16-1A Statement of cash flows (indirect method) L.O. A1, P1, P2, P3 Kazaam Company, a merchandiser, recently completed its calendar-year 2011 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The companys balance sheets and income statement follow. KAZAAM COMPANY Comparative Balance Sheets December 31, 2011 and 2010 2011 2010 Assets Cash $ 49,200 $ 73,500 Accounts receivable 65,890 56,000 Merchandise inventory 276,000 252,000 Prepaid expenses 1,250 1,700 Equipment 159,000 106,000 Accum. depreciation-Equipment (37,000) (46,000) Total assets $ 514,340 $ 443,200 Liabilities and Equity Accounts payable $ 54,140 $ 112,000 Short-term notes payable 10,000 8,000 Long-term notes payable 70,000 49,000 Common stock, $5 par value 162,250 150,750 Paid-in capital in excess of par, common stock 34,500 0 Retained earnings 183,450 123,450 Total liabilities and equity $ 514,340 $ 443,200 KAZAAM COMPANY Income Statement For Year Ended December 31, 2011 Sales $ 582,500 Cost of goods sold 281,000 Gross profit 301,500 Operating expenses Depreciation expense $ 20,000 Other expenses 134,000 154,000 Other gains (losses) Loss on sale of equipment 6,000 Income before taxes 141,500 Income taxes expense 25,500 Net income $ 116,000 Additional Information on Year 2011 Transactions a. The loss on the cash sale of equipment was $6,000 (details in b). b. Sold equipment costing $46,500, with accumulated depreciation of $29,000, for $11,500 cash. c. Purchased equipment costing $99,500 by paying $25,000 cash and signing a long-term note payable for the balance. d. Borrowed $2,000 cash by signing a short-term note payable. e. Paid $53,500 cash to reduce the long-term notes payable. f. Issued 2,300 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $56,000. Required: 1. Prepare a complete statement of cash flows; report its operating activities using the indirect method. (Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.) KAZAAM COMPANY Statement of Cash Flows For Year Ended December 31, 2011 Cash flows from operating activities $ Adjustments to reconcile net income to net cash provided by operating activities: (NOTE: 6 ENTRIES CHOOSING FROM THE FOLLOWING CATEGORIES ALONG WITH THE $AMT DEBIT/CREDIT : CASH PAID DIVIDENDS, LOSS ON DISPOSAL OF EQUIPMENT, DECREASE IN PREPAID EXPENSES, CASH PAID FOR EQUIPMENT, DEPRECIATION EXPENSE, INCREASE IN ACCOUNTS RECEIVEABLE, INCREASE IN INVENTORY AND DECREASE IN ACCOUNTS PAYABLE) _____________________ $________ _____________________ $________ _____________________ $________ _____________________ $________ _____________________ $________ _____________________ $________ Net cash (SELECT ONE: USED IN/PROVIDED BY) operating activities Cash flows from investing activities $______________ (NOTE: TWO ENTRIES MADE FROM THE FOLLOWING CATEGORIES ALONG WITH THE AMT $ DEBIT: CASH PAID FOR EQUIPMENT, DEPRECIATION EXPENSE, CASH PAID ON LONG-TERM NOTE, INCREASE IN INVENTORY, INCREASE IN ACCOUNTS RECEIVABLE, CASH RECEIVED ON SALE OF EQUIPMENT, CASH PAID FOR DIVIDENDS, AND DECREASE IN ACCOUNTS PAYABLE) ____________ $______________ ____________ $______________ Net cash (SELECT ONE: USED IN/PROVIDED BY) investing activities Cash flows from financing activities $______________ (NOTE: 4 ENTRIES MADE ALONG WITH AMT $$ DEBIT FROM THE FOLLOWING CATEGORIES: INCREASE IN INVENTORY, CASH RECEIVED FROM SALE ON EQUIPMENT, CASH PAID FOR EQUIPMENT, CASH RECEIVED FROM ISSUING STOCK, DEPRECIATION EXPENSE, CASH PAID ON LONG-TERM NOTE, CASH PAID FOR DIVIDENDS AND CASH BORROWED ON SHORT-TERM NOTE) _____________________ $________ _____________________ $________ _____________________ $________ _____________________ $________ Net cash (SELECT ONE: USED IN/PROVIDED BY) financing activities $______________ (NOTE: 1 ENTRY ALONG WITH AMT $$$ CHOOSE FROM THE FOLLOWING CATEGORIES ALONG WITH AMT $$ CREDIT: DECREASE IN PREPAID EXPENSES, NET DECREASE IN CASH, CASH PAID FOR DIVIDENDS, DEPRECIATION EXPENSE, CASH BORROWED ON SHORT-TERM NOTE, NET INCREASE IN CASH, INCREASE IN INVENTORY, CASH PAID ON LONG-TERM NOTE) ________________ $_________________ Cash balance at beginning of 2011 $________ _________ Cash balance at end of 2011 $________ Problem 16-7A Computing cash flows from operations (indirect) L.O. P2 Rapture Companys 2011 income statement and selected balance sheet data at December 31, 2010 and 2011. RAPTURE COMPANY Income Statement For Year Ended December 31, 2011 Sales revenue $ 62,400,000 Expenses Cost of goods sold 21,000,000 Depreciation expense 5,500,000 Salaries expense 11,000,000 Rent expense 2,500,000 Insurance expense 1,400,000 Interest expense 1,900,000 Utilities expense 1,100,000 Net income $ 18,000,000 RAPTURE COMPANY Selected Balance Sheet Accounts At December 31 2011 2010 Accounts receivable $370,000 $ 384,000 Inventory 104,000 83,000 Accounts payable 110,000 118,000 Salaries payable 40,000 27,000 Utilities payable 13,000 10,000 Prepaid insurance 9,000 10,000 Prepaid rent 14,000 18,000 Required: Prepare the cash flows from operating activities section only of the companys 2011 statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign. Enter your answer in thousands of dollars. Omit the "$" sign in your response.) RAPTURE COMPANY Cash Flows from Operating ActivitiesIndirect Method For Year Ended December 31, 2011 Cash flows from operating activities SELECT: NET INCOME OR NET LOSS $__________ Adjustments to reconcile net income to net cash provided by operating activities NOTE THAT 8 ENTRIES ALONG WITH AMOUNT $$ ARE CHOSEN FROM THE FOLLOWING CATEGORIES: DEPRECIATION EXPENSE INCREASE IN UTILITIES PAYABLE DECREASE IN PREPAID RENT DECREASE IN ACCOUNTS PAYABLE INCREASE IN SALARIES PAYABLE DECREASE PREPAID INSURANCE DECREASE IN ACCONTS RECEIVABLE INCREASE IN PREPAID RENT INCREASE IN MERCHANDISE INVENTORY INCREASE IN PREPAID INSURANCE _____________________ $________ _____________________ $________ _____________________ $________ _____________________ $________ _____________________ $________ _____________________ $________ _____________________ $________ _____________________ $________ ______________ Net cash (SELECT ONE: USED IN/PROVIDED BY) operating activities $_______________