16-55 Preparation of Statement of Cash Flows South African Imports Company has assembled the (a) balance sheet and (b) income statement and change in retained earnings for 20X1 shown in Exhibit 16-23. On December 30, 20X1, South African Imports paid R103 million in cash to acquire a new warehouse to expand opera- tions. (R stands for rand, the South African currency.) This was partly financed by an issue of long-term debt for R 50 million cash. The company sold plant assets for their book value of R 6 million during 20X1. Because net income was R 26 million, the highest in the company’s his- tory, Julie Botha, the CEO, was distressed by the company's extremely low cash balance. 1. Prepare a statement of cash flows using the direct method for reporting cash flows from operating activities. You may wish to use Exhibit 16-12 on page 678 as a guide. 2. Prepare a schedule that reconciles net income to net cash provided by operating activities. 3. What is revealed by the statement of cash flows? Does it help you reduce Ms. Botha's dis- tress? Why? Briefly explain to Ms. Botha why cash has decreased even though net income was R 26 million.
16-55 Preparation of Statement of Cash Flows South African Imports Company has assembled the (a) balance sheet and (b) income statement and change in retained earnings for 20X1 shown in Exhibit 16-23. On December 30, 20X1, South African Imports paid R103 million in cash to acquire a new warehouse to expand opera- tions. (R stands for rand, the South African currency.) This was partly financed by an issue of long-term debt for R 50 million cash. The company sold plant assets for their book value of R 6 million during 20X1. Because net income was R 26 million, the highest in the company’s his- tory, Julie Botha, the CEO, was distressed by the company's extremely low cash balance. 1. Prepare a statement of cash flows using the direct method for reporting cash flows from operating activities. You may wish to use Exhibit 16-12 on page 678 as a guide. 2. Prepare a schedule that reconciles net income to net cash provided by operating activities. 3. What is revealed by the statement of cash flows? Does it help you reduce Ms. Botha's dis- tress? Why? Briefly explain to Ms. Botha why cash has decreased even though net income was R 26 million.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Full answer Please
Transcribed Image Text:Balance Sheet December 31, 20X1 (in millions)
20X1
20X0
Change
Assets
Cash
R 5
R 25
R(20)
Accounts receivable
55
28
27
Inventory
72
50
22
Prepaid general expenses
4
3
1
Plant assets, net
207
150
57
R343
R256
R 87
Liabilities and shareholders' equity
Accounts payable for merchandise
R 74
R 60
R 14
Accrued tax payable
3
1
Long-term debt
50
50
Capital stock
100
100
Retained earnings
116
94
22
R343
R256
R 87
Income Statement and Change in Retained Earnings for the Year Ended December 31, 20X1 (in millions)
Sales
R315
Less cost of goods sold
Inventory, December 31, 20X0
R 50
Purchases
210
Cost of goods available for sale
R260
Inventory, December 31, 20X1
72
188
Gross profit
R127
Less other expenses
General expense
R 51
Depreciation
40
Таxes
10
101
Net income
R 26
Dividends
4
Net income of the period retained
R 22
Retained earnings, December 31, 20X0
94
Retained earnings, December 31, 20x1
R116
Exhibit 16-23
South African Imports Co.
Financial Statements
Transcribed Image Text:16-55 Preparation of Statement of Cash Flows
South African Imports Company has assembled the (a) balance sheet and (b) income statement
and change in retained earnings for 20X1 shown in Exhibit 16-23. On December 30, 20X1,
South African Imports paid R103 million in cash to acquire a new warehouse to expand opera-
tions. (R stands for rand, the South African currency.) This was partly financed by an issue of
long-term debt for R 50 million cash. The company sold plant assets for their book value of
R 6 million during 20X1. Because net income was R 26 million, the highest in the company's his-
tory, Julie Botha, the CEO, was distressed by the company's extremely low cash balance.
1. Prepare a statement of cash flows using the direct method for reporting cash flows from operating
activities. You may wish to use Exhibit 16-12 on page 678 as a guide.
2. Prepare a schedule that reconciles net income to net cash provided by operating activities.
3. What is revealed by the statement of cash flows? Does it help you reduce Ms. Botha's dis-
tress? Why? Briefly explain to Ms. Botha why cash has decreased even though net income was
R 26 million.
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