Question 1

Plano Corporation presented the following account balances for 2010 and 2009:
 $\begin{array}{lrr} 
& \text { December } 31,2010 & \text { December 31, 2009 } \
& & \
\text { Dividends payable } & \$ 20,000 & \$ 25,000 \
\text { Additional Paid-in-Capital } & \$ 580,000 & \$ 230,000 \
\text { Treasury Stock } & \$ 185,000 & \$ 100,000 \
\text { Equipment } & \$ 800,000 & \$ 700,000 \
\text { Accumulated Depreciation } & \$ 225,000 & \$ 140,000 \
\text { Common Stock } & \$ 630,000 & \$ 560,000 \
\text { Long-Term Notes Payable } & \$ 225,000 & \$ 125,000
\end{array}$
 
Additional information:
 1. Cash thands af 20,000 were declared an December 15, 2010, payable an January $15,2011 .$
2. The campany issued To,000 shares of $\$ 1$ par value camman stock during $2010 .$
3. The campary repurchased 34,000 shares of its awn comman stock during the period. Nateasury stack was sold during the peridd.
4. Additional equipment was purchased by issuing a 100,000 long-term note payable. 
Required:
1.Prepare the financing section of Plano's 2010 statement of cash flows.
2.Indicate if any of the events will be reported as a significant noncash transaction.

Accepted Answer

The answer of Plano Corporation presented the following account balances...

Question 2

J.Jill is a women's clothing retailer.The company started as a mail order company and has expanded into mall department stores.The company now receives approximately half of its revenues from mail order and half from retail outlets.Over the time period 2010 to 2012,sales increased approximately 25%.
Discuss the relationship between net income,working capital from operations,and cash flow from operations,and between cash flows from operating,investing,and financing activities over the three-year period.
 $$\text { CASH FLOW STATERENT \{in thousands }$$
$\begin{array}{lrrr}
\text { Cash from operations } & 12 / 25 / 2012 & 12 / 27 / 2011 & \mathbf{1 2 / 2 8 / 2 0 1 0} \
\text { Net income } & 8,706 & 7,025 & 18,434 \
\text { Depreciation \& amortization } & 18,663 & 16,131 & 12,672 \
\text { Net increase (decrease) in assets \& liab. } & 6,696 & 26,659 & 10,623 \
\text { Other adjustments, net } & 1,396 & 924 & 3,996 \
\text { Net cash provided by (used in) operations } & \mathbf{3 5 , 4 6 1} & \mathbf{5 0 , 7 3 9} & \mathbf{4 5 , 7 2 5}
\end{array}$

$\begin{array}{l}
\text { Cash from investments }\
\begin{array}{lrrr}
\text { (Increase) decrease in property \& plant } & -28,784 & -34,265 & -34,734 \
\text { Other cash inflow (outflow) } & -35,434 & -1,143 & -2,454 \
\text { Net cash provided by (used in) investing } & -\mathbf{6 4 , 2 1 8} & \mathbf{- 3 5 , 4 0 8} & -\mathbf{3 7 , 1 8 8}
\end{array}
\end{array}$

$\begin{array}{l}
\text { Cash from financing }\
\begin{array}{lrrr}
\text { Issuances (purchases) of equity shares } & 3,142 & 870 & 7,800 \
\text { ncrease (decrease) in borrowings } & -1,706 & -1,648 & -1,755 \
\text { Net cash provided by (used in) financing } & \mathbf{1 , 4 3 6} & \mathbf{- 7 7 8} & \mathbf{6 , 0 4 5} \
& - & - & 14,582 \
\text { Net change cash \& cash equivalents } & -27,321 & 14,553 & 30,152 
\end{array}
\end{array}$
$\begin{array}{llll}
\text { Cash and cash equivalents at start of year } & 59,287 & 44,734 & 30,152 \
\text { Cash and cash equivalents at year end } & 31,966 & 59,287 & 44,734
\end{array}$

Accepted Answer

The answer of J.Jill is a women's clothing retailer.The company...

Question 3

The receipt of cash when employees exercise stock options is a(n)____________________ activity.

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The answer of The receipt of cash when employees exercise...

Question 4

Olive Corporation manufactures food processing equipment.Use Olive Corporation's two most recent balance sheets and most recent income statement to prepare a statement of cash flows for 2010.The company paid dividends of $6,250 during 2010.
 $\begin{array}{l}
\begin{array}{lll}
\text {Olive Corporation}\
\text {Balance Sheet}\
  \text {As of December 31 ,}\
  \text {Assets:}\
  \text {Cash and cash equivalents}\
  \text {Accounts Receivable}\
  \text {Inventory}\
  \text {Current Assets}\
\
  \text {Equipment}\
  \text {Less: Accumulated depreciation}\
  \text {Land}\
\
  \text {Total assets}\
\end{array}
\begin{array}{lll}
\ \
2010 \
\
\$ 41,900 \
24,000 \
\underline{30,000} \
 95,900 \
\
42,000 \
-14,000 \
25,000\
\
\$148,900
\end{array}
\begin{array}{lll}
\ \
2009\
\
\$ 25,000 \
6,250 \
\underline{36,000} \
 67,250\
\
38,500 \
-7,000 \
10,000\
\
\$ 108,750 
\end{array}
\end{array}$

$\begin{array}{l}
\begin{array}{lll}
  \text {Liabilities}\
  \text {Accounts Payable}\
  \text {Accrued Salaries Payable}\
  \text {Rent Expense Payable}\
  \text {Income Tax Payable}\
  \text {Current Liabilities}\
\
  \text {Long-term note payable}\
  \text {Total Liabilities}\
\
  \text {Stockholders' Equity:}\
  \text {Common stock}\
  \text {Retained earnings}\
\
\text { Total liabilities and stockholders' equity }
\end{array}
\begin{array}{lll}
\
\$ 17,500 \
5,500 \
2,200 \
\underline{6,900} \
32,100 \
\ 
\underline{50,000 }\
 82,100\
\ \
42,000\
24,800\
\
\$148,900
\end{array}
\begin{array}{lll}
\
\$ 22,500 \
8,000 \
1,000 \
\underline{4,000 }\
 35,500 \
\ 
\underline{30,000 }\
 65,500\
\ \
30,000\
13,250\
\
\$108,750
\end{array}
\end{array}$ 
 Olive Warporation
Income statement
For the year ended December 31, 2010
$\begin{array}{l}
\begin{array}{lll}
\text { Revenues}\
\text { Cost of goods sold}\
\text { Gross Profit}\
\underline{\text { Operating Expenses}}\
\text { Depreciation expense}\
\text { Salary expense}\
\text { Insurance Expense}\
\text { Rent Expense}\
\text { Interest Expense}\
\text { Total Operating Expenses}\
\text { Income from Operations}\
\text { Income Tax Expense}\
\text { Net income }
\end{array}
\begin{array}{lll}
\$ 147,000 \
-84,000 \
&\$ 63,000\
\
-7,000 \
-14,600 \
-2,500 \
-10,000 \
\underline{-4,200} \
&\underline{-38,300}\
&24,700\
&\underline{-6,900}\
&\underline{\$ 17800}\
\end{array}
\end{array}$

Accepted Answer

The answer of Olive Corporation manufactures food processing equipment.Use Olive...

Question 5

Cash flow from operations should include none of the cash flows associated with marketable securities if such transactions are viewed as ___________________________________.

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The answer of Cash flow from operations should include none...

Question 6

The issuance of debt would be classified as a(n)____________________ activity in the statement of cash flows.

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The answer of The issuance of debt would be classified...

Question 7

One factor that may cause cash flow from operations to differ from net income is the length of the ______________________________.

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The answer of One factor that may cause cash flow...

Question 8

Selected financial statement information for Filmco appears below:
 $$\begin{array} { l r r } 
\underline{\text { Balance Sheet accaunts }} &\underline{ \text { Jan.1,2010 }} &\underline{ \text { Dec. 31, 2010 }} \\
\text { Inventary } & \$ 210,000 &\$90,000 \
\text { Accounts Receivable } & \$ 85,000 & \$ 45,000
\end{array}$$ 
 $\underline{\text { Income Statement (partial)} } \quad \underline{\text { For the year ended Dec. 31, } 2010}$

$\begin{array}{ll}

\text { Sales } &&& \$ 900,000 \
\text { Cost of Goods Sold }&& & \underline{\$ 730,000} \
\text { Gross Profit } & &&\$ 170,000
\end{array}$
 
Calculate the amount of cash collected from customers and the amount of cash spent on inventory for 2010 by Filmco.

Accepted Answer

The answer of Selected financial statement information for Filmco appears...

Question 9

Cilca Corporation is a supplier to the pulp and paper industry.Selected financial information about Cilca is listed below:
• Purchased real estate for $440,000 in cash.The cash was borrowed from a bank.
• Sold investments for $400,000.
• Paid dividends of $480,000.
• Issued shares of common stock for $200,000.
• Purchased machinery and equipment for $100,000 cash.
• Paid $360,000 on a bank loan.
• Reduced accounts receivable by $80,000.
• Increased accounts payable $160,000.
Sales for the period were $450,000
Use the above information to calculate Cilca's:
a.cash used or provided by operating activities
b.cash used or provided by financing activities

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The answer of Cilca Corporation is a supplier to the...

Question 10

Discuss operating,investing,and financing cash flows in relation to the various stages of the product life cycle.

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The answer of Discuss operating,investing,and financing cash flows in relation...

Question 11

Cash collected from customers would appear in the operating activities section of a statement of cash flows prepared using the ____________________ method

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The answer of Cash collected from customers would appear in...

Question 12

Jarrett Company,home improvement retailer,reported cost of goods sold of $33,729 million for the fiscal year ended January 30,2010.It reported merchandise inventories of $9,611 million at the beginning of fiscal 2010 and $10,209 million at the end of fiscal 2010.It reported
accounts payable to suppliers of $5,713 million at the beginning of fiscal 2010 and $6,109
million at the end of fiscal 2010.Compute the amount of cash paid to merchandise suppliers
during fiscal 2010.

Accepted Answer

The answer of Jarrett Company,home improvement retailer,reported cost of goods...

Question 13

The calculation of cash flow from operations under the indirect method involves two types of adjustments.Discuss each type of adjustment and provide an example of each type of adjustment.

Accepted Answer

The answer of The calculation of cash flow from operations...

Question 14

Luke Corporation is a manufacturer of home furnishings.Selected financial information about Luke is listed below:
• Borrowed $850,000 from a bank.
 Purchased equipment for $210,000 in cash.
• Purchase investments for $285,000.
• Received dividends of $51,000 from an investment in Davis Corp.
• Paid dividends of $55,000.
• Issued shares of preferred stock for $500,000.
 Repurchased outstanding common shares using $100,000 in cash.
• Purchased land for $100,000 cash.
• Paid $36,000 interest expense on a bank loan.
• Increased Inventories by $320,000
• Increased accounts receivable by $217,000.
• Increased accounts payable $85,000.
Use the above information to calculate Luke's:
a.cash used or provided by investing activities
b.cash used or provided by financing activities

Accepted Answer

The answer of Luke Corporation is a manufacturer of home...

Question 15

Krenzer,Inc.,a financial company,reported income tax expense of $2,648 million for 2010,comprising $2,346 million of current taxes and $302 million of deferred taxes.The balance sheet showed income taxes payable of $222 million at the beginning of 2010 and $427 million at the end of 2010.Compute the amount of income taxes paid in cash during 2010.

Accepted Answer

The answer of Krenzer,Inc.,a financial company,reported income tax expense of...

Question 16

Discuss the correlations that have been found between net income,net income plus or minus Type 1 adjustments (i.e.,adjustments to net income for revenues,expenses,gains,and losses that are recognized in income and are associated with changes in noncurrent assets,noncurrent liabilities,and shareholders' equity,but do not affect cash by the same amounts for the period),and cash flow from operations.

Accepted Answer

The answer of Discuss the correlations that have been found...

Question 17

Listed below is a list of cash inflows and cash outflows for Toggle Inc.
1.Cash received from issuing debt
2.Cash received from interest earned on a bond investment
3.Cash used to purchase property
4.Cash used to repay debt
5.Cash received from collections of loans
6.Cash paid for retiring common stock
7.Cash paid to employees for salaries
8.Cash from the sale of marketable securities
9.Cash used to pay dividends
10.Cash from the sale of services to customers
11.Cash paid to government agencies for taxes
12.Cash received from the sale of equipment
For each item indicate where it should appear on Toggle's statement of cash flows.Select from:
a.Cash inflows from operating activities
b.Cash outflows from operating activities
c.Cash inflows from investing activities
d.Cash outflows from investing activities
e.Cash inflows from financing activities
f.Cash outflows from financing activities

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The answer of Listed below is a list of cash...

Question 18

What is working capital from operations? Discuss what types of firms will have similar net income and working capital from operations? For which types of firms will net income and working capital from operations be significantly different?

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The answer of What is working capital from operations? Discuss...

Question 19

Clarion Industries manufactures computer equipment and provides financing for purchases by its customers.Clarion reported sales and interest revenues of $79,500 million for 2010.The
balance sheet showed current and noncurrent receivables of $ 30,750 million at the beginning
of 2010 and $ 26,900 million at the end of 2010.Compute the amount of cash collected
from customers during 2010.

Accepted Answer

The answer of Clarion Industries manufactures computer equipment and provides...

Question 20

For the following types of companies,discuss whether you think their cash flows from operations,investing,and financing will be positive (the activity provides cash)or negative (the activity uses cash).Provide support for your answer.
1.Tech Corporation is a developer of computer software for the gaming industry.The company recently launched its first software title.The company is expanding its operations by hiring additional developers and administrative staff.The company is not yet profitable,but expects to break even within two years.Investors view it as having a first mover advantage and have been happy to invest in the company.
2.Midwest Corporation is a supplier to the agricultural industry.The company is experiencing its 25th year of profitability,but is concerned that sales have contracted for the fifth year in a row.Midwest prides itself in paying dividends and having no debt on its balance sheet.
3.Semi Inc.manufactures semiconductors.The company has just introduced its ninth new product and is the leader in market share for the industry.The company continues to invest in research and development and expand by purchasing competitors.The company has yet to pay dividends,but is considering it in the future.The company's largest current asset is cash,due to its high profit margin.

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The answer of For the following types of companies,discuss whether...

Quiz 3: Income Flows versus Cash Flows: Understanding the Statement of Cash Flows