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Concept explainers
Statement of
To Prepare: The Statement of cash flow for Company A, using the T-Accounts.
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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 Company A, for various accounts are shown below:
Cash Account:
Cash (Statement of Cash Flows) (Amount in millions) | |||
(13) $86 | Cash Balance | ||
Operating activities: | |||
From customers | (1) $414 | (4) $200 | To suppliers of goods |
From investment revenue | (2) $3 | (5) $78 | To employees |
From sale of cash equivalents | (3) $2 | (8) $3 | For insurance |
(9) $21 | For bond interest | ||
(11) $35 | For income taxes | ||
Investing activities: | |||
Sale of machine components | (10) $17 | (13) $25 | Purchase of Long Term Investment |
(14) $23 | Purchase of land | ||
Financing activities: | |||
Sale of |
(18) $75 | (15) $7 | Payment on lease liability |
(16) $60 | Retirement of bonds payable | ||
(19) $22 | Payment of cash dividends | ||
(20) $9 | Purchase of |
Table (1)
Long Term investment (Amount in millions) | |||
Increase in Long Term investment | $31 | ||
Opening Balance | $125 | $156 | Closing Balance |
Land (Amount in millions) | |||
Increase in investment revenue receivable | $46 | ||
Opening Balance | $150 | $196 | Closing Balance |
Patent (Amount in millions) | |||
$2 | Decrease in patent | ||
Opening Balance | $32 | $30 | Closing Balance |
Buildings and Equipment (Amount in millions) | |||
Increase in buildings and equipment | $12 | ||
Opening Balance | $400 | $412 | Closing Balance |
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|||
Decrease in accumulated depreciation | $23 | ||
Opening Balance | $120 | $97 | Closing Balance |
Accounts payable (Amount in millions) | |||
Decrease in accounts payable | $15 | ||
Opening Balance | $65 | $50 | Closing Balance |
Salaries Payable (Amount in millions) | |||
Decrease in salaries payable | $5 | ||
Opening Balance | $11 | $6 | Closing Balance |
Notes Payable (Amount in millions) | |||
$23 | Increase in Notes Payable | ||
Opening Balance | $0 | $23 | Closing Balance |
Bonds Payable (Amount in millions) | |||
Decrease in Bonds Payable | $60 | ||
Opening Balance | $275 | $215 | Closing Balance |
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|||
$15 | Increase in Retained earnings | ||
Opening Balance | $227 | $242 | Net Income |
Bond Interest Payable (Amount in millions) | |||
$4 | Increase in Bond Interest Payable | ||
Opening Balance | $4 | $8 | Closing Balance |
Income tax payable (Amount in millions) | |||
Decrease in Income tax payable | $2 | ||
Opening Balance | $14 | $12 | Closing Balance |
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|||
$3 | Increase in Deferred tax liability | ||
Opening Balance | $8 | $11 | Closing Balance |
Lease liability (Amount in millions) | |||
$75 | Increase in Lease liability | ||
Opening Balance | $8 | $75 | Closing Balance |
Discount on Bonds (Amount in millions) | |||
$3 | Increase in Discount on Bonds | ||
Opening Balance | $0 | $3 | Closing Balance |
Common Stock (Amount in millions) | |||
$20 | Increase in Common Stock | ||
Opening Balance | $410 | $430 | Closing Balance |
Paid-in capital (Amount in millions) | |||
$10 | Increase in Paid-in capital | ||
Opening Balance | $85 | $95 | Closing Balance |
Preferred stock (Amount in millions) | |||
$75 | Increase in Preferred stock | ||
Opening Balance | $0 | $75 | Closing Balance |
Treasury Stock (Amount in millions) | |||
Increase in Treasury Stock | $9 | ||
Opening Balance | $0 | $9 | Closing Balance |
Sales revenue (Amount in millions) | |||
$410 | Increase in Sales revenue | ||
Opening Balance | $0 | $410 | Closing Balance |
Investment revenue (Amount in millions) | |||
$11 | Increase in Investment revenue | ||
Opening Balance | $0 | $11 | Closing Balance |
Gain on sale of treasury bills (Amount in millions) | |||
$2 | Gain on sale of treasury bills | ||
Opening Balance | $0 | $2 | Closing Balance |
Cost of goods sold (Amount in millions) | |||
Cost of goods sold | $180 | ||
Opening Balance | $0 | $180 | Closing Balance |
Salaries expense (Amount in millions) | |||
Salaries expense | $73 | ||
Opening Balance | $0 | $73 | Closing Balance |
Depreciation expense (Amount in millions) | |||
Depreciation expense | $12 | ||
Opening Balance | $0 | $12 | Closing Balance |
Patent amortization expense (Amount in millions) | |||
Patent amortization expense | $2 | ||
Opening Balance | $0 | $2 | Closing Balance |
Insurance expense (Amount in millions) | |||
Insurance expense | $7 | ||
Opening Balance | $0 | $7 | Closing Balance |
Bond interest expense (Amount in millions) | |||
Bond interest expense | $28 | ||
Opening Balance | $0 | $28 | Closing Balance |
Loss on machine damage (Amount in millions) | |||
Loss on machine damage | $18 | ||
Opening Balance | $0 | $18 | Closing Balance |
Income tax expense (Amount in millions) | |||
Income tax expense | $36 | ||
Opening Balance | $0 | $36 | Closing Balance |
Net income (Amount in millions) | |||
Net income | $67 | ||
Opening Balance | $0 | $67 | Closing Balance |
The Statement of cash flow of Company A is as follows.
Company A | ||
Statement of Cash Flows | ||
For year ended December 31, 2018 | ||
Amount in Millions | ||
Particulars | Amount ($) | Amount ($) |
Operating activities: | ||
Cash Inflows: | ||
From customers | $414 | |
From investment revenue | $3 | |
From sale of cash equivalents | $2 | |
To suppliers of goods | ($200) | |
To employees | ($78) | |
For insurance | ($3) | |
For bond interest | ($21) | |
For income taxes | ($35) | |
Net cash flows from operating activities | $82 | |
Investing activities: | ||
Sale of machine components | $17 | |
Purchase of Long Term investment | ($25) | |
Purchase of land | ($23) | |
Net cash flows from investing activities | ($31) | |
Financing activities: | ||
Payment on lease liability | ($7) | |
Retirement of bonds payable | ($60) | |
Sale of preferred stock | $75 | |
Payment of cash dividends | ($22) | |
Purchase of treasury stock | ($9) | |
Net cash flows from financing activities | ($23) | |
Net decrease in cash | $28 | |
Cash balance, January 1, 2018 | $81 | |
Cash balance, December 31, 2018 | $109 |
Table (2)
The statement of cash flows of Company A, shows opening balance of cash flows for the reporting year 2018 as $81 million and the closing balance of cash as $109 million.
Note:
Non Cash investing activity and financing activity:
- Company A acquired a building on 15 year lease for $82 million.
- Company A acquired a land for $46 million, by:
- Paying Cash of $23 million;
- Issuing 4-year note for $23 million.
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