西方财务会计课后答案第15章.doc

CHAPTER 14The Statement of Cash FlowsASSIGNMENT CLASSIFICATION TABLEBriefABStudy ObjectivesQuestionsExercisesExercisesProblemsProblems*1.Indicate the usefulnessof the statement of cashflows.1, 2, 3, 16*2.Distinguish among4, 5, 6, 7,3, 5, 101, 6, 9operating, investing, andfinancing activities.10, 17*3.Prepare a statement8, 9, 11,1, 2, 4, 92, 3, 4, 51A, 4A, 5A,1B, 4B, 5B,of cash flows using theindirect method.12, 13, 14,157A, 9A7B, 9B*4.Prepare a statement9, 18, 19,6, 7, 8, 97, 8, 9, 102A, 3A, 6A,2B, 3B, 6B,of cash flows using the20, 218A8Bdirect method.*5.Analyze the statement22115, 115A, 6A, 9A5B, 6B, 9Bof cash flows.*6.Explain the guidelines23121210A10Band procedural stepsin using a work sheet toprepare the statementof cash flows using theindirect method.*Note: All asterisked Questions, Exercises, and Problems relate to material contained in the appendix*to the chapter.14-1ASSIGNMENT CHARACTERISTICS TABLEProblemDifficultyTimeNumber1A2A3A4A5ADescriptionPrepare the operating activities sectionindirect method.Prepare the operating activities sectiondirect method.Prepare the operating activities sectiondirect method.Prepare the operating activities sectionindirect method.Prepare a statement of cash flowsindirect method, andLevelSimpleSimpleSimpleSimpleModerateAllotted (min.)20302030203020303545perform analysis.6APrepare a statement of cash flowsdirect method, andModerate3545perform analysis.7A8A9APrepare a statement of cash flowsindirect method.Prepare a statement of cash flowsdirect method.Prepare a statement of cash flowsindirect method, andModerateModerateModerate405040504555perform analysis.*10A*1B2B3B4B5BPrepare a work sheet.Prepare the operating activities sectionindirect method.Prepare the operating activities sectiondirect method.Prepare the operating activities sectiondirect method.Prepare the operating activities sectionindirect method.Prepare a statement of cash flowsindirect method, andModerateSimpleSimpleSimpleSimpleModerate405020302030203020303545perform analysis.6BPrepare a statement of cash flowsdirect method, andModerate3545perform analysis.7B8B9BPrepare a statement of cash flowsindirect method.Prepare a statement of cash flowsdirect method.Prepare a statement of cash flowsindirect method, andModerateModerateModerate405040504555perform analysis.*10B*Prepare a work sheet.Moderate405014-2BLOOMS TAXONOMY TABLE14-3Correlation Chart between Blooms Taxonomy, Study Objectives and End-of-Chapter Exercises and ProblemsKnowledge ComprehensionQ14-1Q14-2Q14-5Q14-7Q14-4Q14-6Q14-10Q14-17Q14-8Q14-9Q14-11Q14-12Q14-13Q14-15Q14-9Q14-18Q14-21BE14-1BE14-2BE14-4E14-2E14-3E14-4E14-5P14-1AP14-4AP14-5AP14-7AP14-9AP14-1B BE14-9P14-4BP14-5BP14-7BP14-9BBE14-5 BE14-3BE14-10E14-1E14-9E14-6Q14-3Q14-16ApplicationAnalysisSynthesisEvaluationStudy Objective1. Indicate the usefulness of thestatement of cash flows.2. Distinguish among operating,investing, and financingactivities.Q14-143. Prepare a statement ofcash flows using the indirectmethod.4. Prepare a statement of cashflows using the direct method.Q14-19Q14-20BE14-6BE14-7BE14-8E14-7E14-8E14-9E14-10P14-2AP14-3AP14-6AP14-8AQ14-23BE14-12E14-12P14-10AP14-10BP14-2B BE14-9P14-3BP14-6BP14-8B5. Analyze the statement of cashflows.Q14-22BE14-11E14-5E14-11P14-5AP14-6AP14-9AP14-5BP14-6BP14-9B*6. Explain the guidelines and pro-cedural steps in using a worksheet to prepare the statementof cash flows using the indirectmethod.Broadening Your PerspectiveExploring the Web Comparative AnalysisResearch CaseInterpreting FinancialStatementsGroup Decision CaseCommunicationCookie ChronicleFinancial ReportingA Global FocusGroup DecisionEthics CaseComp. AnalysisANSWERS TO QUESTIONS..The statement of cash flows reports the cash receipts, cash payments, and net change incash resulting from the operating, investing, and financing activities during a period in a for-mat that reconciles the beginning and ending cash balances.Disagree. The statement of cash flows is required. It is the fourth basic financial statement.The statement of cash flows is useful because it provides information to the investors,creditors, and other users about: (1) the entitys ability to generate future cash flows, (2) theentitys ability to pay dividends and meet obligations, (3) the reasons for the difference be-tween net income and net cash provided (used) by operating activities, and (4) the cashinvesting and financing transactions during the period.The three types of activities are:Operating activities include the cash effects of transactions that create revenues and ex-penses and thus enter into the determination of net income.Investing activities include: (a) acquiring and disposing of investments and property, plant,and equipment and (b) lending money and collecting loans.Financing activities include: (a) obtaining cash from issuing debt and repaying amountsborrowed and (b) obtaining cash from stockholders and providing them with a return on theirinvestment.Examples of sources (inflows) of cash in a statement of cash flows include cash from opera-tions; issuance of debt; issuance of capital stock; sale of investments; and the sale of prop-erty, plant, and equipment. Examples of uses (outflows) of cash include payment of cashdividends; redemption of debt; purchase of investments; redemption of capital stock; and thepurchase of property, plant, and equipment; and payments to suppliers and employees.The statement of cash flows presents investing and financing activities so that even noncashtransactions of an investing and financing nature are disclosed in the financial statements. Ifthey affect financial conditions significantly, the FASB requires that they be disclosed ineither a separate schedule at the bottom of the statement of cash flows or in a separate noteor supplementary schedule to the financial statements.Examples of noncash transactions are: (1) issuance of common stock to purchase assets,(2) conversion of bonds into common stock, (3) issuance of debt to purchase assets, and (4)exchanges of plant assets.Comparative balance sheets, a current income statement, and certain transaction data allprovide information necessary for preparation of the statement of cash flows. Comparativebalance sheets indicate how assets, liabilities, and equities have changed during the period.A current income statement provides information about the amount of cash provided or usedby operations. Certain transactions provide additional detailed information needed to deter-mine whether cash was provided or used during the period.14-4Questions Chapter 14 (Continued)5.16.17.The advantages of the direct method are that it is more consistent with the FASBs objec-tive for the statement of cash flows and that it shows operating cash receipts and payments.Its principal disadvantages are that the necessary data can be expensive and time-consuming to accumulate and that calculations from the indirect method must also beincluded.The advantages of the indirect method are that it is easier to prepare and that it focuses onthe differences between net income and net cash flow from operating activities.Both methods are acceptable but the FASB expressed a preference for the direct method.Yet, the indirect method is the overwhelming favorite of companies.When total cash inflows exceed total cash outflows, the excess is identified as a “netincrease in cash” near the bottom of the statement of cash flows.The indirect method involves converting accrual-based net income to net cash provided byoperating activities. This is done by starting with accrual-based net income and adding orsubtracting noncash items included in net income. Examples of adjustments include depre-ciation and other noncash expenses and changes in the balances of current asset and cur-rent liability accounts from one period to the next.It is necessary to convert accrual-based net income to cash-basis net income because theunadjusted net income includes items that do not provide or use cash. An example would bean increase in accounts receivable. If accounts receivable increased during the period, reve-nues reported on the accrual basis would be higher than the actual cash revenues received.Thus, accrual basis net income must be adjusted to reflect the net cash provided by operatingactivities.A number of factors could have caused an increase in cash despite the net loss. These are:(1) high cash revenues relative to low cash expenses; (2) sales of property, plant, andequipment; (3) sales of investments; and (4) issuance of debt or capital stock.Depreciation expense.Gain or loss on sale of a noncurrent asset.Increase/decrease in accounts receivable.Increase/decrease in accounts payable.Increase/decrease in inventory.Increase/decrease in prepaid expenses.Under the indirect method, depreciation is added back to net income to reconcile net incometo net cash provided by operating activities because depreciation is an expense but not acash payment.Noncash charges other than depreciation expense include amortization of intangible assetsand depletion expense.This transaction is reported in the note or schedule entitled “Noncash investing andfinancing activities” as follows: “Retirement of bonds payable through issuance of commonstock, $1,600,000.”14-5Questions Chapter 14 (Continued)*18.Net cash provided by operating activities under the direct approach is the difference be-tween cash revenues and cash expenses. The direct approach adjusts the revenues andexpenses directly to reflect the cash basis. This results in cash net income, which is equalto “net cash provided by operating activities.”*19.(a) Cash receipts from customers = Revenues from sales+ Decrease in accounts receivable Increase in accounts receivable(b) Purchases = Cost of goods sold+ Increase in inventory Decrease in inventoryCash payments to suppliers = Purchases+ Decrease in accounts payable Increase in accounts payable*20.Sales.Add: Decrease in receivables.Cash receipts from customers.$2,000,000400,000$2,400,000*21.*22.*23.Depreciation expense is not listed in the direct method operating activities section because it isnot a cash flow itemit does not affect cash.Free cash flow indicates a companys cash generating ability. It is calculated by subtractingcapital expenditures and dividends from cash from operations.A work sheet is desirable because it allows the accumulation and classification of data that willappear on the statement of cash flows. It is an optional but efficient device that aids in the prepa-ration of the statement of cash flows.14-6SOLUTIONS TO BRIEF EXERCISESBRIEF EXERCISE 14-1Net cash provided by operating activities is $2,720,000. Using the indirectapproach, the solution is:Net income .Adjustments to reconcile net incometo net cash provided by operatingactivitiesDepreciation expense.Decrease in accounts receivable .$180,000)350,000)$2,500,000Decrease in accounts payable .Net cash provided by operating.activities .BRIEF EXERCISE 14-2Cash flows from operating activitiesNet income .Adjustments to reconcile net incometo net cash provided by operatingactivitiesDepreciation expense.Loss on sale of plant assets .Net cash provided by operatingactivities .BRIEF EXERCISE 14-3(a)Cash inflow from financing activity, $300,000.(b)Cash outflow from investing activity, $140,000.(c)Cash inflow from investing activity, $20,000.(d)Cash outflow from financing activity, $50,000.14-7(310,000)$60,00010,000220,000$2,720,000$280,00070,000$350,000BRIEF EXERCISE 14-4Net income .Adjustments to reconcile net income to netcash provided by operating activitiesDecrease in accounts receivable.Increase in prepaid expenses .$75,000)(16,000)$250,000Increase in inventories.Net cash provided by operatingactivities.BRIEF EXERCISE 14-5(a)Investing activity.(b)Investing activity.(c)Financing activity.(d)Operating activity.(e)Financing activity.(f)Financing activity.BRIEF EXERCISE 14-6(30,000)29,000$279,000Receipts fromcustomers=Salesrevenues+ Decrease in accounts receivable Increase in accounts receivable$463,000 = $470,000 $7,000 (Increase in accounts receivable)BRIEF EXERCISE 14-7Cash paymentsfor income taxes=Income taxexpense+ Decrease in income taxes payable Increase in income taxes payable$92,000 = $87,000 + $5,000 (Decrease in income taxes payable)14-8BRIEF EXERCISE 14-8+ Increase in prepaid expensesCashOperating Decrease in prepaid expensespayments foroperatingexpenses=expenses,excludingdepreciationand+ Decrease in accrued expenses payable Increase in accrued expenses payable$90,500 = $100,000 $6,600 $2,900BRIEF EXERCISE 14-9Original cost of equipment sold .Less: Accumulated depreciation .Book value of equipment sold .Less: Loss on sale of equipment .Cash received from sale of equipment.BRIEF EXERCISE 14-10Cash flows from financing activitiesProceeds from issuance of bonds payable .Payment of dividends.Net cash provided by financing activities .BRIEF EXERCISE 14-11Free cash flow = $450,000 $110,000 $40,000 = $300,000.14-9$22,0005,50016,5004,100$12,400$200,000)(41,000)$159,000)*BRIEF EXERCISE 14-12BalanceReconciling ItemsBalanceBalance Sheet AccountsPrepaid expensesAccrued expenses payable1/1/0618,6008,700DebitCredit(a) 6,600(b) 2,90012/31/0612,00011,600Statement of Cash Flow EffectsOperating activitiesDecrease in prepaid expensesIncrease in accrued expenses(a) 6,600payable14-10(b) 2,9009,500.9,500SOLUTIONS TO EXERCISESEXERCISE 14-.Financing activities, (c).Operating activities, (a).Financing a