Fundamentals Of Financial Accounting
6th Edition
ISBN: 9781259864230
Author: PHILLIPS, Fred, Libby, Robert, Patricia A.
Publisher: Mcgraw-hill Education,
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Chapter 12, Problem 4PA
Preparing and Interpreting a Statement of Cash Flows (Indirect Method)
Heads Up Company was started several years ago by two hockey instructors. The company’s comparative balance sheets and income statement follow, along with additional information.
| Current Year | Previous Year | |
| Balance Sheet at December 31 | ||
| Cash | $ 6,300 | $4,000 |
| Accounts Receivable | 900 | 1,750 |
| Equipment | 5,500 | 5,000 |
| Accumulated |
(1,500) | (1,250) |
| $11,200 | $9,500 | |
| Accounts Payable | $ 500 | $1,000 |
| Salaries and Wages Payable | 500 | 750 |
| Note Payable (long-term) | 1,700 | 500 |
| Common Stock | 5,000 | 5,000 |
| Retained Earnings | 3,500 | 2,250 |
| $11,200 | $9,500 | |
| Income Statement | ||
| Service Revenue | $37,500 | |
| Salaries and Wages Expense | 35,000 | |
| Depreciation Expense | 250 | |
| Income Tax Expense | 1,000 | |
| Net Income | $ 1,250 |
Additional Data:
- a. Bought new hockey equipment for cash, $500.
- b. Borrowed $1,200 cash from the bank during the year.
- c. Accounts Payable includes only purchases of services made on credit for operating purposes. Because there are no liability accounts relating to income tax, assume that this expense was fully paid in cash.
Required:
- 1. Prepare the statement of cash flows for the current year ended December 31 using the indirect method.
- 2. Use the statement of cash flows to evaluate the company’s cash flows.
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Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows:
Ending Balance
Beginning Balance
Cash and cash equivalents
$
102,000
$
122,400
Accounts receivable
81,700
88,000
Inventory
109,700
100,000
Total current assets
293,400
310,400
Property, plant, and equipment
291,000
280,000
Less accumulated depreciation
97,000
70,000
Net property, plant, and equipment
194,000
210,000
Total assets
$
487,400
$
520,400
Accounts payable
$
64,000
$
113,700
Income taxes payable
49,700
65,700
Bonds payable
120,000
100,000
Common stock
140,000
120,000
Retained earnings
113,700
121,000
Total liabilities and stockholders’ equity
$
487,400
$
520,400…
Required information
Skip to question
[The following information applies to the questions displayed below.]
Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows:
Ending Balance
Beginning Balance
Cash and cash equivalents
$
102,000
$
122,400
Accounts receivable
81,700
88,000
Inventory
109,700
100,000
Total current assets
293,400
310,400
Property, plant, and equipment
291,000
280,000
Less accumulated depreciation
97,000
70,000
Net property, plant, and equipment
194,000
210,000
Total assets
$
487,400
$
520,400
Accounts payable
$
64,000
$
113,700
Income taxes payable
49,700
65,700
Bonds payable
120,000
100,000
Common stock
140,000
120,000
Retained earnings
113,700
121,000
Total liabilities and stockholders’ equity
$
487,400
$
520,400…
Required information
Skip to question
[The following information applies to the questions displayed below.]
Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows:
Ending Balance
Beginning Balance
Cash and cash equivalents
$
102,000
$
122,400
Accounts receivable
81,700
88,000
Inventory
109,700
100,000
Total current assets
293,400
310,400
Property, plant, and equipment
291,000
280,000
Less accumulated depreciation
97,000
70,000
Net property, plant, and equipment
194,000
210,000
Total assets
$
487,400
$
520,400
Accounts payable
$
64,000
$
113,700
Income taxes payable
49,700
65,700
Bonds payable
120,000
100,000
Common stock
140,000
120,000
Retained earnings
113,700
121,000
Total liabilities and stockholders’ equity
$
487,400
$
520,400…
Chapter 12 Solutions
Fundamentals Of Financial Accounting
Ch. 12 - Compare the purposes of the income statement, the...Ch. 12 - Prob. 2QCh. 12 - Prob. 3QCh. 12 - What are the major categories of business...Ch. 12 - Prob. 5QCh. 12 - Describe the types of items used to compute cash...Ch. 12 - Under the indirect method, depreciation expense is...Ch. 12 - Prob. 8QCh. 12 - Explain why a 50,000 increase in inventory during...Ch. 12 - Prob. 10Q
Ch. 12 - As a junior analyst, you are evaluating the...Ch. 12 - Prob. 12QCh. 12 - Prob. 13QCh. 12 - Prob. 14QCh. 12 - (Supplement 12A) How is the sale of equipment...Ch. 12 - Prob. 1MCCh. 12 - Prob. 2MCCh. 12 - Prob. 3MCCh. 12 - Prob. 4MCCh. 12 - Which of the following would not appear in the...Ch. 12 - Prob. 6MCCh. 12 - Prob. 7MCCh. 12 - Prob. 8MCCh. 12 - The total change in cash as shown near the bottom...Ch. 12 - Prob. 10MCCh. 12 - Prob. 1MECh. 12 - Matching Items Reported to Cash Flow Statement...Ch. 12 - Determining the Effects of Account Changes on Cash...Ch. 12 - Computing Cash Flows from Operating Activities...Ch. 12 - Prob. 5MECh. 12 - Computing Cash Flows from Investing Activities...Ch. 12 - Computing Cash Flows from Financing Activities...Ch. 12 - Computing Cash Flows Under IFRS Using the data...Ch. 12 - Prob. 9MECh. 12 - Interpreting Cash Flows from Operating, Investing,...Ch. 12 - Matching Items Reported to Cash Flow Statement...Ch. 12 - Computing Cash Flows from Operating Activities...Ch. 12 - Prob. 13MECh. 12 - Matching items Reported to Cash Flow Statement...Ch. 12 - Prob. 2ECh. 12 - Prob. 3ECh. 12 - Prob. 4ECh. 12 - Prob. 5ECh. 12 - Prob. 6ECh. 12 - Prob. 7ECh. 12 - Prob. 8ECh. 12 - Reporting and Interpreting Cash Flows from...Ch. 12 - Prob. 10ECh. 12 - Prob. 11ECh. 12 - Inferring Balance Sheet Changes from the Cash Flow...Ch. 12 - Prob. 13ECh. 12 - Prob. 14ECh. 12 - Prob. 15ECh. 12 - Prob. 16ECh. 12 - Prob. 17ECh. 12 - Prob. 18ECh. 12 - Prob. 19ECh. 12 - Prob. 20ECh. 12 - Prob. 21ECh. 12 - Prob. 22ECh. 12 - (Supplement 12B) Preparing a Statement of Cash...Ch. 12 - Determining Cash Flow Statement Effects of...Ch. 12 - Prob. 2CPCh. 12 - Prob. 3CPCh. 12 - Preparing and Interpreting a Statement of Cash...Ch. 12 - Prob. 5CPCh. 12 - Prob. 6CPCh. 12 - (Supplement 12A) Preparing and Interpreting a...Ch. 12 - Prob. 1PACh. 12 - Prob. 2PACh. 12 - Prob. 3PACh. 12 - Preparing and Interpreting a Statement of Cash...Ch. 12 - Computing Cash Flows from Operating Activities...Ch. 12 - Prob. 6PACh. 12 - (Supplement 12A) Preparing and Interpreting a...Ch. 12 - Prob. 1PBCh. 12 - Prob. 2PBCh. 12 - Prob. 3PBCh. 12 - Preparing and Interpreting a Statement of Cash...Ch. 12 - Prob. 5PBCh. 12 - Prob. 6PBCh. 12 - Prob. 1SDCCh. 12 - Prob. 2SDCCh. 12 - Prob. 6SDCCh. 12 - Prob. 7SDCCh. 12 - Prob. 8SDCCh. 12 - Prob. 9SDCCh. 12 - Prob. 1CC
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