CHAPTER 13—PROBLEMS: SET B P13-1B You are provided with the following transactions that took place during a recent fiscal year Transaction Statement of Cash Flow Activity Affected Cash Inflow, Outflow, or No Effect? Distinguish among operating, investing, and financing activities (LO 2), C (a) Recorded depreciation expense on the plant assets (b) Incurred a loss on disposal of plant assets (c) Acquired a building by paying cash (d) Made principal repayments on a mortgage (e) Issued common stock (f) Purchased shares of another company to be held as a long-term equity investment (g) Paid cash dividends to common stockholders (h) Sold inventory on credit The company uses a perpetual inventory system (i) Purchased inventory on credit (j) Paid wages to employees Instructions Complete the table indicating whether each item (1) affects operating (O) activities, investing (I) activities, financing (F) activities, or is a noncash (NC) transaction reported in a separate schedule; and (2) represents a cash inflow or cash outflow or has no cash flow effect Assume use of the indirect approach P13-2B The following selected account balances relate to the plant asset accounts of Raji Inc at year-end Accumulated depreciation—buildings Accumulated depreciation—equipment Buildings Depreciation expense Equipment Land Loss on disposal of plant assets 2014 2013 $337,500 145,000 750,000 101,500 300,000 100,000 7,000 $300,000 93,000 750,000 85,500 250,000 70,000 Determine cash flow effects of changes in plant asset accounts (LO 3), AN Additional information: Raji purchased $90,000 of equipment and $30,000 of land for cash in 2014 Raji also sold equipment in 2014 Depreciation expense in 2014 was $37,500 on building and $64,000 on equipment Instructions (a) Determine the amounts of any cash inflows or outflows related to the plant asset accounts in 2014 (b) Indicate where each of the cash inflows or outflows identified in (a) would be classified on the statement of cash flows (a) Cash proceeds $21,000 P-1 P-2 Problems: Set B Prepare the operating activities section—indirect method (LO 3), AP P13-3B The income statement of Asquith Company is presented on the next page Additional information: Accounts receivable decreased $230,000 during the year, and inventory increased $120,000 Prepaid expenses increased $125,000 during the year Accounts payable to merchandise suppliers increased $50,000 during the year Accrued expenses payable increased $155,000 during the year Asquith Company Income Statement For the Year Ended December 31, 2014 Sales revenue $5,250,000 Cost of goods sold Beginning inventory $1,780,000 Purchases 3,430,000 Goods available for sale Ending inventory 5,210,000 1,900,000 Total cost of goods sold 3,310,000 Gross profit Operating expenses Depreciation expense Amortization expense Other expenses 1,940,000 95,000 20,000 945,000 Net income Cash from operations $1,185,000 1,060,000 $ 880,000 Instructions Prepare the operating activities section of the statement of cash flows for the year ended December 31, 2014, for Asquith Company, using the indirect method Prepare the operating activities *P13-4B Data for Asquith Company are presented in P13-3B section—direct method (LO 6), AP Cash from operations $1,185,000 Instructions Prepare the operating activities section of the statement of cash flows using the direct method Prepare the operating activities section—indirect method P13-5B The income statement of Anne Droid Inc reported the following condensed information (LO 3), AP Anne Droid Inc Income Statement For the Year Ended December 31, 2014 Sales revenue Operating expenses $551,000 400,000 Income from operations Income tax expense 151,000 36,000 Net income $115,000 Anne Droid’s balance sheet contained these comparative data at December 31 Accounts receivable Accounts payable Income taxes payable 2014 2013 $55,000 40,000 12,000 $70,000 51,000 4,000 Anne Droid has no depreciable assets Accounts payable pertain to operating expenses Cash from operations $127,000 Instructions Prepare the operating activities section of the statement of cash flows using the indirect method Problems: Set B *P13-6B Data for Anne Droid Inc are presented in P13-5B Prepare the operating activities section—direct method Instructions Prepare the operating activities section of the statement of cash flows using the direct method P13-7B Presented below are the financial statements of Rocastle Company Cash Accounts receivable Inventory Equipment Less: Accumulated depreciation— equipment 2014 2013 $ 18,000 25,000 45,000 $ 33,000 14,000 25,000 $ 70,000 (27,000) Total (LO 6), AP Cash from operations $127,000 Prepare a statement of cash flows—indirect method, and compute free cash flow Rocastle Company Comparative Balance Sheets December 31 Assets (LO 3, 4), AP, AN $ 78,000 43,000 (24,000) 54,000 $131,000 $126,000 $ 31,000 24,000 20,000 25,000 31,000 $ 43,000 20,000 10,000 25,000 28,000 $131,000 $126,000 Liabilities and Stockholders’ Equity Accounts payable Income taxes payable Bonds payable Common stock Retained earnings Total Rocastle Company Income Statement For the Year Ended December 31, 2014 Sales revenue Cost of goods sold $286,000 204,000 Gross profit Operating expenses 82,000 37,000 Income from operations Interest expense 45,000 7,000 Income before income taxes Income tax expense 38,000 10,000 Net income P-3 $ 28,000 Additional data: Depreciation expense was $6,000 Dividends of $25,000 were declared and paid During the year, equipment was sold for $12,000 cash This equipment cost $15,000 originally and had accumulated depreciation of $3,000 at the time of sale Additional equipment was purchased for $7,000 cash Instructions (a) Prepare a statement of cash flows using the indirect method (b) Compute free cash flow (a) Cash from operations $(5,000) P-4 Problems: Set B Prepare a statement of cash flows—direct method, and compute free cash flow (LO 4, 6), AP, AN (a) Cash from operations $(5,000) Prepare a statement of cash flows—indirect method *P13-8B Data for Rocastle Company are presented in P13-7B Further analysis reveals the following Accounts payable pertains to merchandise creditors All operating expenses except for depreciation are paid in cash All depreciation expense is in the operating expenses All sales and purchases are on account Instructions (a) Prepare a statement of cash flows using the direct method (b) Compute free cash flow P13-9B Condensed financial data of Minnie Hooper Company are shown below Minnie Hooper Company Comparative Balance Sheets December 31 (LO 3), AP Assets Cash Accounts receivable Inventory Investments Plant assets Accumulated depreciation Total 2014 2013 $ 93,600 63,200 124,500 79,500 318,000 (44,000) $ 33,400 37,000 102,650 107,000 205,000 (40,000) $634,800 $445,050 $ 56,600 15,100 140,000 250,000 173,100 $ 48,280 18,830 70,000 200,000 107,940 $634,800 $445,050 Liabilities and Stockholders’ Equity Accounts payable Accrued expenses payable Bonds payable Common stock Retained earnings Total Minnie Hooper Company Income Statement For the Year Ended December 31, 2014 Sales revenue Less: Cost of goods sold Operating expenses, excluding depreciation expense Depreciation expense Loss on disposal of plant assets Income taxes Interest expense $297,500 $99,460 19,670 25,000 5,000 37,270 2,940 Net income 189,340 $108,160 Additional information: Cash from operations $94,700 New plant assets costing $149,000 were purchased for cash during the year Investments were sold at cost Plant assets costing $36,000 were sold for $10,000, resulting in a loss of $5,000 A cash dividend of $43,000 was declared and paid during the year Instructions Prepare a statement of cash flows using the indirect method Problems: Set B *P13-10B Data for Minnie Hooper Company are presented in P13-9B Further analysis reveals that accounts payable pertain to merchandise creditors P-5 Prepare a statement of cash flows—direct method (LO 6), AP Instructions Prepare a statement of cash flows for Minnie Hooper Company using the direct method Cash from operations $94,700 P13-11B Presented on next page are the comparative balance sheets for Vernet Company at December 31 Prepare a statement of cash flows—indirect method (LO 3), AP Vernet Company Comparative Balance Sheets December 31 Assets Cash Accounts receivable Inventory Prepaid expenses Land Equipment Accumulated depreciation—equipment Buildings Accumulated depreciation—buildings Total 2014 2013 $ 41,460 77,000 170,000 12,140 140,000 215,000 (70,000) 250,000 (70,000) $ 57,000 64,000 140,000 16,540 150,000 175,000 (42,000) 250,000 (50,000) $765,600 $760,540 $ 58,000 265,000 275,000 167,600 $ 45,000 265,000 250,000 200,540 $765,600 $760,540 Liabilities and Stockholders’ Equity Accounts payable Bonds payable Common stock, $1 par Retained earnings Total Additional information: Operating expenses include depreciation expense $57,000 and charges from prepaid expenses of $4,400 Land was sold for cash at cost for $35,000 Cash dividends of $82,940 were paid Net income for 2014 was $50,000 Equipment was purchased for $80,000 cash In addition, equipment costing $40,000 with a book value of $31,000 was sold for $37,000 cash Issued 25,000 shares of $1 par value common stock in exchange for land with a fair value of $25,000 Instructions Prepare a statement of cash flows for 2014 using the indirect method Cash from operations $75,400