Beck Company uses the indirect method of preparing the Statement of Cash Flows

Beck Company uses the indirect method of preparing the Statement of Cash Flows and reports the following comparative balance sheet information. As customary, the most recent data is in the first column.

Balance Sheets
12-31-2007 12-31-2006
Cash $60,000 $80,000
Inventory 150,000 128,000
Equipment 240,000 205,000
Accumulated depreciation (39,000) (15,000)
$411,000 $398,000

Accounts payable $93,000 $133,000
Bonds payable (due in 7 years) 81,000 70,000
Common stock 129,000 120,000
Retained earnings 108,000 75,000
$411,000 $398,000

Additional information:
Net income for 2007 was $40,000.
No equipment was disposed of during 2007.

Required:
Prepare a Cash Flow Statement using the indirect method.

Click here for the solution: Beck Company uses the indirect method of preparing the Statement of Cash Flows

Given the following information, prepare a statement of cash flows

Given the following information, prepare a statement of cash flows

Increase in accounts receivable $25
Increase in inventories 30
Operating income 75
Interest expense 25
Increase in accounts payable 25
Dividends 15
Increase in common stock 20
Increase in net fixed assets 23
Depreciation expense 12
Income taxes 17
Beginning cash 20

Click here for the solution: Given the following information, prepare a statement of cash flows

The client has presented all required financial statements with the exception of the statement of cash flows

MULTIPLE CHOICE

Question 1
The client has presented all required financial statements with the exception of the statement of cash flows. The auditor has completed the audit and is satisfied that all other statements are presented fairly. The auditor:

Question 2
A CPA may wish to emphasize specific matters regarding the financial statements even though an unqualified opinion will be issued. Normally, such explanatory information is:

Question 3
Examples of unqualified opinions which contain modified wording (without adding an explanatory paragraph) include:

Question 4
When the auditor determines the financial statements are fairly stated and then determines that the auditor lacks independence, the auditor should issue:

Question 5
Which of the following is not a change that affects consistency and, therefore, does not
require an explanatory paragraph?

Question 6
The audit report date on a standard unqualified report indicates:

Question 7
GAAP requires that changes in accounting principles be to a:

Question 8
If the balance sheet of a company is dated December 31, 2009, the audit report is dated February 8, 2010, and both are released on February 15, 2010, this indicates that the auditor has searched for subsequent events that occurred up to:

Question 9
The purpose of the introductory paragraph in the standard unqualified report is:

Question 10
The introductory paragraph of the standard audit report states that the auditor is:


Click here for the solution: The client has presented all required financial statements with the exception of the statement of cash flows

What is the major advantage of using the indirect method to present the statement of cash flows?

14. What is the major advantage of using the indirect method to present the statement of cash flows?


Click here for the solution: What is the major advantage of using the indirect method to present the statement of cash flows?

Which method (direct or indirect) of presenting the statement of cash flows is more intuitively logical? Why?

13. Which method (direct or indirect) of presenting the statement of cash flows is more intuitively logical? Why?


Click here for the solution: Which method (direct or indirect) of presenting the statement of cash flows is more intuitively logical? Why?

What is the difference between preparing the statement of cash flows using the direct method and using the indirect method?

12. What is the difference between preparing the statement of cash flows using the direct method and using the indirect method?


Click here for the solution: What is the difference between preparing the statement of cash flows using the direct method and using the indirect method?

What is the purpose of the statement of cash flows?

1. What is the purpose of the statement of cash flows?


Click here for the solution: What is the purpose of the statement of cash flows?

Joyner Company’s income statement for Year 2 follows

Joyner Company’s income statement for Year 2 follows:

 Sales . . . . . . . . . . . . . . . . . . . $900,000

Cost of goods sold . . . . . . . . . 500,000

Gross margin . . . . . . . . . . . . . 400,000

Selling and administrative expenses . . . . . . . . . . . . . . 328,000

Net operating income . . . . . . . 72,000

Gain on sale of equipment . . . 8,000

Income before taxes . . . . . . . . 80,000

Income taxes . . . . . . . . . . . . . 24,000

Net income . . . . . . . . . . . . . . . $ 56,000

Its Balance sheet accounts at the end of years 1 and 2 follows:

Debit Balance Accounts Year 2 Year 1

Cash $4,000 $21,000

A/R $250,000 $170,000

Inventory $310,000 $260,000

Prepaid Exp $7,000 $14,000

Loan to Hymas Company $40,000 $-

Plant & Equip $510,000 $400,000

Total Debits $1,121,000 $865,000

Credit Balance Accounts

Accum Depreciation $132,000 $120,000

A/P $310,000 $250,000

Accrued Liabilities $20,000 $30,000

Bonds Payable $190,000 $70,000

Deferred Income Taxes $45,000 $42,000

Common Stock $300,000 $270,000

Retained Earnings $124,000 $83,000

Total Credits $1,121,000 $865,000

Equipment that had cost $40,000 and on which there was accumulated depreciation of $30,000 was sold during Year 2 for $18,000. Cash dividends totaling $15,000 were declared and paid during Year 2.

Required:

1. Using the indirect method, compute the net cash provided by operating activities for Year 2.

2. Prepare a statement of cash flows for Year 2.

3. Compute the free cash flow for Year 2.

4. Briefly explain why cash declined so sharply during the year.

Click here for the solution: Joyner Company’s income statement for Year 2 follows

Balance sheet accounts for Joyner Company contained the following amounts at the end of Years 1 and 2

Problem 15–9 Prepare a Statement of Cash Flows (Indirect Method); Free Cash Flow

Balance sheet accounts for Joyner Company contained the following amounts at the end of Years 1 and 2:

Debit Balance Accounts Year 2 Year 1
Cash $4,000 $21,000
A/R $250,000 $170,000
Inventory $310,000 $260,000
Prepaid Exp $7,000 $14,000
Loan to Hymas Company $40,000 $-
Plant & Equp $510,000 $400,000
Total Debits $1,121,000 $865,000

Credit Balance Accounts
Accum Depreciation $132,000 $120,000
A/P $310,000 $250,000
Accrued Liabilities $20,000 $30,000
Bonds Payable $190,000 $70,000
Deferred Income Taxes $45,000 $42,000
Common Stock $300,000 $270,000
Retained Earnings $124,000 $83,000
Total Credits $1,121,000 $865,000

The company’s income statement for Year 2 follows:

Sales . . . . . . . . . . . . . . . . . . . $900,000
Cost of goods sold . . . . . . . . . 500,000
Gross margin . . . . . . . . . . . . . 400,000
Selling and administrative
expenses . . . . . . . . . . . . . . 328,000
Net operating income . . . . . . . 72,000
Gain on sale of equipment . . . 8,000
Income before taxes . . . . . . . . 80,000
Income taxes . . . . . . . . . . . . . 24,000
Net income . . . . . . . . . . . . . . . $ 56,000


Equipment that had cost $40,000 and on which there was accumulated depreciation of $30,000 was sold during Year 2 for $18,000. Cash dividends totaling $15,000 were declared and paid during Year 2.

Required:
1. Using the indirect method, compute the net cash provided by operating activities for Year 2.
2. Prepare a statement of cash flows for Year 2.
3. Compute the free cash f ow for Year 2.
4. Briefly explain why cash declined so sharply during the year.

Click here for the solution: Balance sheet accounts for Joyner Company contained the following amounts at the end of Years 1 and 2

(SCF-Indirect Method) Condensed financial data of Pat Metheny Company for 2008 and 2007 are presented below

ACC 421 Week 5

Exercise 23-11 (E23-11) (SCF-Indirect Method) Condensed financial data of Pat Metheny Company for 2008 and 2007 are presented below

AND SO ON

Additional information:
During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2008.

Instructions
Prepare a statement of cash flows using the indirect method.

Click here for the solution: (SCF-Indirect Method) Condensed financial data of Pat Metheny Company for 2008 and 2007 are presented below

ACC 421 Week 5 (SCF-Direct Method) Data for Pat Metheny Company are presented in E23-11

ACC 421 Week 5

Exercise 23-12 (E23-12) (SCF-Direct Method) Data for Pat Metheny Company are presented in E23-11.

Instructions
Prepare a statement of cash flows using the direct method. (Do not prepare a reconciliation schedule.)

Click here for the solution: ACC 421 Week 5 (SCF-Direct Method) Data for Pat Metheny Company are presented in E23-11

(Effect of a Line of Credit on Financial Statements) Hulse Company has a line of credit with Bay Bank

Problem 7-25 Effect of a Line of Credit on Financial Statements

Hulse Company has a line of credit with Bay Bank. Hulse can borrow up to $250,000 at any time over the course of the 2010 calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during 2010. Hulse agreed pay interest at an annual rate equal to 1 percent above the bank's prime rate. Funds are borrowed or repaid on the first day of each month. Interest is payable in cash on the last day of the month.

AND SO ON

Hulse earned $22000 of cash revenue during 2010.

Required
a. Organize the information in accounts under an accounting equation.
b. Prepare an income statements, balance sheet, and statement of cash flows for 2010.
c. Write a memo discussing the advantanges to a business of arranging a line of credit.

Check:
b. Interest Expense: $5,650
Total Assets: $56,350

Click here for the solution: (Effect of a Line of Credit on Financial Statements) Hulse Company has a line of credit with Bay Bank

Metro Video Inc. is developing its annual financial statements at December 31, 2011

Metro Video Inc. is developing its annual financial statements at December 31, 2011. The statements are complete except for the statement of cash flows. The completed comparative sheets and income statement are summarized:
2011 2010
Balance sheet at December 31
Cash $68,250 $65,500
Accounts receivable 15,250 22,250
Merchandise inventory 22,250 18,000
Property and equipment 209,250 150,000
Less: Accumulated depreciation (59,000) (45,750)
Accounts payable $9,000 $19,000
Wages payable 4,000 1,200
Note payable, long-term 59,500 71,000
Contributed capital 98,500 65,900
Retained earnings 85,000 52,900
$256,000 $210,000

Income statement for 2011
Sales $195,00
Cost of goods sold 92,000
Depreciation expense 13,250
Other expenses 43,000
Net income $46,750
Additional Data:
a. Bought equipment for cash, $59,250
b. Paid $11,500 on the long-term note payable.
c. Issued new shares of stock for $32,600 cash.
d. Dividends of $14,650 were declared and paid.
e. Other expenses all relate to wages. f. Accounts payable includes only inventory purchases made on credit.
Required:
1. Prepare the statement of cash flows using the indirect method for the year ended December 31, 2011.
2. Based on the cash flow statement, write a short paragraph explaining the major sources and uses of cash by Metro Video during 2011. 

Click here for the solution: Metro Video Inc. is developing its annual financial statements at December 31, 2011