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Chapter1: Financial Statements And Business Decisions
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Problem 1Q
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Plz Solve 13.6A from opreating, investing and finacing with direct method and write compution for every step
Transcribed Image Text:11:03 O O
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L02
PROBLEM 13.6A
Preparing a Statement
of Cash Flows: A
Comprehensive
You are the controller for 21st Century Technologies. Your staff has prepared an income statement
for the current year and has developed the following additional information by analyzing changes
in the company's balance sheet accounts.
through
L04
Problem without a
Worksheet
21st CENTURY TECHNOLOGIES
LOG
INCOME STATEMENT
eXcel
FOR THE YEAR ENDED DECEMBER 31, 2011
L08
Revenue:
Net sales.
$3,200,000
Interest revenue ..
40,000
Gain on sales of marketable securities
34,000
Total revenue and gains.
$3,274,000
Costs and expenses:
Cost of goods sold
$1,620,000
Operating expenses (including depreciation
of $150,000)
1,240,000
Interest expense
42,000
Income tax expense
100,000
Loss on sales of plant assets
12,000
Total costs, expenses, and losses
3,014,000
Net income...
$ 260.000
Additional Information
1. Accounts receivable increased by $60,000.
2. Accrued interest receivable decreased by $2,000.
606
Chapter 13 Statement of Cash Flows
3. Inventory decreased by $60,000, and accounts payable to suppliers of merchandise decreased
by $16,000.
4. Short-term prepayments of operating expenses increased by $6,000, and accrued liabilities for
operating expenses decreased by $8,000.
5. The liability for accrued interest payable increased by $4,000 during the year.
6. The liability for accrued income taxes payable decreased by $14,000 during the year.
7. The following schedule summarizes the total debit and credit entries during the year in other
balance sheet accounts:
Debit
Credit
Entries
Entries
Marketable Securities
$ 60,000
$ 38,000
Notes Receivable (cash loans made to borrowers)
44,000
28,000
Plant Assets (see paragraph 8)
500,000
36,000
Notes Payable (short-term borrowing)
Capital Stock ..
92,000
82,000
20,000
Additional Paid-in Capital-Capital Stock
160,000
Retained Earnings (see paragraph 9)
120,000
260,000
8. The $36,000 in credit entries to the Plant Assets account is net of any debits to Accumulated
Depreciation when plant assets were retired. Thus, the $36,000 in credit entries represents the
book value of all plant assets sold or retired during the year.
9. The $120,000 debit to Retained Earnings represents dividends declared and paid during the
year. The $260,000 credit entry represents the net income shown in the income statement.
10. All investing and financing activities were cash transactions.
11. Cash and cash equivalents amounted to $244,000 at the beginning of the year and to $164,000
at year-end.
Instructions
a. Prepare a statement of cash flows for the current year. Use the direct method of reporting cash
flows from operating activities. Place brackets around dollar amounts representing cash out-
flows. Show separately your computations of the following amounts:
1. Cash received from customers
2. Interest received
3. Cash paid to suppliers and employees
4. Interest paid
5. Income taxes paid
6. Proceeds from sales of marketable securities
7. Proceeds from sales of plant assets
8. Proceeds from issuing capital stock
b. Explain the primary reason why:
1. The amount of cash provided by operating activities was substantially greater than the
company's net income.
2. There was a net decrease in cash over the year, despite the substantial amount of cash
provided by operating activities.
As 21st Century's controller, you think that through more efficient cash management, the
company could have held the increase in accounts receivable for the year to $10,000, with-
out affecting net income. Explain how holding down the growth in receivables affects cash.
Compute the effect that limiting the growth in receivables to $10,000 would have had on the
company's net increase or decrease in cash (and cash equivalents) for the year.
c.
II
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