Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

EXERCISE 13-7

Purpose: (L.O. 5) This exercise will prepare you to use a worksheet in helping you prepare the data for the statement of cash flows.

Additional information:

1. New plant assets costing $92,000 were purchased for cash during the year.
2. Investments were sold at cost.
3. Plant assets costing $47,000 were sold for $15,550 and resulted in a gain of $8,750.
4. A cash dividend of $88,400 was declared and paid during the year.

Instructions

Prepare a worksheet for a statement of cash flows. Enter the reconciling items directly in the work sheet columns, identifying the debit and credit amounts alphabetically.

Analysis:

1. a. Increase in receivables reduces cash inflow-credit.
2. b. Increase in inventories increases cash outflow-credit.
3. c. Increase in accounts payable reduces cash outflow-debit.
4. d. Decrease in accrued expenses payable increases cash outflow-credit.
5. e. Sale of investments increases cash inflow-debit.
6. f. Purchase of plant assets increases cash outflow-credit
7. g. Depreciation expense is a noncash charge to income-debit.
8. h. Sale of plant assets increases cash inflow-debit.
9. i. Issue of bonds increases cash inflow-debit.
10. j. Issue of common stock increases cash inflow-debit.
11. k. Net income increases cash inflow-debit.
12. l. Payment of dividends increases cash outflow-credit.
13. r. Increase ...