Module 6

11. In preparing Titan Inc.'s statement of cash flows for the year ended December 31, 2021, the following amounts were available:

Collect note receivable 320,000

Issue bonds payable 406,000

Purchase treasury shares 210,000

What amount should be reported on Titan, Inc.'s statement of cash flows for investing activities?

a. 320,000 b. 110,000 c. 726,000 d. 110,000

12. The following information on selected cash transactions for 2021 has been provided by Mancuso Company:

Proceeds from sale of land 160,000

Proceeds from long-term borrowings 400,000

Purchases of plant assets 144,000

Purchases of inventories 680,000

Proceeds from sale of Mancuso ordinary shares 240,000

What is the cash provided (used) by investing activities for the year ended December 31, 2021, as a result of the above information?

a. 16,000 b. 256,000 c. 160,000 d. 800,000

13. During 2021, Stout Inc. had the following activities related to its financial operations:

Carrying value of convertible preference shares in Stout,

converted into ordinary shares of Stout 360,000

Payment in 2021 of cash dividend declared in 2020 to

preference shareholders 186,000

Payment for the early retirement of long-term bonds payable

(carrying amount2,220,000) 2,250,000

Proceeds from the sale of treasury shares (on books at cost of 258,000) 300,000

The amount of net cash used in financing activities to appear in Stout's statement of cash flows for 2021 should be

a. 1,590,000 b. 1,776,000 c. 2,136,000 d. 2,148,000

14. Napier Co. provided the following information on selected transactions during 2021:

Purchase of land by issuing bonds 250,000

Proceeds from issuing bonds 500,000

Purchases of inventory 950,000

Purchases of treasury shares 150,000

Loans made to affiliated corporations 350,000

Dividends paid to preference shareholders 100,000

Proceeds from issuing preference share 400,000

Proceeds from sale of equipment 50,000

1. The net cash provided (used) by investing activities during 2021 is

a. 50,000 b. (300,000) c. (550,000) d. (1,250,000)

2. The net cash provided by financing activities during 2021 is

a. 550,000 b. 650,000 c. 800,000 d. 900,000

15. Peavy Corp.'s transactions for the year ended December 31, 2021 included the following:

( Acquired 50% of Gant Corp.'s ordinary shares for 180,000 cash which was borrowed from a bank.

( Issued 5,000 of its preference shares for land having a fair value of 320,000.

( Issued 500 of its 11% debenture bonds, due 2019, for 392,000 cash.

( Purchased a patent for 220,000 cash.

( Paid 120,000 toward a bank loan.

( Sold available-for-sale investments for 796,000.

( Had a net increase in returnable customer deposits (long-term) of 88,000.

1. Peavy's net cash provided by investing activities for 2021 was

a. 296,000 b. 396,000 c. 476,000 d. 616,000

2. Peavy's net cash provided by financing activities for 2021 was

a. 452,000 b. 540,000 c. 572,000 d. 660,000

16. Fleming Company provided the following information on selected transactions during 2021:

Dividends paid to preference shareholders 150,000

Loans made to affiliated corporations 750,000

Proceeds from issuing bonds 900,000

Proceeds from issuing preference shares 1,050,000

Proceeds from sale of equipment 450,000

Purchases of inventories 1,200,000

Purchase of land by issuing bonds 300,000

Purchases of treasury shares 600,000

1. The net cash provided (used) by investing activities during 2021 is

a. (600,000) b. (300,000) c. 150,000 d. 450,000

2. The net cash provided (used) by financing activities during 2021 is

a. (1,650,000) b. 450,000 c. 750,000 d. 1,200,000

17. The balance in retained earnings at December 31, 2020 was 720,000 and at December 31, 2021 was 582,000. Net income for 2021 was 500,000. A share dividend was declared and distributed which increased share capital 200,000 and share premium 110,000. A cash dividend was declared and paid.

1. The amount of the cash dividend was

a. 248,000 b. 328,000 c. 442,000 d. 638,000

2. The share dividend should be reported on the statement of cash flows (indirect method) as

a. an outflow from financing activities of200,000.

b. an outflow from financing activities of310,000.

c. an outflow from investing activities of310,000.

d. Share dividends are not shown on a statement of cash flows.

18. The following information was taken from the 2021 financial statements of Dunlop Corporation:

Bonds payable, January 1, 2021 500,000

Bonds payable, December 31, 2021 2,000,000

During 2021

( A450,000 payment was made to retire bonds payable with a face amount of500,000.

( Bonds payable with a face amount of200,000 were issued in exchange for equipment.

In its statement of cash flows for the year ended December 31, 2021, what amount should Dunlop report as proceeds from issuance of bonds payable?

a. 1,500,000 b. 1,750,000 c. 1,800,000 d. 2,200,000

19. The net cash provided by operating activities in Sosa Company's statement of cash flows for 2021 was115,000. For 2021, depreciation on plant assets was45,000, amortization of patent was8,000, and cash dividends paid on ordinary shares was54,000. Based only on the information given above, Sosa's net income for 2021 was

a. 115,000 b. 62,000 c. 8,000 d. 116,000

20. The balance sheet data of Kohler Company at the end of 2021 and 2020 follow:

2021 2020

Cash 50,000 70,000

Accounts receivable (net)120,000 90,000

Merchandise inventory140,000 90,000

Prepaid expenses20,000 50,000

Buildings and equipment180,000 150,000

Accumulated depreciationbuildings and equipment(36,000) (16,000)

Land 180,000 80,000

Totals654,000 514,000

Accounts payable136,000 110,000

Accrued expenses24,000 36,000

Notes payablebank, long-term 80,000

Mortgage payable60,000

Share capital-ordinary,10 par418,000 318,000

Retained earnings (deficit)16,000 (30,000)

654,000 514,000

Land was acquired for 100,000 in exchange for ordinary shares, par 100,000, during the year; all equipment purchased was for cash. Equipment costing 10,000 was sold for 4,000; book value of the equipment was 8,000 and the loss was reported in net income. Cash dividends of 20,000 were charged to retained earnings and paid during the year; the transfer of net income to retained earnings was the only other entry in the Retained Earnings account. In the statement of cash flows for the year ended December 31, 2021, for Naley Company:

1. The net cash provided by operating activities was

a. 52,000 b. 66,000 c. 56,000 d. 48,000

2. The net cash provided (used) by investing activities was

a. 26,000 b. (40,000) c. (136,000) d. (36,000)

3. The net cash provided (used) by financing activities was

a. -0- b. (20,000) c. (40,000) d. 60,000

21 . The bookkeeper for the Kristine Company prepared the following income statement and retained earnings statement for the year ended December 31, 2021:

Kristine Company

December 31, 2021

Expense and Profits

Sales (net )

P1,568,000

Less: Selling expenses

( 156,800)

Net sales

1,411,200

Add: Interest revenue

18,400

Add: Gain on sale of equipment

25,600

Gross sales revenue

1,455,200

Less: Costs of operations

Cost of goods sold

P960,800

Correction of overstatement in last year'sincome due to error (net of P13,200 income tax credit)

30,800

Dividend costs (P4 per share for 8,000 ordinary shares)

32,000

Loss due to earthquake

33,600

(1,057,200)

Taxable revenues

398,000

Less: Income tax on income from continuing operations

(99,840)

Net income

298,160

Miscellaneous deductions

Loss from operations of discontinued Segment X44 (net of P7,200 income tax credit)

16,800

Administrative expenses

134,400

(151,200)

Net revenues

P146,960

Kristine Company

Retained Revenue Statement

For the Year Ended December 31, 2021

Beginning retained earnings

P474,400

Add: Gain on sale of Segment X44 (net of P10,800 income taxes)

25,200

Recalculated retained earnings

499,600

Add: Net revenues

146,960

646,560

Less: Interest expense

(27,200)

Ending: retained earnings

P619,360

The preceding account balances are correct but have been incorrectly classified in certain instances.

Based on the above and the result of the audit, answer the following:

1. The income from continuing operations for the year ended December 31, 2021 is

a. 207,760 b. 199,360 c. 299,200 d. 226,560

2 The income (loss) from discontinued operations for the year ended December 31, 2021 is

a. 8,400 b. (16,800) c. 25,200 d. 0

3. The profit for the year ended December 31, 2021 is

a. 234,960 b. 307,600 c. 209,760 d. 207,760

4. The balance of retained earnings as of December 31, 2021 should be

a. 619,360 b. 646,560 c. 650,160 d. 709,360