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Lockheed Martin Proprietary Information The primary purpose of the statement of cash flows is to provide information about the cash receipts and cash payments during a period. provide information about the investing and financing activities during a period. facilitate banking relationships. prove that revenues exceed expenses if there is a net income. In addition to the three basic financial statements, which of the following is also a required financial statement? the "Cash Budget" the Statement of Cash Flows the Statement of Cash Inflows and Outflows the "Cash Reconciliation" Land acquired from the issuance of common stock is reported as an investing activity. as an operating activity. in a separate schedule at the bottom of the statement. as a financing activity. During 2013, Forman Industries reported cash provided by operations of $690,000, cash used in investing of $1,029,000, and cash used in financing of $135,000. In addition, cash spent for fixed assets during the period was $414,000. No dividends were paid. Based on this information, what was Forman's free cash flow? $1,440,000 $276,000 ($888,000) ($339,000) In Flagg Company, net income is $280,000. If accounts receivable increased $145,000 and accounts payable decreased $50,000, net cash provided by operating activities using the indirect method is: $475,000. $185,000. Lockheed Martin Proprietary Information Lockheed Martin Proprietary Information $85,000. $375,000. When equipment is sold for cash, the amount received is reflected as a cash inflow in the operating section. outflow in the operating section. inflow in the financing section. inflow in the investing section. The following data are available for Quarter Company. Increase in accounts payable $120,000 Increase in bonds payable 400,000 Sale of investments 150,000 Issuance of common stock 180,000 Payment of cash dividends 90,000 Net cash provided by financing activities is: $520,000. $280,000. $490,000. $460,000. The third (final) step in preparing the statement of cash flows is to compare the net change in cash with the change in the cash account reported on the balance sheet. determine net cash provided by operating activities. list the noncash activities. analyze changes in noncurrent asset and liability accounts. Starting with net income and adjusting it for items that affected reported net income but which did not affect cash is called the indirect method. working capital method. Lockheed Martin Proprietary Information Lockheed Martin Proprietary Information costbenefit method. direct method. The statement of cash flows will not report the uses of cash in the current period. sources of cash in the current period. amount of checks outstanding at the end of the period. change in the cash balance for the current period. Collins Pest Control Products has the following information available: Net Income $25,000 Cash Provided by Operations 31,000 Cash Sales 65,000 Capital Expenditures 11,000 Dividends Paid 3,000 What is Collins' free cash flow? $11,000 $20,000 $17,000 $28,000 Which of the following would not be an adjustment to net income using the indirect method? An increase in Land Amortization Expense Depreciation Expense An increase in Prepaid Insurance sing the indirect method, patent amortization expense for the period causes cash to increase. is deducted from net income. causes cash to decrease. Lockheed Martin Proprietary Information Lockheed Martin Proprietary Information is added to net income. Using the indirect method, if equipment is sold at a gain, the sale proceeds received are added in the operating activities section. amount of the gain is added in the operating activities section. amount of the gain is deducted in the operating activities section. sale proceeds received are deducted in the operating activities section. Madison Company reported net income of $100,000 for the year ended December 31, 2013. During the year, inventories decreased by $12,000, accounts payable decreased by $18,000, depreciation expense was $20,000 and a gain on disposal of equipment of $9,000 was recorded. Net cash provided by operating activities in 2013 using the indirect method was $105,000. $112,000. $90,000. $154,000. Lockheed Martin Proprietary Information Lockheed Martin Proprietary Information Exercise 133 Tim Latimer Corporation had the following transactions. 1. 2. 3. 4. 5. 6. Sold land (cost $12,000) for $10,000. Issued common stock at par value for $22,000. Recorded depreciation on buildings for $14,000. Paid salaries of $7,000. Issued 1,000 shares of $1 par value common stock for equipment worth $9,000. Sold equipment (cost $10,000, accumulated depreciation $8,000) for $3,200. For each transaction above, prepare the journal entry. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Account Titles and Explanation Debit Credit 1. 2. 3. 4. 5. 6. Click here if you would like to Show Work for this question Problem 133A The income statement of Toby Zed Company is presented here. Toby Zed Company Income Statement For the Year Ended November 30, 2014 Sales revenue $7,500,000 Cost of goods sold Beginning inventory Purchases $1,900,000 4,400,000 Lockheed Martin Proprietary Information Lockheed Martin Proprietary Information Goods available for sale 6,300,000 Ending inventory 1,400,000 Total cost of goods sold 4,900,000 Gross profit 2,600,000 Operating expenses 1,150,000 Net income $1,450,000 Additional information: 1. 2. 3. 4. 5. Accounts receivable increased $200,000 during the year, and inventory decreased $500,000. Prepaid expenses increased $175,000 during the year. Accounts payable to suppliers of merchandise decreased $340,000 during the year. Accrued expenses payable decreased $105,000 during the year. Operating expenses include depreciation expense of $85,000. Prepare the operating activities section of the statement of cash flows for the year ended November 30, 2014, for Toby Zed Company, using the indirect method. (Show amounts that decrease cash flow with either a sign e.g. 15,000 or in parenthesis e.g. (15,000).) TOBY ZED COMPANY Partial Statement of Cash Flows For the Year Ended November 30, 2014 $ Adjustments to reconcile net income to $ $ Click here if you would like to Show Work for this question Exercise 136 The three accounts shown below appear in the general ledger of Chaudry Corp. during 2014. Equipment Date Jan. 1 Debit Credit Balance Balance 160,000 Lockheed Martin Proprietary Information Lockheed Martin Proprietary Information July 31 Purchase of equipment 70,000 230,000 Sept. 2 Cost of equipment constructed 53,000 283,000 Nov. 10 Cost of equipment sold 49,000 234,000 Accumulated DepreciationEquipment Date Debit Jan. 1 Accumulated depreciation on equipment sold Dec. 31 Depreciation for year Balance Balance Nov. 10 Credit 71,000 28,000 43,000 23,000 66,000 Retained Earnings Date Debit Jan. 1 Dividends (cash) Dec. 31 Net income Balance Balance Aug. 23 Credit 105,000 17,000 88,000 67,000 155,000 From the postings in the accounts, indicate how the information is reported on a statement of cash flows using the indirect method. The loss on disposal of plant assets was $5,000. (Hint: Cost of equipment constructed is reported in the investing activities section as a decrease in cash of $53,000.) (Show amounts that decrease cash flow with either a sign e.g. 15,000 or in parenthesis e.g. (15,000).) CHAUDRY CORP Partial Statement of Cash Flows For the Year Ended December 31, 2014 $ Adjustments to reconcile net income to $ Lockheed Martin Proprietary Information Lockheed Martin Proprietary Information Click here if you would like to Show Work for this question Exercise 134 Bracewell Company reported net income of $195,000 for 2014. Bracewell also reported depreciation expense of $40,000 and a gain of $5,000 on disposal of plant assets. The comparative balance sheet shows an increase in accounts receivable of $15,000 for the year, a $17,000 increase in accounts payable, and a $4,000 decrease in prepaid expenses. Prepare the operating activities section of the statement of cash flows for 2014. Use the indirect method. (Show amounts that decrease cash flow with either a sign e.g. 15,000 or in parenthesis e.g. (15,000).) BRACEWELL COMPANY Partial Statement of Cash Flows For the Year Ended December 31, 2014 $ Adjustments to reconcile net income to $ $ Click here if you would like to Show Work for this question Lockheed Martin Proprietary Information Lockheed Martin Proprietary Information Exercise 133 Tim Latimer Corporation had the following transactions. 1. 2. 3. 4. 5. 6. Sold land (cost $12,000) for $10,000. Issued common stock at par value for $22,000. Recorded depreciation on buildings for $14,000. Paid salaries of $7,000. Issued 1,000 shares of $1 par value common stock for equipment worth $9,000. Sold equipment (cost $10,000, accumulated depreciation $8,000) for $3,200. For each transaction above, prepare the journal entry. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Account Titles and Explanation Debit Credit 1. 2. 3. 4. 5. 6. Click here if you would like to Show Work for this question Problem 133A The income statement of Toby Zed Company is presented here. Toby Zed Company Income Statement For the Year Ended November 30, 2014 Sales revenue $7,500,000 Cost of goods sold Beginning inventory Purchases $1,900,000 4,400,000 Lockheed Martin Proprietary Information Lockheed Martin Proprietary Information Goods available for sale 6,300,000 Ending inventory 1,400,000 Total cost of goods sold 4,900,000 Gross profit 2,600,000 Operating expenses 1,150,000 Net income $1,450,000 Additional information: 1. 2. 3. 4. 5. Accounts receivable increased $200,000 during the year, and inventory decreased $500,000. Prepaid expenses increased $175,000 during the year. Accounts payable to suppliers of merchandise decreased $340,000 during the year. Accrued expenses payable decreased $105,000 during the year. Operating expenses include depreciation expense of $85,000. Prepare the operating activities section of the statement of cash flows for the year ended November 30, 2014, for Toby Zed Company, using the indirect method. (Show amounts that decrease cash flow with either a sign e.g. 15,000 or in parenthesis e.g. (15,000).) TOBY ZED COMPANY Partial Statement of Cash Flows For the Year Ended November 30, 2014 $ Adjustments to reconcile net income to $ $ Click here if you would like to Show Work for this question Exercise 136 The three accounts shown below appear in the general ledger of Chaudry Corp. during 2014. Equipment Date Jan. 1 Debit Credit Balance Balance 160,000 Lockheed Martin Proprietary Information Lockheed Martin Proprietary Information July 31 Purchase of equipment 70,000 230,000 Sept. 2 Cost of equipment constructed 53,000 283,000 Nov. 10 Cost of equipment sold 49,000 234,000 Accumulated DepreciationEquipment Date Debit Jan. 1 Accumulated depreciation on equipment sold Dec. 31 Depreciation for year Balance Balance Nov. 10 Credit 71,000 28,000 43,000 23,000 66,000 Retained Earnings Date Debit Jan. 1 Dividends (cash) Dec. 31 Net income Balance Balance Aug. 23 Credit 105,000 17,000 88,000 67,000 155,000 From the postings in the accounts, indicate how the information is reported on a statement of cash flows using the indirect method. The loss on disposal of plant assets was $5,000. (Hint: Cost of equipment constructed is reported in the investing activities section as a decrease in cash of $53,000.) (Show amounts that decrease cash flow with either a sign e.g. 15,000 or in parenthesis e.g. (15,000).) CHAUDRY CORP Partial Statement of Cash Flows For the Year Ended December 31, 2014 $ Adjustments to reconcile net income to $ Lockheed Martin Proprietary Information Lockheed Martin Proprietary Information Click here if you would like to Show Work for this question Exercise 134 Bracewell Company reported net income of $195,000 for 2014. Bracewell also reported depreciation expense of $40,000 and a gain of $5,000 on disposal of plant assets. The comparative balance sheet shows an increase in accounts receivable of $15,000 for the year, a $17,000 increase in accounts payable, and a $4,000 decrease in prepaid expenses. Prepare the operating activities section of the statement of cash flows for 2014. Use the indirect method. (Show amounts that decrease cash flow with either a sign e.g. 15,000 or in parenthesis e.g. (15,000).) BRACEWELL COMPANY Partial Statement of Cash Flows For the Year Ended December 31, 2014 $ Adjustments to reconcile net income to $ $ Click here if you would like to Show Work for this question Lockheed Martin Proprietary Information