Solutions to the worksheet problems(1) (2)

Solution: CASH FLOW CATEGORIES Maya Corporation reports the following items in its statement of cash flows prepared using the direct method. Indicate whether each item is disclosed in the operating, investing, or financing activities section of the statement. Operating Investing Financing Cash paid for salaries and wages X Cash paid to purchase property, plant, and equipment X Cash received from issuing common stock to owners X Cash paid for income taxes X Cash paid to purchase investments in securities X Dividends paid to owners X Interest paid on liabilities X Cash received from sale of property, plant, and equipment X Cash used for repaying principal to lenders X Cash used to repurchase stock from owners X Cash provided by dividends and interest on investments X Cash received from customers X Cash from sale or maturity of investments in securities X Cash provided by borrowing from a bank X

Handout 12–2 STATEMENT OF CASH FLOWS (INDIRECT METHOD) The Group, Inc. Consolidated Balance Sheet December 31 (in thousands) Current Year Prior Year ASSETS Cash and Cash Equivalents $92,069 $72,634 Accounts Receivables, Net 55,947 75,492 Inventories 50,784 53,129 Prepaid Expenses 12,112 13,057 Equipment 145,444 134,312 Accumulated Depreciation (50,515) (36,689) Total Assets $305,841 $311,935 LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts Payable $25,466 $34,879 Accrued Liabilities 40,574 40,722 Long-Term Notes 10,422 10,206 Common Stock 1,662 1,284 Retained Earnings 227,717 224,844 Total Liabilities And Stockholders’ Equity $305,841 $311,935 Consolidated Statement of Income Year Ended December 31 (in thousands) Current Year Net Sales $130,896 Cost of Goods Sold 74,040 Gross Profit 56,856 Operating Expenses: Selling, General & Administrative Expenses 33,211 Depreciation Expense 13,826 Total Operating Expenses 47,037 Operating Income 9,819 Interest Income 239 Income Before Income Taxes 10,058 Income Tax Expense 3,621 Net Income $6,437

Solution: STATEMENT OF CASH FLOWS (INDIRECT METHOD) The Group, Inc. Consolidated Balance Sheets December 31 (in thousands) Section Current Year Prior Year Change ASSETS Cash and Cash Equivalents $92,069 $72,634 + 19,435 O Accounts Receivables, Net 55,947 75,492 – 19,545 O Inventories 50,784 53,129 – 2,345 O Prepaid Expenses 12,112 13,057 – 945 I Equipment 145,444 134,312 + 11,132 O Accumulated Depreciation (50,515) (36,689) – 13,826 Total Assets $305,841 $311,935 LIABILITIES AND STOCKHOLDERS’ EQUITY O Accounts Payable $25,466 $34,879 – 9,413 O Accrued Liabilities 40,574 40,722 – 148 F Long-Term Notes 10,422 10,206 216 F Common Stock 1,662 1,284 + 378 O,F Retained Earnings 227,717 224,844 + 2,873 Total Stockholders’ Equity 229,379 226,128 Total Liabilities And Stockholders’ Equity $305,841 $311,935 Consolidated Statement of Income Year Ended December 31 (in thousands) Current Year Net Sales $130,896 Cost of Goods Sold 74,040 Gross Profit 56,856 Operating Expenses: Selling, General & Administrative Expenses 33,211 Depreciation Expense 13,826 Total Operating Expenses 47,037 Operating Income 9,819 Interest Income 239 Income Before Income Taxes 10,058 Income Tax Expense 3,621 Net Income $6,437

Solution , continued The Group, Inc. did not sell any equipment or repay any long-term notes during the current year. The company declared and paid dividends in the amount of $3,564 during the current year. Using the information provided above, compute the net cash flow provided by (used for) operating activities using the indirect method. Net Income $6,437 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 13,826 Changes in current assets and current liabilities: Accounts Receivable 19,545 Inventories 2,345 Prepaid Expenses 945 Accounts Payable (9,413) Accrued Liabilities (148) Net cash flows provided by operating activities $33,537 Then, compute the cash flows during the current year for each category and complete the following table: Cash flows from operating activities (see above) $33,537 Cash flows from investing activities (1) (11,132) Cash flows from financing activities (2) (2,970) Net increase in cash and cash equivalents 19,435 Cash and cash equivalents at beginning of year 72,634 Cash and cash equivalents at end of year $92,069 (1) Attributable to purchases of equipment (that is, the increase in the equipment account). There were no other investing activities. (2) Cash flows from financing activities were determined as follows: Additional long-term notes $ 216 Proceeds from stock issuance 378 Cash dividends paid (3,564) Net cash flows from financing activities $(2,970)

Handout 12–3 , continued The Group, Inc. did not sell any equipment or repay any long-term notes during the current year. The company declared and paid dividends in the amount of $3,564 during the current year. Using the information provided above, compute the net cash flows from operating activities using the direct method. Then, compute the cash flows during the current year for each category and complete the following table: Net cash flows from operating activities $ Net cash flows from investing activities Net cash flows from financing activities Net increase (decrease) in cash and cash equivalents 19,435 Cash and cash equivalents at beginning of year 72,634 Cash and cash equivalents at end of year $ 92,069

Solution: STATEMENT OF CASH FLOWS (DIRECT METHOD)