Chapter 21, Problem 21.19P

To determine

Statement of cash flows: This statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as the ending balance of cash at the end of the accounting period.

To Prepare: The Statement of cash flow for Company D, using the T-Accounts.

Explanation of Solution

T-account: T-account is the form of the ledger account, where the journal entries are posted to this account. It is referred to as the T-account, because the alignment of the components of the account resembles the capital letter ‘T’.

The components of the T-account are as follows:

a) The title of the account

b) The left or debit side

c) The right or credit side

The T-accounts for Company D, for various accounts are shown below:

Cash (Statement of Cash Flows) (Amount ($) in millions)
Cash Balance		13
Operating activities:
From customers	(1) 202	(3) 132	To suppliers of goods
From dividends received	(2) 2	(4) 28	To employees
		(6) 5	For interest
		(8) 17	For income taxes
Investing activities:
Sale of equipment	(7)  7	(10) 5	Purchase of long term investment
		(12)  15	Purchase of equipment
Financing activities:
Sale of bonds payable	(13) 25	(15) 13	Payment of dividends
		(16) 8	Purchase of treasury stock

Table (1)

Accounts Receivable:

Accounts Receivable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
				December 31, 2018	Decrease in accounts receivable	2
					Balance	(1) 2

Table (2)

Allowance for uncollectible accounts:

Allowance for uncollectible accounts
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Increase in allowance for uncollectible accounts	1
	Balance	(1) 1

Table (3)

Inventory:

Inventory Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Increase in inventory	5
	Balance	(3) 5

Table (4)

Dividend Receivable:

Dividend Receivable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Increase in dividend receivable	1
	Balance	(2) 1

Table (5)

Long-Term Investment:

Long-Term Investment Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Increase in long-term investment	5
	Balance	(10) 5

Table (6)

Land:

Land Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Increase in land	30
	Balance	X (11) 30

Table (7)

Building and Equipment:

Building and Equipment Account
Date	Details	Debit ($)		Date	Details	Credit ($)
				December 31, 2018	Decrease in building and equipment	25
December 31, 2018	Purchase of equipment	(12) 15			Balance	(7) 40

Table (8)

Accumulated Depreciation:

Accumulated Depreciation Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Accumulated depreciation	25
	Depreciation	(7) 30		December 31, 2018	Balance	(5) 5

Table (9)

Accounts Payable:

Accounts Payable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Decrease in accounts payable	7
	Balance	(3) 7

Table (10)

Salary Payable:

Salary Payable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Decrease in salary payable	3
	Balance	(4) 3

Table (11)

Interest Payable:

Interest Payable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
				December 31, 2018	Increase in interest payable	2
					Balance	(6) 2

Table (12)

Income Tax Payable:

Income Tax Payable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Decrease in income tax payable	1
	Balance	(8) 1

Table (13)

Notes Payable:

Notes Payable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
				December 31, 2018	Notes payable	30
					Balance	X (11) 30

Table (14)

Bonds Payable:

Bonds Payable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
				December 31, 2018	Bonds payable	25
					Balance	(13) 25

Table (15)

Discount on Bonds:

Discount on Bonds Account
Date	Details	Debit ($)		Date	Details	Credit ($)
				December 31, 2018	Discount on bond	1
					Balance	(6) 1

Table (16)

Common stock:

Common stock Account
Date	Details	Debit ($)		Date	Details	Credit ($)
				December 31, 2018	Common stock	10
					Balance	(14) 10

Table (17)

Paid-in Capital:

Paid-in Capital Account
Date	Details	Debit ($)		Date	Details	Credit ($)
				December 31, 2018	Paid-in capital	4
					Balance	(14) 4

Table (18)

Retained Earnings:

Retained Earnings Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Payment of cash dividend	(15) 13			Balance	(9) 25
	Retained earning	(14) 14

Table (19)

Treasury Stock:

Treasury Stock Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Treasury stock	8
	Balance	(16) 8

Table (20)

Note (X):

Purchase $30,000 worth of land by issuing a 13%, 7-year note is considered as non cash investing and financing activities.

Prepare T-account for income statement account of DUX Company for the year ended December 31, 2018:

Sales:

Sales Account
Date	Details	Debit ($)		Date	Details	Credit ($)
				December 31, 2018	Sales revenue	200
					Balance	(1) 200

Table (21)

Dividend Revenue:

Dividend Revenue Account
Date	Details	Debit ($)		Date	Details	Credit ($)
				December 31, 2018	Dividend revenue	3
					Balance	(2) 3

Table (22)

Cost of Goods Sold:

Cost of Goods Sold Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Cost of Goods Sold	120
	Balance	(3) 120

Table (23)

Salaries Expense:

Salaries Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Salaries Expense	25
	Balance	(4) 25

Table (24)

Depreciation Expense:

Depreciation Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Depreciation Expense	5
	Balance	(5) 5

Table (25)

Bad debt Expense:

Bad debt Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Bad debt Expense	1
	Balance	(1) 1

Table (26)

Interest Expense:

Interest Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Interest Expense	8
	Balance	(6) 8

Table (27)

Loss on Sale of Building:

Loss on Sale of Building Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Loss on sale of building	3
	Balance	(7) 3

Table (28)

Income Tax Expense:

Income Tax Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Income Tax Expense	16
	Balance	(8) 16

Table (29)

Net income (income summary):

Net Income (income summary)Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31, 2018	Net income	25
	Balance	(9) 25

Table (30)

Prepare the statement of cash flows using direct method for DUX Company for the year ended December 31, 2018:

DUX Company
Statement of Cash Flows
Year Ended December 31, 2018
Details	Amount ($)	Amount ($)
Cash flows from operating activities:
Cash inflows:
From customers	202
From dividends received	2
Cash outflows:
To suppliers of goods	(132)
To employees	(28)
For interest	(5)
For income taxes	(17)
Net cash flows from operating activities		22
Cash flows from investing activities:
Sale of building	7
Purchase of long-term investment	(5)
Purchase of equipment	(15)
Net cash flows from investing activities		(13)
Cash flows from financing activities:
Sale of bonds payable	25
Purchase of treasury stock	(8)
Payment of cash dividends	(13)
Net cash flows from financing activities		4
Net increase in cash		13
Cash balance, January 1,		20
Cash balance, December 31,		33

Table (31)

Conclusion

Hence, the opening cash balance is $20 million and closing cash balance is $33 million.