Question 1: Score 0/1
Correct response
Exercise 13.3: Computing Cash Flows L.O. 4
An analysis of the Marketable Securities control account of Prosper Products, Inc., shows the following entries during the year:
Balance, Jan. 1 $290,000
Debit entries 125,000
Credit entries (140,000)
Balance, Dec. 31 $275,000
In addition, the company's income statement includes a $35,000 loss on sales of marketable securities. None of the company's marketable
securities is considered a cash equivalent.
Compute the amounts that should appear in the direct method statement of cash flows as:
a. Purchases of marketable securities.
b. Proceeds from sales of marketable securities.
Ex. 13.3 a. Purchases of marketable securities $ 125,000
b. Proceeds from sales of marketable securities ($ 140,000book value, less $35,000 loss) $ 105,000
Total grade: 0.0×1/3 + 0.0×1/3 + 0.0×1/3 = 0% + 0% + 0%
Question 2: Score 0.18/1
Correct response
Exercise 13.13: Cash Flows from Investing Activities L.O. 4
Wofford Company provides the following information related to its investing and financing activities for the current year:
Cash receipts:
Sale of common stock $ 250,000
Sale of equipment (at $34,000 loss) 156,000
Sale of land (at $50,000 gain) 160,000
Cash payments:
Purchase of equipment $ 178,000
Purchase of treasury stock 45,000
Retirement of debt 36,500
Dividends on preferred and common stock 75,000
Required:
(a) Calculate the net amount of cash provided by or used for investing activities for the year. Amounts to be deducted should be
indicated with a minus sign. Omit the "$" sign in your response.
Sale of Equipment $ 156,000
Sale of Land 160,000
Purchase of Equipment -178,000
Cash provided by investing activities $ 138,000
Total grade: 0.0×1/8 + 0.0×1/8 + 0.0×1/8 + 0.0×1/8 + 1.0×1/8 + 1.0×1/8 + 1.0×1/8 + 0.0×1/8 = 0% + 0% + 0% + 0% + 13% + 13% + 13% + 0%
(b)
W
hat
im
pa
ct
do
es
eq
ui
p
me
nt
sol
d
at
a
los
s,
an
d
lan
d
sol
d
at
a
gai
n
ha
ve
on
yo
ur
cal
cul
ati
on
?
Se
lec
t
all
th
at
ap
pl
y.
Choice Selected Points
Loss on sale of equipment is reported separately from cash receipts. No
Loss or gain will be reflected in neither cash receipts nor cash payments figure. No
Loss on sale of equipment is reflected in the cash payments figure. Yes -1
Gain on sale of land is reported separately from cash receipts figure. No
The amount of gain or loss is reflected in the cash receipts figure. Yes +1
Gain on sale of land is reflected in the cash payments figure. No
Total correct answers: 3
Partial Grading Explained
Feedback: The amount of gain or loss is reflected in the cash receipts figure. For example, equipment that was sold for $156,000 at a $34,000 loss
had a book value (cost, less accumulated depreciation) at the time of sale of $190,000:
Cost, less accumulated depreciation $ 190,000
Cash received from sale (156,000 )
Loss on sale $ 34,000
Similarly, land that was sold for $160,000 and which resulted in a $50,000 gain had a cost of $110,000:
Cash received from sale $ 160,000
Cost less accumulated depreciation (110,000 )
Gain on sale $ 50,000
Question 3: Score 1.28/2
Correct response
Exercise 13.2: Using a Statement of Cash Flows L.O. 1, 2, 6
Auto Supply Company's 2007 statement of cash flows appears in Exhibit 13-8. Study the statement and respond to the following
questions:
Required:
(a) What was the company's free cash flow in 2007, using the method described in the text on page 589 - last paragraph? Enter your
answer in thousands. Omit the "$" sign in your response.
Free cash flow $ 110
Total grade: 0.0×1/1 = 0%
Feedback:
Note: All dollar figures in the following calculations are in thousands.
Cash from operations $ 280
Expenditures for property and equipment (30)
Dividends paid (140)
Free cash flow $ 110
(b) What was the major source of cash from financing activities during 2007?
Your Answer:
Choice Selected Correct
Dividends paid
Payments to retire bonds payable
Proceeds from sales of marketable securities
Depreciation expense
None
(c)
W
ha
t
w
er
e
th
e
m
aj
or
us
es
of
ca
sh
fr
o
m
fin
an
ci
ng
ac
tiv
iti
es
du
rin
g
20
07
?
Se
le
ct
all
th
at
ap
pl
y.
Choice Selected Points
Payments to retire bonds payable Yes +1
Dividends paid Yes +1
Proceeds from sales of marketable securities No
Depreciation expense No
Total correct answers: 2
Partial Grading Explained
(d) Did the net effect of financing activities result in an increase or a decrease in cash during the year?
Your Answer:
Choice Selected
Increase
Decrease
Feedback: Financing activities resulted in a decline in cash of $290 in 2007.
Correct response
(e) What happened to the total amount of cash and cash equivalents during the year? Omit the "$" sign in your response.
Cash and cash equivalents decreased by $5,000
(f) Assuming 2007 was a typical year, is the firm in a position to continue its dividend payments in the
future?
Your Answer:
Choice Selected
Yes
No
Feedback: The company paid dividends of $140,000 in 2007, and appears to be in a relatively strong cash position should it decide to pay dividends
in the future.
(g)
Lo
ok
at
th
e
re
co
nc
ili
ati
on
of
ne
t
in
co
m
e
to
ne
t
ca
sh
pr
ov
id
ed
by
op
er
ati
ng
act
ivi
tie
s,
an
d
ch
oo
se
th
e
co
rre
ct
sta
te
m
en
t
fro
m
be
lo
w.
Se
lec
t
all
th
at
ap
pl
y.
Choice Selected Points
The increase in accounts receivable represents credit sales which were collected in 2007. No
The gain on the sale of marketable securities is deducted to effectively remove the item from net income. Yes +1
The increase in accounts receivable represents credit sales which were not collected in 2007. No
Total correct answers: 2
Partial Grading Explained
Question 4: Score 1.55/2
Correct response
Exercise 13.4: Comparing Net Sales and Cash Receipts L.O. 3, 6
During the current year, Tachnic, Inc., made cash sales of $285,000 and credit sales of $460,000.
During the year, accounts receivable decreased by $32,000.
a. Compute for the current year the amounts of:
1. Net sales reported as revenue in the income statement.
2. Cash received from collecting accounts receivable.
3. Cash received from customers.
Ex. 13.4 a. (1)Net sales:
Cash sales $ 285,000
Credit sales 460,000
Net sales reported as revenue in the income statement $ 745,000
(2)Cash received from collecting accounts receivable:
Credit sales $ 460,000
Add: Decrease in accounts receivable 32,000
Collections of accounts receivable $ 492,000
(3)Cash received from customers:
Net sales (includes cash sales and credit sales) $ 745,000
Add: Decrease in accounts receivable 32,000
Cash received from customers $ 777,000
Total grade: 1.0×1/9 + 1.0×1/9 + 1.0×1/9 + 1.0×1/9 + 1.0×1/9 + 0.0×1/9 + 1.0×1/9 + 1.0×1/9 + 0.0×1/9 = 11% + 11% + 11% + 11% + 11% + 0% + 11% + 11% + 0%
Question 5: Score 1.71/2
Correct response
Exercise 13.7: Format of a Statement of Cash Flows L.O. 2
The accounting staff of Wyoming Outfitters, Inc., has assembled the following information for the year ended December 31, 2007:
Cash and cash equivalents, Jan. 1 $35,800
Cash and cash equivalents, Dec. 31 74,800
Cash paid to acquire plant assets 21,000
Proceeds from short-term borrowing 10,000
Loans made to borrowers 5,000
Collections on loans (excluding interest) 4,000
Interest and dividends received 27,000
Cash received from customers 795,000
Proceeds from sales of plant assets 9,000
Dividends paid 55,000
Cash paid to suppliers and employees 635,000
Interest paid 19,000
Income taxes paid 71,000
Using this information, prepare a statement of cash flows.
Ex. 13.7 WYOMING OUTFITTERS, INC.
Statement of Cash Flows
For the Year Ended December 31, 2007
Cash flows from operating activities:
Cash received from customers $ 795,000
Interest and dividends received 27,000
Cash provided by operating activities $ 822,000
Cash paid to suppliers and employees ( 635,000)
Interest paid (19,000)
Income taxes paid ( 71,000)
Cash disbursed for operating activities ( 725,000)
Net cash flow from operating activities $ 97,000
Cash flows from investing activities:
Loans made to borrowers $( 5,000)
Collections on loans 4,000
Cash paid to acquire plant assets ( 21,000)
Proceeds from sales of plant assets 9,000
Net cash used by investing activities ( 13,000)
Cash flows from financing activities:
Proceeds from short-term borrowing $10,000
Dividends paid ( 55,000)
Net cash used by financing activities ( 45,000)
Net increase in cash and cash equivalents $ 39,000
Cash and cash equivalents, beginning of year 35,800
Cash and cash equivalents, end of year $ 74,800
Total grade: 1.0×1/14 + 1.0×1/14 + 1.0×1/14 + 1.0×1/14 + 1.0×1/14 + 1.0×1/14 + 1.0×1/14 + 1.0×1/14 + 1.0×1/14 + 1.0×1/14 + 1.0×1/14 + 1.0×1/14 + 0.0×1/14 + 0.0×1/14 = 7% + 7% + 7% + 7% +
7% + 7% + 7% + 7% + 7% + 7% + 7% + 7% + 0% + 0%
Question 6: Score 1.55/2
Correct response
Exercise 13.10: Computation of Net Cash Flows from Operating Activities—Indirect Method L.O. 7
The following data are taken from the income statement and balance sheet of Keaner Machinery, Inc.:
Dec. 31, 2007 Jan. 1, 2007
Income statement:
Net Income $385,000
Depreciation Expense 125,000
Amortization of Intangible Assets 40,000
Gain on Sale of Plant Assets 90,000
Loss on Sale of Investments 35,000
Balance sheet:
Accounts Receivable $335,000 $380,000
Inventory 503,000 575,000
Prepaid Expenses 22,000 10,000
Accounts Payable (to merchandise suppliers) 379,000 410,000
Accrued Expenses Payable 180,000 155,000
Using this information, prepare a partial statement of cash flows for the year ended December 31, 2007, showing the computation of net cash
flows from operating activities by the indirect method.
Ex. 13.10 KEANER MACHINERY, INC.
Partial Statement of Cash Flows
For the Year Ended December 31, 2007
Cash flows from operating activities:
Net income $385,000
Add: Depreciation expense $125,000
Amortization of intangible assets 40,000
Decrease in accounts receivable 45,000
Decrease in inventory 72,000
Increase in accrued expenses payable 25,000
Nonoperating loss on sale of investments 35,000 342,000
Subtotal $ 727,000
Less: Increase in prepaid expenses $ 12,000
Decrease in accounts payable 31,000
Nonoperating gain on sale of plant assets 90,000 133,000
Net cash flow from operating activities $ 594,000
Total grade: 1.0×1/9 + 1.0×1/9 + 1.0×1/9 + 1.0×1/9 + 0.0×1/9 + 1.0×1/9 + 1.0×1/9 + 1.0×1/9 + 0.0×1/9 = 11% + 11% + 11% + 11% + 0% + 11% + 11% + 11% + 0%