Question 1

George Corp.'s policy is to report all cash inflows from interest and dividends in the investing section and cash outflows arising from interest and dividends in the financing section. Angela's activities for the year ended December 31,2016 included the following:
• Declared a $12,000 cash dividend payable on January 15,2017.
• Acquired an automobile costing $30,000 under a finance lease.
• Declared and issued a stock dividend valued at $15,000.
• Issued $330,000 in ordinary shares.
• Accounts payable increased $18,000 during the year.
• Paid $980,000 to repurchase bonds. The book value of the bonds was $1,010,000.
• Made a $15,000 principal payment on a bank loan.
• Interest expense for the period was $8,000. The interest payable account increased
$2,000.
Required:
a. Prepare the cash flows from financing activities section of the statement of cash flows.
b. Identify how the activities listed above that are not financing activities would be reported in the statement of cash flows assuming that the statement is prepared using the indirect method.

Accepted Answer

The answer of George Corp.'s policy is to report all...

Question 2

Rusabh Ltd.'s policy is to report all cash flows arising from interest and dividends in the operating section. Rusabh's activities for the year ended December 31,2018 included the following:
• Sold a held-for-trading investment for $16,000. The book value of this investment,which was not designated as a cash equivalent,was $13,000.
• Purchased an available-for-sale investment for $51,000.
• Borrowed $100,000 from the bank for investment purposes.
• Sold equipment for $23,000 that originally cost $55,000. The net book value of this item at time of sale was $35,000.
• Purchased inventory costing $84,000 for cash.
• Received $8,000 in interest and 5,500 in dividends on sundry investments.
• Acquired a forklift costing $32,000 under a finance lease.
• Acquired land and buildings valued at $100,000 by issuing ordinary shares.
• Bought $400,000 in bonds at a discount,paying $375,000 cash.
Required:
a. Prepare the cash flows from investing activities section of the statement of cash flows.
b. Identify how the activities listed above that are not investing activities would be reported in the statement of cash flows assuming that the statement is prepared using the indirect method.

Accepted Answer

The answer of Rusabh Ltd.'s policy is to report all...

Question 3

Boboto Inc.'s policy is to report all cash flows arising from interest and dividends in the operating section. Boboto's activities for the year ended December 31,2018 included the following:
• Declared and issued a stock dividend valued at $50,000.
• Paid $46,000 to repurchase ordinary shares and cancelled them. The book value was $33,000.
• Accounts payable decreased $23,000 during the year.
• Issued $1,500,000 in bonds. The cash proceeds were $1,410,000.
• Interest expense for the period was $10,000. The interest payable account decreased $4,000.
• Made a $75,000 principal payment on a bank loan.
• Declared a $15,000 cash dividend payable on January 15,2019.
Required:
a. Prepare the cash flows from financing activities section of the statement of cash flows.
b. Identify how the activities listed above that are not financing activities would be reported in the statement of cash flows assuming that the statement is prepared using the indirect method.

Accepted Answer

The answer of Boboto Inc.'s policy is to report all...

Question 4

Reuse It Inc.'s activities for the year ended December 31,2016 included the following:
• Comprehensive income totaled $468,000 including $88,000 in other comprehensive income.
• Paid a cash dividend of $30,000 that was declared in 2015.
• Interest expense for the year was $14,000; the opening and closing balances in the interest payable account were $28,000 and $19,000,respectively.
• Accounts receivable increased $63,000 and accounts payable decreased $19,000 during the year.
• RII paid $51,000 cash for equipment.
• RII sold held-to-maturity investments for $36,000. The book value of the investment was $39,000.
• Depreciation expense for the year totaled $9,000.
• Suffered an impairment loss on patents of $1 0,000.
• Declared and issued a 2-for-l stock split. There were 20,000 ordinary shares outstanding before the split with a collective market value of $3,000,000.
Requirement:
Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method,assuming that the company's policy is to report interest and dividends received as an investing activity,and interest and dividends paid as a financing activity.

Accepted Answer

The answer of Reuse It Inc.'s activities for the year...

Question 5

ABC Inc.'s policy is to report all cash flows arising from interest and dividends in the operating activities section. Tub Time's activities for the year ended December 31,2017 included the following:
• Net income after taxes totaled $400,000.
• The company recorded a $4000 goodwill impairment loss during the year.
• Depreciation expense for the year was $24,000.
• Declared and issued a stock dividend valued at $10,000.
• Accounts receivable increased $33,000 in the year.
• Sold a held-for-trading investment for $23,000. The book value was $18,000. (Assume this held-for-trading investment was not designated as a cash equivalent.)
• Interest revenue for the period was $6,000. The interest receivable account decreased $4,000.
• Declared a $10,000 dividend payable. The dividends payable account decreased $19,000 in the year.
• Sold an available-for-sale investment for $19,000. The book value was $14,000.
Requirements:
a. Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.
b. Identify how the activities listed above that are not operating activities would be required in the statement of cash flows.

Accepted Answer

The answer of ABC Inc.'s policy is to report all...

Question 6

Soorya Law Ltd.'s policy is to report all cash inflows from interest and dividends in the investing section and cash outflows arising from interest and dividends in the financing section. Soorya Law's activities for the year ended December 31,2016 included the following:
• Sold a held-for-trading investment for $11,000. The book value of this investment,which was designated as a cash equivalent,was $11,000.
• Sold an available-for-sale investment for $27,000. The book value of the investment was $27,000.
• Borrowed $120,000 from the bank for investment purposes.
• Sold equipment for $63,000 that originally cost $80,000. The net book value of this item at time of sale was $54,000.
• Received $5,000 in interest and $5,000 in dividends on sundry investments.
• Paid $4,000 interest on the investment loan.
• Acquired land and buildings valued at $450,000 by paying $150,000 cash and issuing ordinary shares for the balance.
• Bought $350,000 in bonds at a premium,paying $305,000 cash.
Required:
a. Prepare the cash flows from investing activities section of the statement of cash flows.
b. Identify how the activities listed above that are not investing activities would be reported in the statement of cash flows assuming that the statement is prepared using the indirect method.

Accepted Answer

The answer of Soorya Law Ltd.'s policy is to report...

Question 7

Katie Ltd.'s policy is to report all cash flows arising from interest and dividends in the operating section. Katie's activities for the year ended December 31,2018 included the following:
• Income tax expense for the year was $30,000.
• Sales for the year were $1,030,000.
• Accounts payable decreased $20,000 in 2018.
• Selling and administration expenses for the year totaled $240,000.
• Accounts receivable decreased $36,000 in 2018.
• Mamie's cost of goods sold in 2018 was $315,000.
• Mamie's inventory increased $13,000 during the year.
• Interest expense for the period was $12,000. The interest payable account increased $5,000.
• Dividends were not declared during the year; however,the dividends payable account increased $5,000.
• Sold an available-for-sale investment for $45,000. The book value was $52,000.
• Depreciation expense for the year was $19,000.
Requirements:
a. Prepare the cash flows from operating activities section of the statement of cash flows using the direct method.
b. Identify how the activities listed above that are not operating activities would be reported in the statement of cash flows.

Accepted Answer

The answer of Katie Ltd.'s policy is to report all...

Question 8

Financial information for Fesone Inc.'s balance sheet for fiscal 2013 and 2014 follows:
 $\begin{array}{lll}
&2014&2013\
\text { Cash } & 204,800 & 550,000 \
\text { Accounts receivable } & 1,150,000 & 1,300,000 \
\text { Inventory } & 410,000 & 250,000 \
\text { Investments - held for trading } & 400,000 & \
\text { Investments - held to maturity } & 150,000 & \
\text { Property plant and equipment } & 3,400,000 & 3,400,000 \
\text { Accumulated depreciation } & (1,860,000) & (1,570,000) \
\text { Total } & \mathbf{3 , 8 5 4 , 8 0 0} & \mathbf{3 , 9 3 0 , 0 0 0}
\end{array}$ $\begin{array}{lll}
\text { Accounts payable } & 260,000 & 80,000 \
\text { Bank loan } & 2,226,000 & 2,850,000 \
\text { Bonds payable } & 187,800 & 185,000 \
\text { Preferred shares } & 0 & 15,000 \
\text { Common shares } & 597,000 & 450,000 \
\text { Retained earnings } & 584,000 & 350,000 \
\text { Total } & \mathbf{3 , 8 5 4 , 8 0 0} & \mathbf{3 , 9 3 0 , 0 0 0}
\end{array}$
 Additional information:
1. Preferred shares were converted to common shares during the year at their book value.
2. The face value of the bonds is $200,000; they pay a coupon rate of 6% per annum. The effective interest rate of interest is 8% per annum.
3. Net income was $290,000.
4. There was an ordinary stock dividend valued at $12,000 and cash dividends were also paid.
5. Interest expense for the year was $130,000. Income tax expense was $116,000.
6. Fesone arranged for a $200,000 bank loan to finance the purchase of the held-to-maturity investments.
7. Fesone has adopted a policy of reporting cash flows arising from the payment of interest and dividends as operating and financing activities,respectively.
8. Assume that Fesone designates the held-for-trading investment as a cash equivalent.
Requirements:
a. Prepare a statement of cash flows for the year ended December 31,2014 using the indirect method.
b. Discuss how the transaction(s)above that are not reported on the statement of cash flows are reported in the financial statements.

Accepted Answer

The answer of Financial information for Fesone Inc.'s balance sheet...

Quiz 9: Statement of Cash Flows