ANS: Pat Gibson Company Income Statement (Cash Basis) For the Year Ended December 31, 2012 Collections from customers Sales Increase in receivables $900,000 (20,000) S80,000 Cash paid for merchandise: Cost of goods sold Increase in inventory Increase in accounts payable Depreciation expense $550,000 30,000 (10,000) (20.000) (550,000) Cash payments for selling and administrative: Selling and administrative expense Goxxwill amortization $133,000 (10,000) (123,000) Cash payments for income taxes: Income taxes Decrease in deferred income taxes Decrease in income taxes payable $ 65,400 5,000 20.000 90, 400) Net cash inflow $116,600 Cash Flows from Operating Activities $151,600 Net income Adjustments to reconcile net income to cash provided by operating activities: Depreciation Goodwill amortization Decrease in deferred income taxes Increase in accounts receivable Increase in accounts payable Increase in inventories Decrease in income taxes payable Net cash provided by operating activities $ 20, LO SO) 2 001 000 000 2.000) 16,00 PTS: 1 DIF: Difficulty: Moderate NAT: BUSPT : Analytic STA: AICPA FN: Measurement ACRSP: Statement of Cash Flows IMA:F acial Statement Analysis TOP: Procedures for Development of the Statement of sh Flows KEY: Bloom's: Application NOT: Time: 20 min. 8. Required: For each of the following situations, give a likely reason or explanation For Jones Company, net cash provided by operating activities is significantly less than net income. b. Significant cash outflows were used for investing activities, c. The ratio operating cash flow/total debt decreases, while the ratio operating cash flow/current maturities of long-term debt and current notes payable increases. ANS: ANS: Pat Gibson Company Income Statement (Cash Basis) For the Year Ended December 31, 2012 Collections from customers Sales Increase in receivables $900,000 (20,000) S80,000 Cash paid for merchandise: Cost of goods sold Increase in inventory Increase in accounts payable Depreciation expense $550,000 30,000 (10,000) (20.000) (550,000) Cash payments for selling and administrative: Selling and administrative expense Goxxwill amortization $133,000 (10,000) (123,000) Cash payments for income taxes: Income taxes Decrease in deferred income taxes Decrease in income taxes payable $ 65,400 5,000 20.000 90, 400) Net cash inflow $116,600 Cash Flows from Operating Activities $151,600 Net income Adjustments to reconcile net income to cash provided by operating activities: Depreciation Goodwill amortization Decrease in deferred income taxes Increase in accounts receivable Increase in accounts payable Increase in inventories Decrease in income taxes payable Net cash provided by operating activities $ 20, LO SO) 2 001 000 000 2.000) 16,00 PTS: 1 DIF: Difficulty: Moderate NAT: BUSPT : Analytic STA: AICPA FN: Measurement ACRSP: Statement of Cash Flows IMA:F acial Statement Analysis TOP: Procedures for Development of the Statement of sh Flows KEY: Bloom's: Application NOT: Time: 20 min. 8. Required: For each of the following situations, give a likely reason or explanation For Jones Company, net cash provided by operating activities is significantly less than net income. b. Significant cash outflows were used for investing activities, c. The ratio operating cash flow/total debt decreases, while the ratio operating cash flow/current maturities of long-term debt and current notes payable increases. ANS