Question
1.) During 2021, Sixty-One Company took out a loan from a bank. The principal amount of the loan was $250,000. During the year, Sixty-One made
1.) During 2021, Sixty-One Company took out a loan from a bank. The principal amount of the loan was $250,000. During the year, Sixty-One made a total of $4,250 in interest payments on this loan to the bank.
- How would each of these components (the principal amount and the interest payments) be categorized on the statement of cash flows (operating, investing or financing)?
- What is the total cash inflow or outflow impact on eachof the categorizations (operating, investing and financing) as a result of these two events?
2.)Judge Company had the following income statement for the current year:
Sales | $2,400,000 | |
Cost of goods sold | 1,900,000 | |
Gross profit | 500,000 | |
Operating expenses: | ||
Depreciation expense | $100,000 | |
Wages expense | 300,000 | |
Advertising expense | 60,000 | 460,000 |
Net income | $ 40,000 |
Additional information about the company follows. Read the headers below CAREFULLY!!
End of Year | Beginning of Year | |
Cash | $ 84,000 | $ 48,000 |
Accounts receivable | 72,000 | 92,000 |
Inventory | 185,000 | 160,000 |
Prepaid advertising | 25,000 | 30,000 |
Accounts payable | 110,000 | 80,000 |
Wages payable | 25,000 | 15,000 |
Please lay out, in proper form, the section of the statement of cash flows relating to operating activities for the current year using the indirect method.
3.)During 2021, Stanton Company's long-term investments account (at cost) increased $50,000, which was the net result of purchasing stock costing $200,000 and selling stock costing $150,000 at a $15,000 gain. Stanton's notes payable account increased $60,000, the net result of issuing $125,000 of notes and paying $65,000 during the year on notes.
What items and amounts appear in these sections of Stanton Company's 2021 statement of cash flows:
a. Cash flows from investing activities
b. Cash flows from financing activities
4.) The following schedule of information relates to Kayster, Inc. for the year ended December 31, 2022:
Depreciation expense | $ 87,960 |
Net income | 502,800 |
Cash at start of year | 44,040 |
Nonoperating cash receipts: | |
From sale of plant assets (recorded a gain of $2,400) | 39,000 |
From sale of marketable securities | 93,600 |
Nonoperating cash payments: | |
For repurchase of preferred stock | 114,000 |
For purchase of bonds as investment | 319,320 |
To stockholders as dividends | 141,240 |
Change in working capital accounts: | |
Accounts receivable increase | 97,080 |
Inventory increase | 6,480 |
Accounts payable decrease | 44,400 |
Accrued liabilities increase | 7,920 |
- Prepare, in good form, a full2022 statement of cash flows for Kayster, Inc., using the indirect method for the operating section, and the direct method for the investing and financing sections.
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