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    Cash Flow Statement, Journal Entries etc...

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    E14-2

    An analysis of comparative balance sheets, the current year's income statement, and the general ledger accounts of Gagliano Corp. uncovered the following items. Assume all items involve cash unless there is information to the contrary.
    Instructions
    Indicate how each item should be classified in the statement of cash flows using these four major classifications: operating activity (indirect method), investing activity, financing activity, and significant noncash investing and financing activity.
    (a) Payment of interest on notes payable.

    (b) Exchange of land for patent.

    (c) Sale of building at book value.

    (d) Payment of dividends.

    (e) Depreciation.

    (f) Receipt of dividends on investment in stock.

    (g) Receipt of interest on notes receivable.

    (h) Issuance of capital stock.

    (i) Amortization of patent.

    (j) Issuance of bonds for land.

    (k) Purchase of land.

    (l) Conversion of bonds into common stock.

    (m) Loss on sale of land (loss only).

    (n) Retirement of bonds.

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    E14-3

    Rachael Ray Corporation had the following transactions.
    1. Sold land (cost $12,000) for $15,000.
    2. Issued common stock for $20,000.
    3. Recorded depreciation of $17,000.
    4. Paid salaries of $9,000.
    5. Issued 1,000 shares of $1 par value common stock for equipment worth $8,000.
    6. Sold equipment (cost $10,000, accumulated depreciation $7,000) for $1,200.
    Instructions
    For each transaction above, (a) prepare the journal entry, and (b) indicate how it would affect the statement of cash flows. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)
    Account / Description Debit Credit
    1. (a)
    $

    $

    $

    (b) The cash receipt is reported in the section. The is net income in the section.

    Account / Description Debit Credit
    2. (a)
    $

    $

    (b) The cash receipt is reported in the section.

    Account / Description Debit Credit
    3. (a)
    $

    $

    (b) Depreciation expense is added to net income in the section.

    Account / Description Debit Credit
    4. (a)
    $

    $

    (b) Salaries expense reported separately on the statement of cash flows.

    Account / Description Debit Credit
    5. (a)
    $

    $

    $

    (b) The issuance of common stock for equipment is reported as a activity at the bottom of the statement of cash flows.

    Account / Description Debit Credit
    6. (a)
    $

    $

    $

    $

    (b) The cash receipt is reported in the section. The is net income in the section.

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    E14-6

    The three accounts shown below appear in the general ledger of Cesar Corp. during 2008.

    Equipment
    Date Debit Credit Balance
    Jan. 1 Balance 160,000
    July 31 Purchase of equipment 70,000 230,000
    Sept. 2 Cost of equipment constructed 53,000 283,000
    Nov. 10 Cost of equipment sold 49,000 234,000

    Accumulated Depreciation-Equipment
    Date Debit Credit Balance
    Jan. 1 Balance 71,000
    Nov. 10 Accumulated depreciation on
    equipment sold 30,000 41,000
    Dec. 31 Depreciation for year 28,000 69,000

    Retained Earnings
    Date Debit Credit Balance
    Jan. 1 Balance 105,000
    Aug. 23 Dividends (cash) 14,000 91,000
    Dec. 31 Net income 67,000 158,000
    Instructions
    From the postings in the accounts, indicate how the information is reported on a statement of cash flows using the indirect method. The loss on sale of equipment was $5,000. (Hint: Cost of equipment constructed is reported in the investing activities section as a decrease in cash of $53,000.) (If amount decreases cash flow, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). List amounts from largest positive to smallest positive followed by most negative to least negative, e.g. 15, 14, 10, -17, -5, -1.)
    CESAR CORP
    Partial Statement of Cash Flows
    For the Year Ended December 31, 2008
    Cash flows from operating activities

    $

    Adjustments to reconcile net income
    to net cash by operating activities

    $

    Net cash by operating activities

    Cash flows from investing activities

    Net cash by investing activities

    Cash flows from financing activities

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    E14-7

    Scully Corporation's comparative balance sheets are presented below.

    SCULLY CORPORATION
    Comparative Balance Sheets
    December 31
    2008 2007
    Cash $14,300 $10,700
    Accounts receivable 21,200 23,400
    Land 20,000 26,000
    Building 70,000 70,000
    Accumulated depreciation (15,000) (10,000)
    Total $110,500 $120,100

    Accounts payable $12,370 $31,100
    Common stock 75,000 69,000
    Retained earnings 23,130 20,000
    Total $110,500 $120,100
    Additional information:
    1. Net income was $22,630. Dividends declared and paid were $19,500.
    2. All other changes in noncurrent account balances had a direct effect on cash flows, except the change in accumulated depreciation. The land was sold for $4,900.

    Complete the statement of cash flows for 2008 using the indirect method. (List multiple entries with a positive cash flow first and then the negative cash flow. List amounts from largest to smallest eg 10, 5, 3, 2. If amount decreases cash flow, use either a negative sign preceding the number eg -45 or parentheses eg (45).)
    SCULLY CORPORATION
    Statement of Cash Flows
    For the Year Ended December 31, 2008
    Cash flows from operating activities

    $

    Adjustments to reconcile net income
    to net cash provided by operating activities

    $

    Net cash by operating activities

    Cash flows from investing activities

    Cash flows from financing activities

    Net cash by financing activities

    Net in cash

    Cash at beginning of period

    Cash at end of period $

    Compute free cash flow. (If amount decreases cash flow, use either a negative sign preceding the number eg -45 or parentheses eg (45).)
    $
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    Question Attempts: 0 of 3 used

    P14-5A NOTE: GIVEN: CASH FROM OPERATIONS--$308,000.00

    Grania Company's income statement contained the condensed information below.
    GRANIA COMPANY
    Income Statement
    For the Year Ended December 31, 2008
    Revenues $970,000
    Operating expenses, excluding depreciation $624,000
    Depreciation expense 60,000
    Loss on sale of equipment 16,000 700,000
    Income before income taxes 270,000
    Income tax expense 40,000
    Net income $230,000
    Grania's balance sheet contained the comparative data at December 31, shown below.
    2008 2007
    Accounts receivable $75,000 $60,000
    Accounts payable 41,000 28,000
    Income taxes payable 11,000 7,000
    Accounts payable pertain to operating expenses.
    Instructions
    Complete the operating activities section of the statement of cash flows using the indirect method. (List multiple entries with a positive cash flow first and then the negative cash flow. List amounts from largest to smallest eg 10, 5, 3, 2. If amount decreases cash flow, use either a negative sign preceding the number eg -45 or parentheses eg (45).)
    GRANIA COMPANY
    Partial Statement of Cash Flows
    For the Year Ended December 31, 2008
    Cash flows from operating activities

    $

    Adjustments to reconcile net income to net cash
    provided by operating activities

    $

    Net cash provided by operating activities $

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    P14-9A NOTE: GIVEN: CASH FROM OPERATIONS-$185,250.00

    Condensed financial data of Arma Inc. follow.

    ARMA INC.
    Comparative Balance Sheets
    December 31
    Assets 2008 2007
    Cash $ 90,800 $ 48,400
    Accounts receivable 92,800 33,000
    Inventories 112,500 102,850
    Prepaid expenses 28,400 26,000
    Investments 138,000 114,000
    Plant assets 270,000 242,500
    Accumulated depreciation (50,000) (52,000)
    Total $682,500 $514,750

    Liabilities and Stockholders' Equity
    Accounts payable $112,000 $ 67,300
    Accrued expenses payable 16,500 17,000
    Bonds payable 110,000 150,000
    Common stock 220,000 175,000
    Retained earnings 224,000 105,450
    Total $682,500 $514,750

    ARMA INC.
    Income Statement
    For the Year Ended December 31, 2008
    Sales $392,780
    Less:
    Cost of goods sold $135,460
    Operating expenses, excluding depreciation 12,410
    Depreciation expense 46,500
    Income taxes 27,280
    Interest expense 4,730
    Loss on sale of plant assets 7,500 233,880
    Net income $158,900
    Additional information:
    1. New plant assets costing $85,000 were purchased for cash during the year.
    2. Old plant assets having an original cost of $57,500 were sold for $1,500 cash.
    3. Bonds matured and were paid off at face value for cash.
    4. A cash dividend of $40,350 was declared and paid during the year.
    Instructions
    Complete the statement of cash flows using the indirect method. (List multiple entries with a positive cash flow first and then the negative cash flow. List amounts from largest to smallest eg 10, 5, 3, 2. If amount decreases cash flow, use either a negative sign preceding the number eg -45 or parentheses eg (45).)
    ARMA INC.
    Statement of Cash Flows
    For the Year Ended December 31, 2008
    Cash flows from operating activities

    $

    Adjustments to reconcile net income to net
    cash provided by operating activities

    $

    Net cash by operating activities

    Cash flows from investing activities

    Net cash by investing activities

    Cash flows from financing activities

    Net cash by financing activities

    Net in cash

    Cash at beginning of period

    Cash at end of period $

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    E14-6

    Cash Received for Sale of Equipment = 49000-30000-5000 = $14,000 (Cost of ...

    Solution Summary

    The solution provides an analysis of comparative balance sheets, the current year's income statement, and the general ledger accounts of Gagliano Corp, Rachael Ray Corporation's journal entries,Cesar Corp's statement of cash flows using the indirect method.

    $2.19

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