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

Explanation of Solution
T-account: T-account is the form of the ledger account, where the
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 Industries M, for various accounts are shown below:
Cash Account:
Cash (Statement of Cash Flows) (Amount ($) in millions) | |||
Cash balance | 205 | ||
Operating activities: | |||
From customers | (1) 2,495 | (4) 675 | To suppliers |
(9) 425 | For expenses | ||
Investing activities: | |||
Sale of land | (3) 165 | (11) 90 0 | Purchase of equipment |
Sale of equipment | (7) 15 | ||
Financing activities: | |||
(2) 20 | Payment on lease | ||
(13) 450 | Payment of dividend |
Table (1)
Accounts Receivable Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in accounts receivable | 150 | ||||
Balance | (1) 150 |
Table (2)
Inventory:
Inventory Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in inventory | 375 | ||||
Balance | (4) 375 |
Table (3)
Land:
Land Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in land | 75 | ||||
Lease liability | X (2) 150 | December 31, 2016 | Balance | 75 |
Table (4)
Accumulated Depreciation - Building Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Accumulated depreciation | 30 | ||||
December 31, 2018 | Balance | (5) 30 |
Table (5)
Equipment:
Equipment Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in equipment | 600 | ||||
December 31, 2018 | Balance | (11) 900 | December 31, 2018 | Sale of equipment | (7) 300 |
Table (6)
Accumulated Depreciation - Equipment:
Accumulated Depreciation - Equipment Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Accumulated depreciation | 45 | ||||
December 31, 2018 | Increase in equipment | (7) 270 | December 31, 2018 | Balance | (6) 315 |
Table (7)
Patent:
Patent Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Decrease in patent | 300 | ||||
December 31, 2018 | Balance | (8) 300 |
Table (8)
Accounts Payable:
Accounts Payable Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in accounts payable | 300 | ||||
Balance | (4) 300 |
Table (9)
Accrued Expense Payable:
Accrued Expense Payable Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in accrued expense payable | 75 | ||||
Balance | (9) 75 |
Table (10)
Lease Liability – Land:
Lease Liability – Land Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in lease liability | 130 | ||||
(2) 20 | Balance | X (2) 150 |
Table (11)
Common Stock:
Common Stock Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in common stock | 150 | ||||
Balance | (12) 150 |
Table (12)
Paid-in Capital:
Paid-in Capital Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Increase in paid-in capital | 75 | ||||
Balance | (12) 75 |
Table (13)
Retained Earnings Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | December 31, 2018 | Balance of retained earnings | 300 | |||
Payment of cash dividend | (13) 450 | Balance | (10) 975 | |||
Retained earning | (12) 225 |
Table (14)
Note (X):
Purchase $150 worth of land by lease is considered as non cash investing and financing activities.
Prepare T-account for income statement account of Industries Mfor the year ended December 31, 2018:
Sales:
Sales Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Sales revenue | 2,645 | ||||
Balance | (1) 2,645 |
Table (15)
Gain on Sale of Land:
Gain on Sale of Land Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Gain on sale of land | 90 | ||||
Balance | (3) 90 |
Table (16)
Cost of Goods Sold:
Cost of Goods Sold Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Cost of Goods Sold | 600 | ||||
Balance | (4) 600 |
Table (17)
Depreciation Expense - Building:
Depreciation Expense - Building Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Depreciation Expense - Building | 30 | ||||
Balance | (5) 30 |
Table (18)
Depreciation Expense - Equipment:
Depreciation Expense - Equipment Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Depreciation Expense – Equipment | 315 | ||||
Balance | (6) 315 |
Table (19)
Loss on Sale of Equipment:
Loss on Sale of Equipment Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Loss on sale of building | 15 | ||||
Balance | (7) 15 |
Table (20)
Amortization of Patent:
Amortization of Patent Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Amortization of patent | 300 | ||||
Balance | (8) 300 |
Table (21)
Operating Expenses:
Operating Expenses Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Operating expense | 500 | ||||
Balance | (9) 500 |
Table (22)
Net income (income summary):
Net Income (income summary)Account | ||||||
Date | Details | Debit ($) |
Date | Details | Credit ($) |
|
December 31, 2018 | Net income | 975 | ||||
Balance | (10) 975 |
Table (23)
The spreadsheet of M Company shows the analysis of cash flows in the reporting year 2018:
Industries M | ||
Statement of Cash Flows (Direct Method) | ||
Year Ended December 31, 2018 | ||
Details | Amount ($) | Amount ($) |
Cash flows from operating activities: | ||
From customers | 2,495 | |
To suppliers of goods | (675) | |
For operating expenses | (425) | |
Net cash flows from operating activities | 1,395 | |
Cash flows from investing activities: | ||
Purchase of equipment | (900) | |
Sale of land | 165 | |
Sale of equipment | 15 | |
Net cash flows from investing activities | (720) | |
Cash flows from financing activities: | ||
Payment on lease liability | (20) | |
Payment of cash dividends | (450) | |
Net cash flows from financing activities | (470) | |
Net increase in cash | 205 | |
Cash balance, January 1, | 375 | |
Cash balance, December 31, | 580 |
Table (24)
Note (X):
Schedule of Non Cash Investing and Financing Activities: | ||
Land acquire by lease | $150 |
Table (25)
Hence, the opening cash balance is $375 million and closing cash balance is $580 million.
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Chapter 21 Solutions
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