Exercise 2: Cash Flows From Operating Activities Indirect Me

Exercise 2 Cash Flows From Operating Activities Indirect Methodthe C

Exercise 2 : Cash Flows from Operating Activities: Indirect Method The condensed single-step income statement for the year ended December 31, 2014, of Conti Chemical Company, a distributor of farm fertilizers and herbicides, follows. Sales $26,000,000 Less: Cost of goods sold $15,200,000 Operating expenses (including depreciation of $1,640,,600,000 Income taxes expense 800,,600,000 $2,400,000 Selected accounts from Conti Chemical’s balance sheets for 2014 and 2013 follow. Accounts receivable $4,800,000 $3,400,000 Inventory 1,680,,040,000 Prepaid expenses 520,,000 Accounts payable 120,,000 Income taxes available 280,,000 Prepare a schedule of cash flows from operating activities using the indirect method.

Exercise 8: Preparing the Statement of cash Flows: Indirect Method Keeper Cooperation’s income statement for the year ended June 30, 2014, and its comparative balance sheets for June 30, 2014 and 2013 follow. Keeper Corporation Income Statement For the Year Ended June 30, 2014 Sales $234,000 Cost of goods sold 156,000 Gross Margin $78,000 Operating expenses 45,000 Operating income $33,000 Interest expense 2,800 Income before income taxes $30,200 Income taxes expense 12,300 Net income $17,900 Keeper Corporation Comparative Balance Sheets June 30, 2014 and Assets Cash $69,900 $12,500 Accounts receivable (net) 21,,000 Inventory 43,,400 Prepaid Expenses 3,,600 Furniture 55,,000 Accumulated depreciation- furniture (9,,000) Total Assets: $183,500 $144,500 Liabilities and Stockholders’ Equity Accounts payable $13,000 $14,000 Income taxes payable 1,,800 Notes payable (long-term) 37,,000 Common stock, $10 par value 115,,000 Retained earnings 17,,700 Total liabilities and stockholders’ equity $183,500 $144,500 Keeper issued a $22,000 note payable for purchase of furniture; sold at carrying value furniture that cost $27,000 with accumulated depreciation of $15,300; recorded depreciation on the furniture for the year, $19,300; repaid a note in the amount of $28,000; issued $25,000 of common stock at par value; and paid dividends of $4,300. Prepare Keeper’s statement of cash flows for the year 2014 using the indirect method.

Exercise 9: In 2014, Andy’s Corporation had year-end assets of $2,400,000 sales of $3,300,000. Net income of $280,000, net cash flows from operating activities of $390,000, dividends of $120,000, purchases of plant assets of $500,000, and sales of plant assets of $90,000. In 2013, year-end assets were $2,100,000. Calculate free cash flow and the cash-generating efficiency ratios of cash flow yield, cash flows to sales, and cash flows to assets (Round to one decimal or the nearest tenth of a percent.) Problem 1: Classification of Cash Flow Transaction Analyze each transaction listed in the table that follows and place X’s in the appropriate columns to indicate the transaction’s classification and its effect on cash flows using the indirect method. Cash Flow Classification Effect on Cash Flows Transaction Operating activity Investing activity Financing activity Noncash transaction Increase Decrease No effect 1. Paid a cash dividend 2. Decreased accounts receivable 3. Increased inventory 3. Incurred a net loss. 5. Declared and issued a stock dividend 6. Retired long-term debt with cash 7. Sold available-for-sales securities at a loss. 8. Issued stock for equipment. 9. Decreased prepaid insurance. 10. Purchased treasury stock with cash. 11. Retired a fully depreciated truck (no gain or loss). 12. Increased interest payable. 13. Decreased dividends receivable on investment 14. Sold treasury stock. 15. Increased income taxes payable. 16. Transferred cash to money market account. 17. Purchased land and building with a mortgage. Problem 3: Statement of Cash Flows: Indirect Method Chaplin Arts, Inc.’s comparative balance sheets for December 31, 2014 and 2013, follow: Chaplin Arts, Inc. Comparative Balance Sheets December 31, 2014 and 2013 Assets Cash $94,560 $27,360 Accounts receivable (net) 102,340 75,430 Inventory 112,,890 Prepaid expenses - 20,000 Land 25,000 - Building 117,000 - Accumulated depreciation-building -15,000 - Equipment 33,000 34,000 Accumulated depreciation-equipment -14,,000 Patients 4,000 6,000 Total assets $479,380 $276,680 Liabilities and Stockholders' Equity Accounts payable $10,750 $36,750 Notes payable (current) 10,000 - Accrued liabilities - 12,300 Mortgage payable 162,000 - Common stock, $10 Par Value 180,,000 Additional paid-in capital 57,200 37,200 Retained Earnings 59,430 40,430 Total liabilities and stockholders' equity $479,380 $276,680 The following additional information about Chaplin Art’s operations during 2013 is available: (a) net income, $28,000; (b) building and equipment depreciation expense amounts, $15,000 and $3,000, respectively; (c) equipment that cost $13,500 with accumulated depreciation of $12,500 sold at a gain of $5,300; (d) equipment purchases, $12,500; (e) patent amortization, $3,000; purchase of patent, $1,000; (f) funds borrowed by issuing notes payable, $25,000; notes payable repaid, $15,000; (g) land and building purchased for $162,000 by signing a mortgage for the total cost; (h) 1,500 shares of $20 par value common stock issued for a total of $50,000; and (i) paid cash dividends, $9,000. REQUIRED: Using the indirect method, prepare of a statement of cash flows for Chaplin Arts. Why did Chaplin Arts have an increase in cash of $67,200 when it recorded net income of only $28,000? Discuss and interpret. Compute and assess cash flow yield and free cash flow for 2014. (Round to one decimal place.) What is your assessment of Chaplin Arts’ cash-generating ability? - -