Question

HOMEWORK #11

Due April 27, 5 pm

10 points

Download this Word document and fill in answers to the three parts.

1. Classify: Indicate whether each of the following items would be associated with a cash inflow (I), cash outflow (O), or noncash item (N) and under which category each would be reported on a statement of cash flows: Operating Activities (OA), Investing Activities (IA), Financing Activities (FA), or not on the statement (NOS).

ITEM	CLASSIFIED AS		REPORTED UNDER
1. Cash paid to supplier
2. Interest paid on debt
3. Proceeds from issuing common stock
4. Purchase of new equipment with cash
5. Purchase of common stock issued by another firm
6. Depreciation on equipment
7. Principal payment on long-term debt
8. Sale of treasury stock
9. Purchase of building with a mortgage
10. Dividends paid to shareholders
11. Sale of inventory on account

2. Determine cash receipts and/or payments involved with the data presented (I have supplied you the answer to part a in order to help you understand what I am asking):

a.                                            Income Statement                         Balance Sheet

                                                    For year                          Beg year    End year

  Sales revenue (on credit)           $500,000                

  Accounts Receivable (net)                                                   $30,000       $55,000

Cash receipts related to sales were $475,000. Figure this out by making a t-account of accounts receivable and solving for the cash collected. Note that by indicating that Accounts Receivable is net, you do not need to worry about bad debts or the allowance for doubtful accounts in this setting.

Accounts Receivable (net)
Beginning Balance                    $30,000 Sales on account                     $500,000	$475,000 must be the cash collected
Ending Balance                        $55,000

b.                                             Income Statement                       Balance Sheet

                                                      For year                  Beg year      End year

    Income taxes expense              $ 95,000      

    Income taxes Payable $33,000    $36,000

c.                                                Income Statement                       Balance Sheet

                                                    For year     Beg year           End year            Cost of goods sold                        $135,000            

Inventory                                                                              $18,000             $27,000

Accounts Payable                                                                 $23,000             $30,000

3. The Harper Company reported a net income of $36,000 for the year just ended. Relevant data for the company follows:

Account	Beginning of year	End of year
Accounts receivable (net)	$63,000	$60,000
Inventory	88,000	97,000
Prepaid expense	14,000	19,000
Accounts payable	67,000	61,000
Accrued liabilities	11,800	14,800
Dividends payable	42,000	38,000

Long term debt payable                                            133,000    145,000

Other items:

Depreciation for the year             $48,000

Gain on the sale of equipment        3,000

Determine the net cash flows provided by (used in) operating activities for the Harper Company. Show how you converted net income to net cash flow from operations by including the first 2 columns of Exhibit 12.4 on page 610 of your textbook. You may want to use Excel to do the calculation. You can then cut and paste your results from Excel into this Word document.

Answer 1

Solution 1:

Items associated as a cash inflow (I), cash outflow (O), or noncash item (N) and category each would be reported on a statement of cash flows: Operating Activities (OA), Investing Activities (IA), Financing Activities (FA), or not on the statement (NOS) is as shown below:

	Classified as	Reported under
1. Cash paid to supplier	Cash Outflow (O)	Operating activity (OA)
2. Interest paid on debt	Cash Outflow (O)	Operating activity (OA)
3. Proceeds from issuing common stock	Cash Inflow (I)	Financing activity (FA)
4. Purchase of new equipment with cash	Cash Inflow (I)	Investing activity (IA)
5. Purchase of common stock issued by another firm	Cash Outflow (O)	Investing activity (IA)
6. Depreciation on equipment	Noncash Item (N)	Operating activity (OA)
7. Principal payment on long-term debt	Cash Outflow (O)	Financing activity (FA)
8. Sale of treasury stock	Cash Inflow (I)	Financing activity (FA)
9. Purchase of building with a mortgage	Noncash Item (N)	Not on the statement (NOS)
10. Dividends paid to shareholders	Cash Outflow (O)	Financing activity (FA)
11. Sale of inventory on account	Noncash Item (N)	Operating activity (OA)