Chapter 12 Solutions 2241

Chapter 12
The Statement of Cash Flows

Exercises
(10-15 min.) E 12-10
O+
NIF
k.
Acquisition of equipment
by issuance of note
payable
F b. Payment of cash dividend
l.
Payment of long-term debt
I+
c. Sale of long-term
investment
m. Acquisition of building by
cash payment
O+
d. Loss on sale of equipment
n.
Accrual of salary expense
O+
e. Amortization of intangible
assets
o.
Purchase of long-term
investment
F+ f. Issuance of long-term note

payable to borrow cash
O+
p.
Decrease in merchandise
inventory
O+
g. Depreciation of equipment
q.
F h. Repurchase of common shares
I+
r.
Cash sale of land
F+ i. Issuance of common shares

for cash
s.
Decrease in accrued
liabilities
O+
a. Net income
Increase in prepaid expenses
j. Increase in accounts payable
(5-10 min.) E 12-11

a.
Investing
g.
Investing
b.
Investing
h.
Financing
c.
Financing
i.
Financing
Chapter 12 The Statement of Cash Flows

Copyright 2012 Pearson Canada Inc.
815
d.
Noncash investing and financing
e.
Operating
f.
Financing
816
j.
k.
Operating
Operating
l.
Investing
m.
Operating
Financial Accounting Fourth Canadian Edition Instructors Solutions Manual

(10-15 min.) E 12-12

Cash flows from operating activities:
Net income
.................................................................................................
Adjustments to reconcile net income to
net cash used for operating activities:
Depreciation
Loss on sale of land
$ 18,000
5,000
Increase in current assets other

than cash
..................................................................................
Decrease in current liabilities..........................................
Net cash provided by operating
activities
Evaluation:
$ 35,000
(27,000)
(20,000)
(24,000)
$11,000
Operating cash flow is strong, as shown by the net cash provided by

operating activities.

817
(20-30 min.) E 12-14
Req. 1
Noel Travel Products Inc.
Statement of Cash Flows
For the Year Ended December 31, 2011
Net income..............................................................................................
$ 57,000

net cash provided by operating activities:
Depreciation......................................................................................
$ 29,000
Decrease in accounts receivable.....................................................
15,000
Increase in inventory........................................................................
(6,000)
Increase in prepaid expenses..........................................................
(1,000)
Increase in accounts payable...........................................................
13,000
Decrease in accrued liabilities.........................................................
(8,000)
Net cash provided by operating activities.......................................
42,000
99,000
Cash flows from investing activities:

Acquisition of plant assets....................................................................
Proceeds from sale of land...................................................................
$(100,000)
24,000
Net cash used for investing activities.............................................
(76,000)
Cash flows from financing activities:

Proceeds from issuance of common shares.......................................
$ 30,000
Payment of long-term note payable......................................................
(15,000)
Payment of dividends ...........................................................................
(11,000)
Net cash provided by financing activities..
4,000
Net increase in cash...................................................................................
$ 27,000
Cash balance, December 31, 2010.............................................................
20,000
$ 47,000
Noncash investing and financing activities:

Acquisition of plant assets by issuing note payable
$ 50,000
Req. 2
Evaluation:
Noels cash flows look strong. Operations are the main source of cash. The
company is investing in new plant assets without having to borrow. It was
818

able to issue common shares and pay off a long-term note payable both
financing transactions. All of these signs are favourable.

819
(5-10 min.) E 12-15

Case A -
A combination of operations and issuing common shares generated most

of the cash for acquisition of plant assets. Operations provided more cash
than did cases B and C.
Case B -
The sale of plant assets generated the cash needed to acquire new plant
assets. Operations provided the least amount of cash, compared to cases
A and
C.
Case C -
Issuing common shares generated the cash to acquire plant

assets.
Most healthy financially
Case A
Mid-range
Least healthy financially
820
Case B

Case C
Problems
Group A
(35-45 min.) P 12-40A

Primrose Software Inc.

Net income..............................................................................................
$ 45,100

Depreciation.......................................................................................
$ 27,100
Loss on sale of equipment...............................................................
11,700
Increase in accounts receivable.......................................................
(5,500)
Increase in inventories......................................................................
(5,600)
Increase in prepaid expenses...........................................................
(1,200)
Increase in accounts payable...........................................................
1,400
Increase in income tax payable........................................................
1,900
Decrease in accrued liabilities.........................................................
(11,700)
18,100
Net cash provided by operating activities.......................................
63,200

Purchase of building..............................................................................
$(125,300)
Purchase of long-term investment........................................................
(31,600)
Proceeds from sale of equipment.........................................................
58,000
Collection of loan...................................................................................
8,700
Net cash used for investing activities..............................................
(90,200)

Issuance of common shares.................................................................
$ 41,200
Issuance of long-term note payable......................................................
34,400
Payment of cash dividends...................................................................
(18,300)
Repurchase of common shares............................................................
(14,300)
Net cash provided by financing activities.......................................
43,000
Net increase in cash....................................................................................
$ 16,000
22,700
$ 38,700

Acquisition of land by issuing long-term note payable
$ 95,000
821
Derecognition of bonds payable by issuing common shares...

Total noncash investing and financing activities.
Operations provided $63,200 of the $90,200 cash used in the investing activities.
822

65,000
$160,000
Req. 1
(35-45 min.) P 12-41A

Northern Movie Theatre Company
For the Year Ended March 31, 2011

Net income...............................................................................................
$ 50,000

Depreciation........................................................................................ $ 17,300
Decrease in accounts receivable......................................................
6,800
Increase in inventories.......................................................................
(2,600)
Increase in prepaid expenses............................................................
(200)
Increase in accounts payable............................................................

Decrease in accrued liabilities...........................................................
Increase in income tax payable.........................................................
2,700
(400)
3,300
26,900
Net cash provided by operating activities........................................
76,900

Purchase of equipment........................................................................... $(78,700)
Purchase of building...............................................................................
(47,000)
Sale of long-term investment..................................................................
13,700
Net cash used for investing activities...............................................
(112,000)

Issuance of long-term note payable....................................................... $ 50,000
Issuance of common shares...................................................................
Payment of cash dividend.......................................................................
11,000
(30,000)
Net cash provided by financing activities........................................
31,000
Net (decrease) in cash..................................................................................
$ (4,100)
Cash balance, March 31, 2010.....................................................................
14,000
Cash balance, March 31, 2011.....................................................................
9,900

Acquisition of land by issuing note payable.........................................
$101,000
Req. 2
Evaluation:
Northerns cash flows look strong. Operations are the main source of cash.
The company is investing in new plant assets, and borrowing a
823
financing cash flow appears reasonable. All of these signs are

favourable.
824

(30-40 min.) P 12-42A

Req. 1
4 Seasons Supply Corp.
Net income......................................................................................................
$75,100

Depreciation...............................................................................................
$ 4,000
Decrease in accounts receivable.............................................................
400
Decrease in inventories.............................................................................
3,600
Increase in prepaid expenses...................................................................
(600)
Increase in accounts payable...................................................................
2,100
Decrease in salary payable.......................................................................
(3,500)
Decrease in other accrued liabilities........................................................
(1,100)
Net cash provided by operating activities..........................................
4,900
80,000

Purchase of land.............................................................................................
$(29,000)
Purchase of equipment ($49,400 amortization

expense of $4,000 = $45,400; $53,500
$45,400)..................................................................................................
(8,100)
Net cash used for investing activities.................................................
(37,100)

Payment of dividends ($2,700 + $75,100 $48,600)
$(29,200)
Payment of note payable................................................................................
(25,000)
Issuance of common shares..........................................................................
23,600
Net cash used for financing activities................................................
(30,600)
Net increase in cash............................................................................................
$12,300
Cash balance, December 31, 2010.....................................................................
5,300
Cash balance, December 31, 2011.....................................................................
$17,600
Req. 2
This problem will help students learn how operating activities, investing activities, and financing
activities generate cash receipts and cash payments. By solving this problem, students will learn how
825
companies prepare the statement of cash flows. Students will thus be able to understand the meaning
of cash flows from the three basic categories of business activities. This knowledge will aid their
analysis of investments. For example, students should know that net cash provided by operating
activities conveys a more positive signal about a company than net cash used for operations.
Student responses will vary.
826

Problems
Group B
(35-45 min.) P 12-45B

Crowne Plaza Products Inc.

Net income.................................................................................................
$ 31,000

Depreciation..........................................................................................
30,300
Gain on sale of investment..................................................................
(3,500)
Decrease in accounts receivable........................................................
3,600
Decrease in inventories........................................................................
5,900
Increase in prepaid expenses..............................................................
(1,100)
Increase in accounts payable..............................................................
4,100
Decrease in income tax payable..........................................................

Increase in accrued liabilities..............................................................
(900)
5,100
Net cash provided by operating activities..........................................
43,500
74,500

Purchase of equipment.............................................................................
$(69,000)
Purchase of long-term investment...........................................................
(44,800)
Sale of long-term investment....................................................................
12,200
Collection of loan......................................................................................
10,300
Net cash used for investing activities.................................................
(91,300)

Issuance of long-term note payable.........................................................
Payment of cash dividends......................................................................
Payment of long-term note payable.........................................................
Issuance of preferred shares....................................................................
$ 71,000
(48,300)
(47,800)
36,200
Net cash provided by financing activities..........................................
11,100
Net (decrease) in cash...................................................................................
$ (5,700)
Cash balance, December 31, 2010................................................................
34,800
Cash balance, December 31, 2011................................................................
$29,100

827

Acquisition of building by issuing long-term note payable..............................................
$201,000
Payment of note payable by issuing common shares.......................................................
89,400
Total noncash investing and financing activities...................................................................
$290,400
Operations provided $74,500 of the $91,300 invested during 2011.
828

(35-45 min.) P 12-46B

Req. 1
Crossbow Novelties Corp.
Net income................................................................................................
Depreciation.........................................................................................
Decrease in accounts receivable.......................................................
Decrease in inventories......................................................................
Increase in prepaid expenses............................................................
Increase in accounts payable.............................................................
Decrease in accrued liabilities...........................................................
Decrease in income tax payable........................................................
Net cash provided by operating activities.........................................
$ 52,000
17,800
700
1,400
(500)
3,100
(2,500)
(3,300)
16,700
68,700

Purchase of building................................................................................ $(124,000)
Purchase of equipment............................................................................
(55,000)
Sale of long-term investment..................................................................
6,000
(173,000)

Issuance of common shares................................................................... $ 105,600
Issuance of long-term note payable.......................................................
32,000
Payment of cash dividends.....................................................................
(17,000)
Net cash provided by financing activities.........................................
Net increase in cash......................................................................................
Cash balance, December 31, 2010...............................................................
Cash balance, December 31, 2011...............................................................
120,600
$ 16,300
12,500
$ 28,800

Derecognition of note payable by issuing common shares.
$ 30,000
Req. 2
Evaluation:
Crossbows cash flows look strong. Operations are a significant source of

cash. The company is investing heavily in new property, plant, and

829
equipment. Also the company is financing the new investments more by

issuing shares than by borrowing. All of these signs are favourable.
830

(30-40 min.) P 12-47B

Req. 1
Riverbend Pools Inc.
Net income....................................................................................................
$ 81,600

Depreciation............................................................................................. $ 15,300
Increase in accounts receivable.............................................................
Increase in inventories............................................................................
Decrease in prepaid expenses................................................................
Decrease in accounts payable................................................................
(3,100)
(4,400)
500
(1,900)
Increase in salary payable.......................................................................
700
Increase in other accrued liabilities.......................................................
1,900
Net cash provided by operating activities........................................
9,000
90,600

Purchase of land...........................................................................................
$(25,100)
Purchase of equipment ($93,700

depreciation expense of $15,300 = $78,400;
$100,900 $78,400)..................................................................................
(22,500)
(47,600)

Payment of dividends
($19,600 + $81,600 $72,500).................................................................
$(28,700)
Payment of note payable..............................................................................
(10,000)
Issuance of common shares........................................................................
8,800
Net cash used for financing activities...............................................
(29,900)
Net increase in cash..........................................................................................
$ 13,100
Cash balance, December 31, 2010....................................................................
15,600
Cash balance, December 31, 2011....................................................................
$ 28,700

831
(continued) P 12-47B
Req. 2
This problem will help students learn how operating activities, investing activities, and
financing activities generate cash receipts and cash payments. By solving this problem,
students will learn how companies prepare the statement of cash flows. Students will thus
be able to understand the meaning of cash flows from the three basic categories of business
activities. This knowledge will aid their analysis of investments. For example, students
should know that net cash provided by operating activities conveys a more positive signal
about a company than net cash used for operations.
Student responses may vary.
(20-30 min.) E 12A-12

(All amounts in thousands)
a. Collections
832
= $24,637
Sales
$24,623
+
+
Decrease in
Accounts Receivable
($615 $601)


Chapter 12 Solutions 2241

Încărcat de

Informații document

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Chapter 12 Solutions 2241

Încărcat de

Drepturi de autor:

Formate disponibile

Chapter 12

The Statement of Cash Flows

F b. Payment of cash dividend

Payment of long-term debt

d. Loss on sale of equipment

Accrual of salary expense

F+ f. Issuance of long-term note

F h. Repurchase of common shares

Cash sale of land

F+ i. Issuance of common shares

Increase in prepaid expenses

j. Increase in accounts payable

(5-10 min.) E 12-11

Chapter 12 The Statement of Cash Flows

Noncash investing and financing

Financial Accounting Fourth Canadian Edition Instructors Solutions Manual

(10-15 min.) E 12-12

Increase in current assets other

Operating cash flow is strong, as shown by the net cash provided by

Chapter 12 The Statement of Cash Flows

(20-30 min.) E 12-14

Adjustments to reconcile net income to

Decrease in accounts receivable.....................................................

Increase in prepaid expenses..........................................................

Increase in accounts payable...........................................................

Decrease in accrued liabilities.........................................................

Net cash provided by operating activities.......................................

Cash flows from investing activities:

Net cash used for investing activities.............................................

Cash flows from financing activities:

Payment of long-term note payable......................................................

Payment of dividends ...........................................................................

Net cash provided by financing activities..

Net increase in cash...................................................................................

Cash balance, December 31, 2010.............................................................

Cash balance, December 31, 2011.............................................................

Noncash investing and financing activities:

Financial Accounting Fourth Canadian Edition Instructors Solutions Manual

Chapter 12 The Statement of Cash Flows

(5-10 min.) E 12-15

A combination of operations and issuing common shares generated most

Issuing common shares generated the cash to acquire plant

Most healthy financially

Financial Accounting Fourth Canadian Edition Instructors Solutions Manual

(35-45 min.) P 12-40A

Cash flows from operating activities:

Adjustments to reconcile net income to

Loss on sale of equipment...............................................................

Increase in accounts receivable.......................................................

Increase in prepaid expenses...........................................................

Increase in accounts payable...........................................................

Increase in income tax payable........................................................

Decrease in accrued liabilities.........................................................

Net cash provided by operating activities.......................................

Cash flows from investing activities:

Purchase of long-term investment........................................................

Proceeds from sale of equipment.........................................................

Net cash used for investing activities..............................................

Cash flows from financing activities:

Issuance of long-term note payable......................................................

Payment of cash dividends...................................................................

Repurchase of common shares............................................................

Net cash provided by financing activities.......................................

Net increase in cash....................................................................................