What is meant by a cash flow?

Problem 12-2AA Indirect: Cash flows spreadsheet LO P1, P2, P3, P4

Forten Company, a merchandiser, recently completed its calendar-year 2013 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 balance sheets and income statement follow.

FORTEN COMPANY Comparative Balance Sheets December 31, 2013 and 2012
2013   2012
Assets
Cash $ 49,200      $ 73,000
Accounts receivable   65,890        57,000
Merchandise inventory   276,500        253,000
Prepaid expenses   1,250        1,900
Equipment   158,000        106,500
Accum. depreciation—Equipment   (36,500)       (46,000)

Total assets $ 514,340      $ 445,400

Liabilities and Equity
Accounts payable $ 63,590      $ 111,000
Short-term notes payable   10,000        6,000
Long-term notes payable   62,500        48,250
Common stock, $5 par value   162,250        150,750
Paid-in capital in excess of par, common stock   34,500        0
Retained earnings   181,500        129,400

Total liabilities and equity $ 514,340      $ 445,400

FORTEN COMPANY Income Statement For Year Ended December 31, 2013
Sales       $ 582,500
Cost of goods sold         289,000

Gross profit         293,500
Operating expenses
Depreciation expense $ 20,000
Other expenses   134,000       154,000

Other gains (losses)
Loss on sale of equipment         (5,500)

Income before taxes         134,000
Income taxes expense         25,500

Net income       $ 108,500

Additional Information on Year 2013 Transactions

a. Net income was $108,500.
b. Accounts receivable increased.
c. Merchandise inventory increased.
d. Prepaid expenses decreased.
e. Accounts payable decreased.
f. Depreciation expense was $20,000.
g. Sold equipment costing $46,500, with accumulated depreciation of $29,500, for $11,500 cash. This yielded a loss of $5,500.
h. Purchased equipment costing $98,000 by paying $30,000 cash and (i.) by signing a long-term note payable for the balance.
j. Borrowed $4,000 cash by signing a short-term note payable.
k. Paid $53,750 cash to reduce the long-term notes payable.
l. Issued 2,300 shares of common stock for $20 cash per share.
m. Declared and paid cash dividends of $56,400.

Required:
Prepare a complete statement of cash flows using a spreadsheet; report its operating activities using the indirect method. (Enter all amounts as positive values.)

 

Golden Corp., a merchandiser, recently completed its 2013 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.

hiododf CORPORATION
Comparative Balance Sheets
December 31, 2013 and 2012
2013 2012
Assets
Cash $ 163,000 $ 135,000
Accounts receivable 84,000 72,000
Merchandise inventory 625,000 515,000
Equipment 345,000 269,000
Accum. depreciation—Equipment (156,000) (103,000)

Total assets $ 1,061,000 $888,000

Liabilities and Equity
Accounts payable $ 164,000 $ 103,000
Income taxes payable 26,000 23,000
Common stock, $2 par value 590,000 568,000
Paid-in capital in excess of par value, common stock 197,000 164,000
Retained earnings 84,000 30,000

Total liabilities and equity $ 1,061,000 $ 888,000

GOLDEN CORPORATION
Income Statement
For Year Ended December 31, 2013
Sales $ 1,800,000
Cost of goods sold 1,088,000

Gross profit 712,000
Operating expenses
Depreciation expense $ 53,000
Other expenses 499,000 552,000
Income before taxes 160,000
Income taxes expense 21,000
Net income $ 139,000

Additional Information on Year 2013 Transactions
a. Purchased equipment for $76,000 cash.
b. Issued 11,000 shares of common stock for $5 cash per share.
c. Declared and paid $85,000 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.)