MODULE 11 – Statement of Cash Flows – QUESTIONS
Note: we are only covering the indirect method for the operating activities.
Template for class (similar to Tony’s template)
Title:
Cash flows from Operating Activities
Net Income
Adjustments for non-cash items:
Depreciation
Gain/loss on sale of PPE
Gain/loss on sale of investments
Goodwill Amortization
Change in non-cash working capital accounts:
Change in prepaid rent
Change in taxes payable
Change in wages/salaries payable
Change in accounts receivable
Change in inventory
Change in prepaid insurance
Change in offi ce supplies
Change in accounts payable
Change in interest payable
Change in other (accrued) liabilities
Net cash inflow/(outflow) from operating activities
Cash flows from Investing Activities
Cash paid for PPE
Cash received on sale of PPE
Cash paid for investments
Cash received on sale of investments
Net cash inflow/(outflow) from investing activities
Cash flows from Financing Activities
Cash paid for reduction in bonds/non-current debt
Cash received on issuance of bonds/non-current debt
Cash paid for redemption of shares
Cash received on issuance of shares
Cash paid for dividends
Cash paid/received on current debt
Net cash inflow/(outflow) from financing activities
Net increase/decrease in cash
Cash balance, Jan 1
Cash balance, Dec 31
11-1A – Basic Cash Flow Statement
The financial statements of Bait and Tackle are presented below:
Bait and Tackle
Balance Sheet
As at December 31
2024 2023
Cash $39,000 $24,000
Accounts receivable 64,000 50,000
Inventory 58,000 88,000
Equipment 325,000 250,000
Accumulated depreciation (92,000) (125,000)
Total assets $394,000 $287,000
Accounts payable $32,000 $40,000
Income taxes payable 10,000 11,000
Bank loan payable 20,000 0
Common shares 60,000 50,000
Retained earnings 272,000 186,000
Total liabilities and shareholders’ equity $394,000 $287,000
Bait and Tackle
Income Statement
For the Year Ended December 31, 2024
Sales $635,000
Cost of goods sold 320,000
Gross profit 315,000
Operating expenses 135,000
Operating income 180,000
Interest expense 1,000
Income before taxes 179,000
Income taxes 43,000
Net income $136,000
Additional information:
1.) Operating expenses are composed of: Depreciation $12,000; Salaries $50,000; Loss on Sale of Equipment $9,000;
other operating expenses $64,000.
2.) Other operating expenses are cash expenses.
3.) Equipment was purchased during the year for $135,000 cash.
4.) Equipment was sold for cash during the year. The original cost of the equipment was $60,000, and the accumulated
depreciation was $45,000.
5.) Dividends were declared and paid during the year.
Required:
Prepare a cash flow statement using the direct method or indirect method or both (depending on what your instructor
assigns).
NOTE: Download the template from [Link]
Free Video Walkthrough:
11-1A (Part 1) [Link]
11-1A (Part 2) [Link]
11-1A (Part 3) [Link]
QUESTION 2 – BUBBLES
Bubbles Company
Balance Sheet
December 31, 2022
2022 2020
Assets
Cash $ 813 $ 92
Accounts Receivable 165 150
Inventory 235 240
ST Investments 300 400
Equipment 830 500
Accumulated depreciation (280) (282)
Total $ 2,063 $ 1,100
Liabilities and Shareholders’ Equity
Accounts payable $ 229 $ 190
Bonds payable 300 100
Common shares 1,000 450
Retained earnings 534 360
Total $ 2,063 $ 1,100
Bubbles Company
Income Statement
For the year ended December 31, 2022
Sales $1,500
Cost of goods sold 980
Gross profit 520
Depreciation expense $ (48)
Other expenses (233)
Gain on sale of equipment 20 (261)
Net Income $ 259
Equipment costing $530 was bought by paying cash.
ST Investments were sold for book value.
Bonds amounting to $500 were issued for cash.
Common shares were issued for cash during the year.
REQUIRED
Prepare a cash flow statement for the year ended December 31, 2022.
Harder/longer problem: