000
    Cash [Investing outflow]                                                            4,900,000



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h.       WWW acquired a parcel of land adjoining the new factory by giving the owner 20,000 shares of its common
         stock. At the date of the transaction, the market value of the stock was $40 per share. The value of the land
         is $800,000 (20,000 * 40).

Plant, property and equipment                                        800,000
    Common stock, $10 par                                                                200,000
    Additional paid in capital                                                           600,000
i.       During the year WWW purchased $875,000 in marketable securities and sold securities which had cost
         $584,000. The market value of the portfolio at the end of the year was $390,000. From the income
         statement, the gain on sale was 108,000. Therefore, the cash received from the sale of securities was
         584+108 = $692,000

Investments - Securities available for sale                          875,000
    Cash [Investing outflow]                                                             875,000
Cash [Investing inflow]                                              692,000
    Investments - Securities available for sale                                          584,000
    Gain on sale of investments                                                          108,000
j.       WWW owns 30% of a company which manufactures parts that WWW uses in its production process.
         WWW received $18,000 in dividends from this partially owned company during 1996. Dividends received
         from equity-method investments reduce the investment account and do NOT appear on the income statement.

Cash [Operating - dividends received]                                 18,000
    Investments (partially-owned companies)                                               18,000
k.       Dividends declared during the year totaled $50,000. Dividends declared reduce retained earnings and
         increase dividends payable. The balancing number in dividends payable (if this account exists) will be the
         dividends paid. If there is no dividends payable account, then the dividends declared = the dividends paid.

Retained earnings                                                     50,000
    Dividends payable                                                                     50,000
Dividends payable                                                     75,000
    Cash [Financing - outflow]                                                            75,000

Starting through the income statement, looking for noncash items:

l.   No deposit was made for share of earnings of partially owned companies. Therefore, this
     account needs to be zeroed out by re-constructing the entry that recorded the share of
     earnings.

Investments in partially owned company                               115,000
    Earnings of partially-owned company                                                  115,000

m. No check was written for bad debt expense. Therefore, this account needs to be zeroed out by
   re-constructing the entry that recorded bad debt expense for the year (the credit is always to
   allowance for doubtful accounts.

Bad debt expense                                                      38,500
    Allowance for doubtful accounts                                                       38,500



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n.   No checks are written to record depreciation expense and amortization of intangibles.
     Therefore, these accounts need to be zeroed out by reconstructing the entry that recorded the
     expenses.

Depreciation expense                                                 244,000
Amortization of intangible assets                                      6,500
   Accumulated depreciation                                                       244,000
   Intangible assets                                                                6,500

Starting through the balance sheet to investigate accounts not yet balanced:

o.   Securities available for sale (at market) doesn’t balance by $51,000. However, this amount
     appears in the owners’ equity section as the change in Unrealized (gain)/loss on investments.
     Therefore, this amount must have been the adjusting entry for the “allowance for change in
     value” account.

Unrealized gain/loss on investments                                   51,000
    Investments in AFS securities (allowance)                                      51,000


p.   The remaining difference in accounts receivable ($120,000) is the adjustment to sales to get
     from accrual basis to cash basis. The difference in Merchandise Inventory is an adjustment to
     cost of goods sold. The difference in prepaid operating expenses is an adjustment to other
     operating expenses. The change in accounts payable would mostly be related to cost of goods
     sold. The change in salaries payable affects salaries and wages expense.

Sales                                                                120,000
    Accounts receivable                                                           120,000
Merchandise inventory                                                270,000
    Cost of goods sold                                                            270,000
Prepaid operating expenses                                            22,000
    Other operating expenses                                                       22,000
    Accounts payable                                                              130,000
Cost of goods sold                                                   130,000
    Salaries payable                                                                5,000
Salaries and wages                                                        5,000

q.   Income tax expense is affected by two accounts on the balance sheet - income taxes payable
     and deferred income taxes.

Income taxes payable                                                  13,600
    Income tax expense                                                             13,600
    Deferred income taxes                                                          92,000
Income tax expense                                                    92,000

r.       Amortization of premiums and discounts on bonds payable impacts interest expense.



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Interest expense                                                      23,000
     Discount on bonds payable                                                      23,000

s.   Long-term debt is presented in two numbers on balance sheet - current and noncurrent. These
     accounts need to be combined to find out how much was borrowed or repaid during the year.
     Take the change in one account to the other. The remaining “amount to balance” will be the
     cash inflow or outflow.

Other long-term debt                                                      8,000
    Current portion of long-term debt                                                8,000

After this entry, the number necessary to balance other long-term debt is $2,430,000 which must
be the amount of long-term debt repaid during the year.

Other long-term debt                                              2,430,000
    Cash [Financing - outflow]                                                    2,430,000




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                                                 Example 4 - Acct 301
                                                        Solution
                                              Wenatchee Whirlpool World
                                               Statement of Cash Flows
                                                For year ended 12/31/96

                                                                          Inflows     Outflows       Net
Cash provided by operations
Cash collected from customers                                             6,320,000
Interest & dividends received                                                31,000
Cash paid for merchandise                                                           (3,740,000)
Cash paid to employees                                                                (585,000)
Other operating disbursements                                                         (367,000)
Interest paid                                                                         (646,400)
Income taxes paid                                                                     (662,000)
                                                      Subtotals           6,351,000 (6,000,400)      350,600

Cash provided by investing activities
Purchase plant, property & equipment                                                  (4,900,000)
Sale of plant, property & equipment                                          25,000
Sale of patent                                                            1,000,000
Marketable securities purchased                                                       (875,000)
Marketable securities sold                                                  692,000
                                    Subtotals                             1,717,000 (5,775,000) (4,058,000)

Cash provided by financing activities
Dividends paid                                                                           (75,000)
Long-term debt retired                                                                (2,430,000)
Bonds issued                                                              5,000,000
Common stock issued                                                       2,050,000
                                  Subtotals                               7,050,000 (2,505,000)     4,545,000

Change in cash                                                                                        837,600
Beginning balance - Cash                                                                            2,000,000
Ending balance - Cash                                                                               2,837,600


Non-cash financing and investing activities
Preferred stock converted to common         1,500,000
Land obtained by issue of common stock      800,000




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            Example 3 - Acct 301                                 Solution
          Wenatchee Whirlpool World
                           For year ended                          12/31/96

Schedule to reconcile net income to cash provided by operations
Net Income                              1,112,200
Depreciation & amortization                250,500
Bond premiums/discounts                     23,000
Realized gains/losses PP&E                  40,000
Realized gain/loss investments           (108,000)
Gain on sale of patent                   (950,000)
Undistributed Earnings of Affiliates      (97,000) *
Deferred income taxes                       92,000
Change in working capital accounts:
Net accounts receivable                    158,500 **
Merchandise Inventory                    (270,000)
Prepaid Operating Expenses                (22,000)
Accounts Payable                           130,000
Salaries Payable                             5,000
Income Taxes Payable                      (13,600)
Cash provided by operations:               350,600

The following notes are explanations and
not part of a formal statement of cash flow

 * Earnings of affiliates (equity method)                                     (115,000)
   Dividends received (equity method affiliates)                                 18,000
                                                                               (97,000)


** This is the easiest way to handle bad debts: just enter change in NET A/R:
       Change in Accounts Receivable                           148,000
       Change in Allowance for Doubtful Accounts                10,500
                                                               158,500
    This is the more difficult alternate:
 Adjustment to sales (to get cash collected from               120,000
customers)
Bad debt expense                                                38,500
                                                               158,500
What does not work is to include bad debt expense +
change in Accounts Receivable and change in Allowance!




6be199c6-02bc-4bc6-8926-151844cb324a.doc Created by T. Gordon 10/2/2012
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Acct 592 – Spring 2005


1. Homework Assignment                                           Solution
Ulliman Company                         Year ending                        Worksheet           Year ending
                                      0   01/01/99 Ref           Debit       Ref  Credit         12/31/99 Target
Cash                                          1,400 x                  1,000                         2,400      1,000
Accounts receivable (net)                     2,800                          L             110       2,690       (110)
Marketable securities (at cost)               1,700 j                  1,300                         3,000      1,300
Allowance for change in value                   500 j                    300                           800         300
Merchandise Inventory                         8,100                          M             190       7,910       (190)
Prepaid Expenses                              1,300 N                    410                         1,710         410
Investments (long-term)                       7,000                          d           1,600       5,400    (1,600)
Land                                         15,000                                                 15,000           0
Buildings and equipment                      32,000 g                 16,200 f           2,000      46,200    14,200
Accumulated depreciation                   (16,000) f                  1,700 k           2,100    (16,400)       (400)
                           Total assets      53,800                                                 68,710

Accounts Payable                                 (3,800)                         O         350         (4,150)       (350)
Income Taxes Payable                             (2,400)                         p         104         (2,504)       (104)
Wages payable                                    (1,100)   q               450                           (650)         450
Interest payable                                       0                        r          400           (400)       (400)
12% bonds payable                                      0                        h       10,000        (10,000)    (10,000)
Premium/Discount on Bonds Payable                      0   h                300 s           10             290         290
Notes payable (long term)                        (3,500)   e              3,500                              0       3,500
10% Convertible bonds                            (9,000)   c              9,000                              0       9,000
Deferred Income Taxes                              (800)                        i          396         (1,196)       (396)
Convertible preferred, $100 par                        0                                                     0           0
Common stock, $10 par                           (14,000)                       c&e       7,500        (21,500)     (7,500)
Additional paid in capital                       (8,700)                       c&e       5,000        (13,700)     (5,000)
Unrealized (gain)/loss investments                 (500)                       j           300           (800)       (300)
Retained Earnings                               (10,000)   b               700 XX        4,800        (14,100)     (4,100)
                     Total liab & equity        (53,800)                                              (68,710)
                                           ok                                                    ok
Closing entry for                                 1999                                                  1999
                                           Rev/(Exp)                                             Receipt/(Disb)
Sales                                           39,930     L               110                        40,040
Other revenue                                        0                                                     0
Gain/(loss) on sale of PP&E                      (200)     f               200                             0
Realized gain/(loss) on investments                700                           d         700             0
Interest and dividend revenue                      820                                                   820
Cost of goods sold                            (19,890)     m&o             540                      (19,350)
Salaries & other operating expenses           (11,000)                           q         450      (11,450)
Other operating expense                        (1,000)                           N         410       (1,410)
Depreciation & amortization                    (2,100)     k              2,100                            0
Interest expense                                 (410)     r&s              410                            0
Income taxes expense                           (2,050)     i&p              500                      (1,550)
Net income (accrual basis)                       4,800     XX             4,800 xx       7,100         7,100




6be199c6-02bc-4bc6-8926-151844cb324a.doc Created by T. Gordon 10/2/2012
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Acct 592 – Spring 2005


Ulliman Company
Statement of Cash Flows                                         INFLOWS               OUTFLOWS Subtotals
Operating Activities                                     xx          7,100                           7,100

Reconciliation Schedule:
Net Income                                       4,800
Loss on sale of equipment                          200   f
Gain on sale of investments                      (700)   d
Depreciation expense                             2,100   k
Bond discount amortization                          10   s
Deferred income taxes                              396   i
Change in WC accounts:
Accounts receivable (net)                          110
Merchandise Inventory                              190
Prepaid Expenses                                 (410)
Accounts Payable                                   350
Income Taxes Payable                               104
Wages payable                                    (450)
Interest payable                                   400
                                                 7,100




Investing Activities                                                                               (15,100)
Investments sold                                         d                2,300
sold equipment                                           f                  100
Purchased equipment                                                               g       16,200
Purchase mkt securities                                                           j        1,300



Financing Activities                                                                                 9,000
Dividends paid                                                                    b         700
Issued bonds at a discount                               h                9,700




Noncash Financing/Investing
LT debt retired by issue of common stock                 e
conversion of bonds to stock                             c


   CHANGE IN CASH                                                                 x        1,000     1,000
Totals                                                                62,720              62,720




6be199c6-02bc-4bc6-8926-151844cb324a.doc Created by T. Gordon 10/2/2012
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Acct 592 – Spring 2005


                                      Ulliman Company
                                  Statement of Cash Flows
                             For year ended December 31, 1999

Cash flows from operating activities
Collections from customers                                                  40,040
Payments to suppliers                                                     (19,350)
Payments to employees                                                     (11,450)
Other operating payments                                                   (1,410)
Income taxes paid                                                          (1,550)
Dividends collected                                                            820
                           Cash provided by operations                       7,100

Cash flows from investing activities
Purchase of marketable securities                                          (1,300)
Proceeds from sale of long-term investments                                  2,300
Disbursements to acquire equipment                                        (16,200)
Proceeds from sale of equipment                                                100
                       Cash used by investing activities                  (15,100)

Cash flows from financing activities
Proceeds from issuance of bonds                                             9,700
Payment of dividends                                                        (700)
                  Cash provided by financing activities                     9,000

Net increase in cash                                                        1,000
Beginning balance in cash                                                   1,400
Cash balance at 12-31-97                                                    2,400

Noncash investing and financing activities
LT debt retired by issue of common stock                                    3,500
conversion of bonds to stock                                                9,000

Reconcilation of net income to cash provided by operations
Net income                                                                  4,800
Loss on sale of equipment                                                     200
Gain on sale of investments                                                 (700)
Depreciation expense                                                        2,100
Bond discount amortization                                                     10
Deferred income taxes                                                         396
Change in WC accounts:
Accounts receivable (net)                                                     110
Merchandise Inventory                                                         190
Prepaid Expenses                                                            (410)
Accounts Payable                                                              350
Income Taxes Payable                                                          104
Wages payable                                                               (450)
Interest payable                                                              400
                                                                            7,100



6be199c6-02bc-4bc6-8926-151844cb324a.doc Created by T. Gordon 10/2/2012
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Acct 592 – Spring 2005


2. Homework Assignment                                          Solution
Driskoll Company                           Year ending                        Worksheet           Year ending
                                             12/31/99 Ref       Debit           Ref  Credit         12/31/99 Target
Cash                                             2,700 x                    820                         3,520         820
Accounts receivable (net)                        5,900 i                    315                         6,215         315
Inventories                                     15,300 j                    230                        15,530         230
Prepaid Expenses                                 1,400                          k             400       1,000       (400)
Investments (long-term)                          8,300                          e           1,000       7,300    (1,000)
Land                                            16,300 d                  2,700                        19,000      2,700
Buildings                                       68,700                          c           8,000      60,700    (8,000)
Acc'd depreciation - Bldg                     (35,000) c                  3,200 g           2,700    (34,500)         500
Equipment                                       29,600                          d           4,000      25,600    (4,000)
Acc'd depreciation - Equip                    (14,200) d                  2,600 g           3,100    (14,700)       (500)
Patents                                          8,700 f                  1,300 h             815       9,185         485
                                              107,700                                                  98,850

Accounts Payable                               (8,900)                           L            295          (9,195)    (295)
Interest payable                                 (630)   m                 330                               (300)      330
Wages payable                                  (2,500)                       n                100          (2,600)    (100)
Bonds payable                                 (23,000)   a            14,000 b              8,000         (17,000)    6,000
Discount on bonds                                    0   b               780 o                 65              715      715
Common stock, $10 par                         (22,000)                       f                650         (22,650)    (650)
Additional paid in capital                    (15,320)                       f                650         (15,970)    (650)
Unrealized (gain)/loss investments                   0                                                           0        0
Retained Earnings                             (35,350)   p                2,100 xx         (1,400)        (31,850)    3,500
                                             (107,700)                                                    (98,850)
                                           ok                                                        ok
Closing entry for                                 1999                                                      1999
                                           Rev/(Exp)                                                 Receipt/(Disb)
Sales                                           49,550                           i            315         49,235
Gain/(loss) on exchange of assets                1,300                           d          1,300              0
Realized gain/(loss) on investments              (200)   e                 200                                 0
Interest and dividend revenue                      790                                                       790
Cost of goods sold                            (23,800)   L                  295 j             230       (23,735)
Salaries & other operating expenses           (16,510)   n                  100                         (16,410)
Other operating expense                        (1,100)   k                  400                            (700)
Depreciation - buildings                       (2,700)   g                2,700                                0
Depreciation - equipment                       (3,100)   g                3,100                                0
Patent amortization                              (815)   h                  815                                0
Interest expense                               (1,715)   o                   65 m             330        (1,980)
Income taxes expense                             (500)                                                     (500)
Extraordinary loss (net of taxes)              (2,600)   c              2,600                                  0
Net income (accrual basis)                     (1,400)   xx           (1,400) xx            6,700          6,700




6be199c6-02bc-4bc6-8926-151844cb324a.doc Created by T. Gordon 10/2/2012
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Acct 592 – Spring 2005


Driskoll Company
Statement of Cash Flows                                         INFLOWS               OUTFLOWS Subtotals
Operating Activities                                     xx          6,700                           6,700

Reconciliation Schedule:
Net income                                      (1,400)
Depreciation                                      5,800 g
amortization                                        815 h
Extraordinary loss (net of taxes)                 2,600
Gain/(loss) on exchange of assets               (1,300)
Realized gain/(loss) on investments                 200
Amort of Bond Discount                               65 o

change in WC accounts:
Accounts receivable (net)                        (315)   i
Inventories                                      (230)   j
Prepaid Expenses                                   400   k
Accounts Payable                                   295   L
Interest payable                                 (330)   m
Wages payable                                      100   n
                                                 6,700




Investing Activities                                                                                 3,000
Proceeds from insurance company                          c                2,200
Sale of long-term investment                             e                  800




Financing Activities                                                                                (8,880)
Retired bonds payable                                                             a       14,000
Proceeds of bond issue                                   b                7,220
dividends paid                                                                    p        2,100




Noncash Financing/Investing
Exchanged equipment for land                             d
Exchanged stock for patent                               f


   CHANGE IN CASH                                                                 x          820       820
Totals                                                                54,170              54,170




6be199c6-02bc-4bc6-8926-151844cb324a.doc Created by T. Gordon 10/2/2012
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Acct 592 – Spring 2005


                                 Driskoll Company
                             Statement of Cash Flows
                        For year ended December 31, 1998

Cash flows from operating activities
Collections from customers                                                  49,235
Payments to suppliers                                                     (23,735)
Payments to employees                                                     (16,410)
Other operating payments                                                     (700)
Income taxes paid                                                            (500)
Interest paid                                                              (1,980)
Dividends collected                                                            790
                                 Cash provided by operations                 6,700

Cash flows from investing activities
Proceeds from insurance company                                             2,200
Proceeds from sale of long-term investments                                   800
                            Cash provided by investing activities           3,000

Cash flows from financing activities
Proceeds from issuance of bonds                                              7,220
Retire bonds payable                                                      (14,000)
Payment of dividends                                                       (2,100)
                             Cash used by financing activities             (8,880)

Net increase in cash                                                          820
Beginning balance in cash                                                   2,700
Cash balance at 12-31-97                                                    3,520

Noncash investing and financing activities
Exchanged stock for patent
Exchanged equipment for land

Reconcilation of net income to cash provided by operations
Net income                                                                 (1,400)
Depreciation                                                                 5,800
amortization                                                                   815
Extraordinary loss (net of taxes)                                            2,600
Gain/(loss) on exchange of assets                                          (1,300)
Realized gain/(loss) on investments                                            200
Amort of Bond Discount                                                          65
Change in working capital accounts:
Accounts receivable (net)                                                   (315)
Inventories                                                                 (230)
Prepaid Expenses                                                              400
Accounts Payable                                                              295
Interest payable                                                            (330)
Wages payable                                                                 100
                                                                            6,700




6be199c6-02bc-4bc6-8926-151844cb324a.doc Created by T. Gordon 10/2/2012
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Acct 592 – Spring 2005


             Albion Altimeters Inc.
            Statement of Cash Flows
                               For year ended                         12/31/97
                                                                 Inflows           Outflows        Net
Cash provided by operations
Cash collected from customers                                        3,708,000
Interest & dividends received                                           15,000
Cash paid for merchandise                                                            (2,016,000)
Cash paid to employees                                                                 (651,300)
Other operating disbursements                                                          (243,800)
Interest paid                                                                           (93,700)
Income taxes paid                                                                      (168,000)
                                             Subtotals               3,723,000       (3,172,800)         550,200

Cash provided by investing activities
Purchase plant, property & equipment                                                 (1,740,000)
Sale of plant, property & equipment                                       35,000
Marketable securities purchased                                                        (585,000)
Marketable securities sold
                                    Subtotals                             35,000     (2,325,000)   (2,290,000)

Cash provided by financing activities
Dividends paid                                                                         (100,000)
Common stock issued                                                  1,750,000
                                   Subtotals                         1,750,000         (100,000)    1,650,000

Change in cash                                                                                       (89,800)
Beginning balance - Cash                                                                             400,000
Ending balance - Cash                                                                                310,200




Land obtained by issue of
common stock                                                 32,000




6be199c6-02bc-4bc6-8926-151844cb324a.doc Created by T. Gordon 10/2/2012
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                       Albion Altimeters Inc.
                                                      For year ended 12/31/97

Schedule to reconcile net income to cash provided by operations
Net Income                                                                      289,900
Depreciation & amortization                                                      30,000
Bond premiums/discounts                                                          (6,000)
Realized gains/losses PP&E                                                       30,000
Deferred income taxes                                                            15,700
Change in working capital accounts:
Net accounts receivable                                                         125,200 **
Merchandise Inventory                                                             21,000
Prepaid Operating Expenses                                                      (13,800)
Accounts Payable                                                                  63,000
Salaries Payable                                                                 (1,300)
Income Taxes Payable                                                             (3,500)
Cash provided by operations:                                                    550,200



**       Change in Accounts Receivable                                                       119,000
       Change in Allowance for Doubtful Accounts                                               6,200
                                                                                             125,200
  This is the more difficult alternate:
Adjustment to sales (to get cash collected from customers)                                   108,000
Bad debt expense                                                                              17,200
                                                                                             125,200




6be199c6-02bc-4bc6-8926-151844cb324a.doc Created by T. Gordon 10/2/2012
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Acct 592 – Spring 2005



Worksheet                                              Year ending                                           Year ending
Albion Altimeters Inc.                                         12/31/96 Ref      Debit     Ref   Credit         12/31/97
Cash                                                            400,000                            89,800        310,200
                                                                           r,     27,000
Securities Available for Sale (at market)                       500,000     f    585,000                       1,112,000
                                                                                           J       11,000
Accounts Receivable                                             900,000                    e      108,000        781,000
Allowance for doubtful accounts                                 (27,000)   e      11,000    i      17,200        (33,200)
Merchandise Inventory                                           850,000                     k      21,000        829,000
Prepaid Operating Expenses                                        25,000   m       13,800                         38,800
                                                                           g,      32,000
Plant, property & equipment                                   1,880,000    c    1,740,000 b        90,000      3,562,000
Accumulated Depreciation                                      (350,000)    b      25,000 h         30,000       (355,000)
                                                              4,178,000                                        6,244,800
Accounts Payable                                              (350,000)                     l      63,000       (413,000)
Salaries Payable                                                 (8,500)   n       1,300                          (7,200)
Income Taxes Payable                                            (27,000)   o       3,500                         (23,500)
Dividends Payable                                               (25,000)   A     100,000 a         75,000              0
Bonds Payable                                               (1,000,000)                                       (1,000,000)
Premium/Discount on Bonds Payable                             (124,000)    p       6,000                        (118,000)
Deferred Income Taxes                                           (88,000)                   q        15,700      (103,700)
                                                                                           G        10,000
Common stock, $10 par                                       (1,000,000)                    d       500,000    (1,510,000)
                                                                                           G        22,000
Additional paid in capital                                    (700,000)                    d     1,250,000    (1,972,000)
Acc'd other comprehensive income                                  14,000                    r      27,000        (13,000)
Retained Earnings                                             (869,500)    a      75,000 x        289,900     (1,084,400)
                                                 0          (4,178,000)                                       (6,244,800)




6be199c6-02bc-4bc6-8926-151844cb324a.doc Created by T. Gordon 10/2/2012
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Acct 592 – Spring 2005


Albion Altimeters
                                                                    1997                                             1997
                                                                                                              Receipt/(Dis
Closing entry for 1997                                      Rev/(Exp) Ref        Debit   Ref      Credit          b)
Sales                                                         3,600,000 j        108,000                         3,708,000
Gain/(loss) on sale of PP&E                                     (30,000) b        30,000                                 0
Interest and dividend revenue                                     15,000                                            15,000
                                                                         k        21,000
Cost of goods sold                                          (2,100,000) l         63,000                        (2,016,000)
Salaries and wages                                            (650,000)                     n        1,300        (651,300)
Other operating expenses                                      (230,000)                     m       13,800        (243,800)
Bad debt expense                                                (17,200) I        17,200                                  0
Depreciation expense                                            (30,000) H        30,000                                  0
Interest expense                                                (87,700)                  p          6,000         (93,700)
Income taxes expense                                          (180,200) Q         15,700 o           3,500        (168,000)
Net income (accrual basis)                                      289,900 X         289,900 X        550,200         550,200
                                                                                                OUTFLOW
Statement of Cash Flows                                                        INFLOWS              S      (Subtotals)
Operating Activities                                                       X      550,200                       550,200
Net income                                                      289,900    X
Add depreciation expense                                         30,000    H
Add loss on sale of equipment                                    30,000    B
Amortization of discount on B/P                                  (6,000)   P
Deferred Income Taxes                                            15,700    Q
Change in working capital accounts:
Accounts Receivable                                             119,000
Allowance for doubtful accounts                                    6,200
Merchandise Inventory                                             21,000
Prepaid Operating Expenses                                      (13,800)
Accounts Payable                                                  63,000
Salaries Payable                                                 (1,300)
Income Taxes Payable                                             (3,500)
                                                                550,200
Investing Activities                                                                                            (2,290,000)
Proceeds from sale of equipment                                            b       35,000
Purchase building & equipment                                                               c     1,740,000
Purchase marketable securities                                                              f       585,000

Financing Activities                                                                                             1,650,000
Dividends paid                                                                              A      100,000
Proceeds from issuance of common stock                                     d    1,750,000

Noncash Financing/Investing
Exchange common stock for land valued at
$32,000
   CHANGE IN CASH                                                                  89,800
Totals                                                                          5,619,400         5,619,400        (89,800)
                                                                                       0




6be199c6-02bc-4bc6-8926-151844cb324a.doc Created by T. Gordon 10/2/2012
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Acct 592 – Spring 2005



Check figures for cash provided by operations:
Endicott Engines                                                     $ 462,000
Camperdown Company                                                   $2,647,000




6be199c6-02bc-4bc6-8926-151844cb324a.doc Created by T. Gordon 10/2/2012
                                                        Page 73
Acct 592 – Spring 2005


Final Exam Question – Spring 2002
                                                                                      Balance Sheet                        12/31/02      12/31/01
Required:                                                                             Current Liabilities
Use the financial statements, the additional information (next page) and the          Accounts Payable                      930,000       750,000
worksheet provided to prepare the statement of cash flow using the direct method.     Salaries Payable                        2,000         5,000
For full credit, use the pages provided to prepare the formal statement in addition
to the worksheet.                                                                     Income Taxes Payable                    9,000        20,000
                                                                                      Dividends Payable                      27,000        18,000
Camperdown Company                                                                                                          968,000       793,000
Balance Sheet                                      12/31/02         12/31/01          Noncurrent Liabilities
                                                                                      Bonds Payable                       7,000,000     7,000,000
Current Assets                                                                        Discount on Bonds Payable           (605,000)     (640,000)
Cash                                               183,000           100,000          Deferred Income Taxes                  64,000        39,000
Securities Available for Sale (at cost)            727,000           367,000          Obligation under capital leases       403,000       380,000
Allowance to adjust to market value                 13,000           (14,000)                                             6,862,000     6,779,000
Net accounts receivable                            917,000         1,238,000
Merchandise Inventory                              480,000           540,000          Stockholder's Equity
                                                 2,320,000         2,231,000          Convertible preferred stock         4,500,000     5,000,000
                                                                                      Common stock, $10 par               2,000,000     1,600,000
Noncurrent Assets                                                                     Additional paid in capital          2,106,000     1,400,000
Plant, property & equipment                    17,208,000        14,500,000           Acc'd other comprehensive
                                                                                      income                                  13,000      (14,000)
Accumulated Depreciation                       (2,527,000)       (1,500,000)
                                                                                      Treasury stock (at cost)              (26,000)      (52,000)
Investment in Edible Oils Inc.                   2,023,000         2,000,000
                                                                                      Retained Earnings                   3,081,000     2,225,000
Intangible Assets                                  480,000           500,000
                                                                                                                         11,674,000    10,159,000
TOTAL ASSETS                                   19,504,000        17,731,000
                                                                                      Total liabilities and equity       19,504,000    17,731,000




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Acct 592 – Spring 2005

                                                                          Additional information:
                            Camperdown Company                            a.      During the year, Camperdown Corporation paid quarterly dividends in
                                                                                  the total amount of $86,000.
                              Income Statement                            b.      The preferred stock is convertible into 6 shares of common stock at the
                           For year ending 12/31/02                               discretion of the stockholder. During the year, 5,000 shares of
                                                                                  preferred stock were converted into common stock.
Sales                                                       10,000,000    c.      Camperdown Corporation received $27,000 in dividends from Edible
Investment income                                                50,000           Oils Inc (equity method investment). The securities held in the
Gain/(loss) on sale of PP&E                                    (45,000)           available for sale portfolio paid no cash dividends during the year.
Realized gain/(loss) on                                                   d.      During the year, Camperdown Corporation sold a piece of equipment
investments                                                     10,000            for $25,000. The historical cost of the asset was $100,000 and the
    Total revenues                                          10,015,000            book value was $70,000 at the date of sale.
                                                                          e.      On April 30, Camperdown Corporation issued 10,000 shares of
                                                                                  common stock for $60 per share.
Cost of goods sold                          6,000,000
                                                                          f.      Camperdown Corporation acquired a new processing plant for a total
Salaries and wages                            600,000                             cost of $2,450,000. $2,000,000 was attributed to the building and the
Other operating expenses                      250,000                             remainder was attributed to the cost of the land.
Bad debt expense                               21,000                     g.      Camperdown Corporation wrote off $5,000 in bad debts during the
Depreciation & amortization                                                       year.
expense                                     1,077,000                     h.      Camperdown Corporation sold marketable securities that had cost
Interest expense                              565,000                             $90,000 for $100,000.
Income taxes expense                          551,000         9,064,000   i.      Camperdown Corporation entered into a new capital lease
                                                                                  arrangement to obtain manufacturing equipment needed for the new
Net income                                                      951,000           facility. The present value of the minimum lease payments was
                                                                                  $358,000 at the inception of the lease.
                                                                          j.      Half of the 1,000 shares of treasury stock were sold for $64 per share.
                                                                                  Camperdown Corporation uses the cost method. The treasury stock on
                                                                                  hand at the beginning of the year was carried at $52 per share.




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Acct 592 – Spring 2005

Statement of Cash Flow Problem
Worksheet                                         Year ending                                       Year ending
Camperdown Company                                       12/31/01Ref      Debit      Ref   Credit        12/31/02      Target
Cash                                                      100,000           83,000                        183,000            83,000


Securities Available for Sale (at cost)                   367,000                                         727,000           360,000


Allowance to adjust to market value                      (14,000)                                          13,000            27,000


Net accounts receivable                                 1,238,000                                         917,000       (321,000)


Merchandise Inventory                                     540,000                                         480,000           (60,000)


Plant, property & equipment                           14,500,000                                       17,208,000       2,708,000


Accumulated Depreciation                              (1,500,000)                                      (2,527,000) (1,027,000)


Investment in Edible Oils Inc.                          2,000,000                                       2,023,000            23,000


Intangible Assets                                         500,000                                         480,000           (20,000)
                                 Total assets         17,731,000                                       19,504,000


Accounts Payable                                        (750,000)                                       (930,000)       (180,000)


Salaries Payable                                           (5,000)                                         (2,000)            3,000


Income Taxes Payable                                     (20,000)                                          (9,000)           11,000


Dividends Payable                                        (18,000)                                        (27,000)            (9,000)


Bonds Payable                                         (7,000,000)                                      (7,000,000)                0


Premium/Discount on Bonds Payable                         640,000                                         605,000           (35,000)


Deferred Income Taxes                                    (39,000)                                        (64,000)           (25,000)


Obligation under capital leases                         (380,000)                                       (403,000)           (23,000)




6be199c6-02bc-4bc6-8926-151844cb324a.doc Created by T. Gordon 10/2/2012                                           Page 76
Acct 592 – Spring 2005


Statement of Cash Flow Problem
Worksheet                                         Year ending                                    Year ending
Camperdown Company                                       12/31/01Ref      Debit   Ref   Credit        12/31/02      Target


Convertible preferred, $100 par                       (5,000,000)                                   (4,500,000)          500,000



Common stock, $10 par                                 (1,600,000)                                   (2,000,000)      (400,000)


Additional paid in capital                            (1,400,000)                                   (2,106,000)      (706,000)


Acc'd other comprehensive income                           14,000                                      (13,000)          (27,000)


Treasury stock (at cost)                                   52,000                                       26,000           (26,000)

Retained Earnings                                    (2,225,000)                                    (3,081,000)   (856,000)
            Total Liab & owners equity              (17,731,000)                                   (19,504,000) (1,773,000)

Closing entry for                                            2002                                          2002
                                                                                                   Inflow/
                                                   Rev/(Exp)        Ref   Debit   Ref   Credit    (Outflow)

Sales                                                 10,000,000

Earnings of investees (equity method)                      50,000

Gain/(loss) on sale of PP&E                              (45,000)

Realized gain/(loss) on investments                        10,000

Cost of goods sold                                    (6,000,000)

Salaries and wages                                      (600,000)

Other operating expenses                                (250,000)

Bad debt expense                                         (21,000)

Depreciation & amortization expense                   (1,077,000)

Interest expense                                        (565,000)

Income taxes expense                                    (551,000)

Net income (accrual basis)                                951,000




6be199c6-02bc-4bc6-8926-151844cb324a.doc Created by T. Gordon 10/2/2012                                        Page 77
Acct 592 – Spring 2005

Camperdown Company

Statement of Cash Flows                                                   INFLOWS   OUTFLOWS   (Subtotals)
Operating Activities

Net income                                             951,000




Investing Activities




Financing Activities




6be199c6-02bc-4bc6-8926-151844cb324a.doc Created by T. Gordon 10/2/2012                                      Page 78
Acct 592 – Spring 2005

Camperdown Company

                                                                          INFLOWS   OUTFLOWS      (Subtotals)

Noncash Financing/Investing




   CHANGE IN CASH                                                                        83,000
Totals




6be199c6-02bc-4bc6-8926-151844cb324a.doc Created by T. Gordon 10/2/2012                                         Page 79
Acct 592 – Spring 2005


                                                       Camperdown Corporation
                                                        Statement of Cash Flow
                                                        For year ended 12-31-02

Cash provided by operations




Cash provided by investing activities




Cash provided by financing activities




6be199c6-02bc-4bc6-8926-151844cb324a.doc Created by T. Gordon 10/2/2012           Page 80
Acct 592 – Spring 2005


                                                       Camperdown Corporation
                                                        Statement of Cash Flow
                                                        For year ended 12-31-02

Reconciling schedule




Notes




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