Solution to Problem 13.
6A
21ST CENTURY TECHNOLOGIES
STATEMENT OF CASH FLOWS – Direct Method
FOR THE YEAR ENDED DECEMBER 31, 2015
Cash flows from operating activities:
Cash received from customers (a) 3,140,000
Interest received (b) 42,000
Cash provided by operating activities (a+b) 3,182,000
Cash paid to suppliers and employees (c) 2,680,000
Interest paid (d) 38,000
Income taxes paid (e) 114,000
Cash disbursed for operating activities (c+d+e) 2,832,000
Net cash provided by operating activities 350,000
Cash flows from investing activities:
Purchases of marketable securities (60,000)
Proceeds from sales of marketable securities (f) 72,000
Loans made to borrowers (44,000)
Collections on loans 28,000
Cash paid to acquire plant assets (500,000)
Proceeds from sales of plant assets (g) 24,000
Net cash used for investing activities (480,000)
Cash flows from financing activities:
Proceeds from short-term borrowing 82,000
Payments to settle short-term debts (92,000)
Proceeds from issuing capital stock (h) 180,000
Dividends paid (120,000)
Net cash provided by financing activities 50,000
Net increase (decrease) in cash (80,000)
Cash and cash equivalents, Jan. 1, 2011 244,000
Cash and cash equivalents, Dec. 31, 2011 164,000
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Supporting computations:
a. Cash received from customers:
Net sales 3,200,000
Less: Increase in accounts receivable 60,000
Cash received from customers 3,140,000
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b. Interest received:
Interest income 40,000
Add: Decrease in accrued interest receivable 2,000
Interest received 42,000
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c. Cash paid to suppliers and employees:
Cash paid for purchases of merchandise:
Cost of goods sold 1,620,000
Less: Decrease in inventory 60,000
Net purchases 1,560,000
Add: Decrease in accounts payable to suppliers 16,000
Cash paid for purchases of merchandise 1,576,000
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Cash paid for operating expenses:
Operating expenses 1,240,000
Less: Depreciation (a “noncash” expense) 150,000
Add: Increase in prepayments 6,000
Add: Decrease in accrued liabilities for operating expenses 8,000
Cash paid for operating expenses 1,104,000
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Cash paid to suppliers and employees (1,576,000 + 1,104,000) 2,680,000
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d. Interest paid:
Interest expense 42,000
Less: Increase in accrued interest payable 4,000
Interest paid 38,000
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e. Income taxes paid:
Income tax expense 100,000
Add: Decrease in accrued income taxes payable 14,000
Income taxes paid 114,000
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f. Proceeds from sales of marketable securities:
Cost of marketable securities sold 38,000
(credit entries to the Marketable Securities account)
Add: Gain reported on sales of marketable securities 34,000
Proceeds from sales of marketable securities 72,000
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g. Proceeds from sales of plant assets:
Book value of plant assets sold (paragraph 8) 36,000
Less: Loss reported on sales of plant assets 12,000
Proceeds from sales of plant assets 24,000
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h. Proceeds from issuing capital stock:
Amounts credited to the Capital Stock account 20,000
Add: Amounts credited to Additional Paid-in Capital account 160,000
Proceeds from issuing capital stock 180,000
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