OBJ. 2 The comparative balance sheet of Cromme Inc. for December 31, 2016 and 2015, is show as follows: PR 16-1A Statement of cash flows-indirect method Dec. 31, 2015 Dec. 31, 2016 Assets $ 585,920 208,960 617,120 240,000 Cash 641,760 Land 553,120 . . .705,120 (166,400) (148,000) $2,057,120 Liabilities and Stockholders'Equity $ 404,960 52,640 19,200 100,000 280,000 1,200,320 $2,057,120 42,240 24,000 150,000 Common stock, $4 par Additional data obtained from an examination of the accounts in the ledger for 2016 are as follows: a. The investments were sold for $280,000 cash. b. Equipment and land were acquired for cash. c. There were no disposals of equipment during the year d. The common stock was issued for cash. e There was a $199,540 credit to Retained Earnings for net income. f. There was a $96000 debit to Retained Earnings for cash dividends declared. Instructions pare a statement of cash flows, using the indirect method of presenting cash flows Pre from operating activities. INSTRUCTIONS Complete each of the following statements by writing the appropriate words or amounts in th : Answers column. Answers 0. The statement that reports a firm's major cash inflows and outflows for a period is the statement of cash flows 1-2. What are the two alternative methods of reporting operating activities in the statement of cash flows? 2. 3-8. Indicate the section of the statement of cash flows (indirect or direct method) in which each of the following would appear (answer operating activities, investing activities, or financing activities): Amortization of bond discount 3. 4. 5. 6. 7. 8. 9. Depreciation expense on equipment Sale of long-term investments Sale of equipment at book value Redemption of bonds payable Sale of patents Cash dividends of $50,000 were declared during the year. dividends payable were $14,000 and $16,000 at the beginning and end of the year, respectively. The amount of cash flows for payment of dividends during the year is Cash 10. The net income from operations was $80,000 and the only revenue or expense item not affecting cash was depreciation expense of $42,000. What amount of net cash flows from operating activities would appear in the statement of cash flows? 11. A corporation purchased and retired 5,000 shares of its $15 par common stock, originally issued at par, for $35. Cash flows amountedS to 12. If a loss of $2,000 is incurred in selling (for cash) a foxed asset having a book value of $25,000, the total amount reported as a cash flow is 13. The $97,000 net income for the year included a charge of $8,000 for the amortization of bond discount. Exclusive of the effect of other adjustments, the amount of net cash flows from operating activities is 14. A corporation issued $2,000,000 of bonds payable at 104. Cash flow was 15. 25,000 shares of $10 par common stock were issued at $16. The total amount reported in the cash flows from financing activities section of the statement of cash flows is 16. Cash flow per share is normally reported on the statement of cash flows (answer true or false) 17. Free cash flow is a measure of profitability (answer true or false) PROBLEM 1-STATEMENT OF CASH FLOWS-27 1/2% INSTRUCTIONS: Selected changes in various corporate accounts during a fiscal year are described below. By the use of xs, indicate the section of the statement of cash flows (indirect or direct method) in whch the charge is reponer If the item described is not reported, so indicate. Section of Statement of Cash Flows Activities Activities Activities Reported 0. Merchandise Inventory-net increase 1. Retained Earnings debit for stock dividends distributed 2. Common Stock-credit for issuance at par for cash 3. Bonds Payable-debit for redemption of bonds 4. Office Supplies net decrease 5. Accounts Receivable-net decrease 6. Retained Eamings- debit for net loss 7. Accounts Payable-net increase 8. Bonds Payable-credit for issuance for cash 9. Retained Eamings debit for cash dividends paid 10. Equipment- credit for items sold 11. Accumulated for fully depreciated items discarded PROBLEM 2 CASH FLOWS FROM OPERATING ACTIVITIES SECTION OF STATEMENT OF CASH FLOWS-30% INSTRUCTIONS: Selected data from various accounts during a fiscall year are presented below. By the use of x indicate whether each of the items will be (1) added to or (2) deducted from net income in arriving at cash flows from operating activities as reported on the statement of cash flows using the indirect method. If the change is not reporte determination of cash flows from operating activities, place an x in the Not Reported column. Cash Flows from Operating Activities Added to Net Income from Net Not Income Reported 0. Stock dividends declared 1. Amortization of bond discount Building and land purchased by issuing common stock 3. 2. Decrease in prepaid expenses 5. Decrease in dividends payable 6. Common stock issued for cash 7. Decrease in inventories 8. Decrease in accounts payable 9. Gain on sale of land 10. Amortization expense on patents 11. Gain on sale of long-term investments 12. Increase in accounts receivable