Chapter 12 Statement of Cash Flows

Required information

[The following information applies to the questions displayed below.]

The following financial statements and additional information are reported.

Additional Information

1. A $30,000 note payable is retired at its $30,000 carrying (book) value in exchange for cash.
2. The only changes affecting retained earnings are net income and cash dividends paid.
3. New equipment is acquired for $58,600 cash.
4. Received cash for the sale of equipment that had cost $49,600, yielding a $2,100 gain.
5. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.
6. All purchases and sales of inventory are on credit.

Required:

(1) Prepare a statement of cash flows for the year ended June 30, 2017, using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Chaopter 13 Comparative ratio analysis

[The following information applies to the questions displayed below.]

Summary information from the financial statements of two companies competing in the same industry follows.

Required:
1a. For both companies compute the (a) current ratio, (b) acid-test ratio, (c) accounts (including notes) receivable turnover, (d) inventory turnover, (e) days' sales in inventory, and (f) days' sales uncollected. (Do not round intermediate calculations.)
1b. Identify the company you consider to be the better short-term credit risk.

2a. For both companies compute the (a) profit margin ratio, (b) total asset turnover, (c) return on total assets, and (d) return on common stockholders’ equity. Assuming that share and each company’s stock can be purchased at $75 per share, compute their (e) price-earnings ratios and (f) dividend yields. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

2b. Identify which company’s stock you would recommend as the better investment.

Chapter 13 Transactions, working capital, and liquidity ratios

Plum Corporation began the month of May with $700,000 of current assets, a current ratio of 2.50:1, and an acid-test ratio of 1.10:1. During the month, it completed the following transactions (the company uses a perpetual inventory system).

May		2		Purchased $50,000 of merchandise inventory on credit.
		8		Sold merchandise inventory that cost $55,000 for $110,000 cash.
		10		Collected $20,000 cash on an account receivable.
		15		Paid $22,000 cash to settle an account payable.
		17		Wrote off a $5,000 bad debt against the Allowance for Doubtful Accounts account.
		22		Declared a $1 per share cash dividend on its 50,000 shares of outstanding common stock.
		26		Paid the dividend declared on May 22.
		27		Borrowed $100,000 cash by giving the bank a 30-day, 10% note.
		28		Borrowed $80,000 cash by signing a long-term secured note.
		29		Used the $180,000 cash proceeds from the notes to buy new machinery.

Required:
Complete the table below showing Plum's (1) current ratio, (2) acid-test ratio, and (3) working capital after each transaction. (Do not round intermediate calculations. Round your ratios to 2 decimal places and the working capitals to nearest dollar amount. Subtracted amount should be indicated with a minus sign.)

Chapter 13 Income statement presentation

In 2017, Randa Merchandising, Inc., sold its interest in a chain of wholesale outlets, taking the company completely out of the wholesaling business. The company still operates its retail outlets. A listing of the major sections of an income statement follows:

Chapter 12 Statement of Cash Flows Salud Company

Salud Company reports the following information. Use the indirect method to prepare only the operating activities section of its statement of cash flows for the year ended December 31, 2017. (Amounts to be deducted should be indicated with a minus sign.)
 

1. Equipment with a book value of $82,500 and an original cost of $165,000 was sold at a loss of $31,000.
2. Paid $106,000 cash for a new truck.
3. Sold land costing $320,000 for $415,000 cash, yielding a gain of $95,000.
4. Long-term investments in stock were sold for $92,100 cash, yielding a gain of $14,750.

Use the above information to determine this company's cash flows from investing activities. (Amounts to be deducted should be indicated with a minus sign.)

Chapter 12 Statement of Cash Flows Arundel Company

Arundel Company disclosed the following information for its recent calendar year.

Required:

1. Prepare the operating activities section of the statement of cash flows using the indirect method. (Any losses or amounts to be deducted should be indicated with a minus sign.)

Chapter 12 Indirect: Statement of Cash Flows- Golden Corp

Golden Corp., a merchandiser, recently completed its 2017 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes. The company’s balance sheets and income statement follow.

Additional Information on Year 2017 Transactions
Purchased equipment for $36,000 cash.
Issued 12,000 shares of common stock for $5 cash per share.
Declared and paid $89,000 in cash dividends.


Required:
Prepare a complete statement of cash flows; report its cash inflows and cash outflows from operating activities according to the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Chapter 12 Indirect: Statement of Cash Flows

Forten Company, a merchandiser, recently completed its calendar-year 2017 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s income statement and balance sheets follow.

Additional Information on Year 2017 Transactions
The loss on the cash sale of equipment was $5,125 (details in b).
Sold equipment costing $46,875, with accumulated depreciation of $30,125, for $11,625 cash.
Purchased equipment costing $96,375 by paying $30,000 cash and signing a long-term note payable for the balance.
Borrowed $4,000 cash by signing a short-term note payable.
Paid $50,125 cash to reduce the long-term notes payable.
Issued 2,500 shares of common stock for $20 cash per share.
Declared and paid cash dividends of $50,100.


Required:
1. Prepare a complete statement of cash flows; report its operating activities using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Chapter 24 Computing net present value of alternate investments

Interstate Manufacturing is considering either replacing one of its old machines with a new machine or having the old machine overhauled. Information about the two alternatives follows. Management requires a 10% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Alternative 1: Keep the old machine and have it overhauled. If the old machine is overhauled, it will be kept for another five years and then sold for its salvage value.

Alternative 2: Sell the old machine and buy a new one. The new machine is more efficient and will yield substantial operating cost savings with more product being produced and sold.

Chapter 24 Analysis and computation of payback period, accounting rate of return, net present value

Most Company has an opportunity to invest in one of two new projects. Project Y requires a $350,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $350,000 investment for new machinery with a three-year life and no salvage value. The two projects yield the following predicted annual results. The company uses straight-line depreciation, and cash flows occur evenly throughout each year. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

1. Compute each project’s annual expected net cash flows.

2. Determine each project’s payback period.

3. Compute each project’s accounting rate of return.

Annual average investment= (cost+ salvage)/2
4. Determine each project’s net present value using 8% as the discount rate. Assume that cash flows occur at each year-end. (Round your intermediate calculations.)

Chapter 24 Computation of payback period, accounting rate of return, and net present value

Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $480,000 cost with an expected four-year life and a $20,000 salvage value. All sales are for cash, and all costs are out-of-pocket, except for depreciation on the new machine. Additional information includes the following. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1. Compute straight-line depreciation for each year of this new machine’s life.

      480000 - 20,000/4 = 115,000

2. Determine expected net income and net cash flow for each year of this machine’s life.

3. Compute this machine’s payback period, assuming that cash flows occur evenly throughout each year.

4. Compute this machine’s accounting rate of return, assuming that income is earned evenly throughout each year.

5. Compute the net present value for this machine using a discount rate of 7% and assuming that cash flows occur at each year-end. (Hint: Salvage value is a cash inflow at the end of the asset’s life.)