Question 1 (Direct Method – Cash Payments to Suppliers)
Meatloaf Inc. had January 1 and December 31 balances as follows:
1/1/2015 12/31/2015
Inventory $95,000 $113,000
Accounts Payable $61,000 $69,000
For 2015, cost of goods sold was $500,000. Compute Meatloaf Inc.’s 2015 cash payments to suppliers. Assume all inventory is purchased on account and accounts payable is only used for inventory purchases.
Question 2 (Cash Provided by Investing Activities)
The balance sheet data of Macaroni & Cheese at the end of 2015 and 2014 are shown below.
Land was acquired for $30,000 in exchange for common stock, par $30,000. During the year, all equipment was purchased for cash. Equipment costing $13,000 was sold for $3,000. Book value of the equipment was $6,000. Cash dividends of $9,000 were declared and paid during the year.
Compute net cash provided (used) by Investing Activities
Question 3 (Cash Provided by Financing Activities)
Using the same information presented above, compute net cash provided (used) by Financing Activities.
Question 4 (Indirect Method – Operating Activities)
Chicken Parmesan reported net income of $50,000 in 2016. Depreciation expense was $17,000. The following working capital accounts changed.
Accounts Receivable $11,000 increase
Available-for-sale Securities $16,000 increase
Inventory $7,400 increase
Nontrade Long-Term Note Payable $15,000 decrease
Accounts Payable $12,300 increase
Compute net cash provided by operating activities.
Question 5 (Direct Method – Operating Activities)
Presented below is data taken from the records of BBQ Brisket Company.
Dec. 31, 2014 Dec. 31, 2013
Cash
$15,000 $10,000
Current Assets (non cash)
$85,000 $58,000
Long-Term Investments
$10,000 $53,000
Plant Assets
$335,000 $215,000
Accumulated depreciation
($20,000) ($20,000)
Total Assets $425,000 $296,000
Current Liabilities
$40,000 $22,000
Bonds Payable
$75,000 $0
Common Stock
$254,000 $254,000
Retained Earnings
$56,000 $20,000
Total Liabilities & Equity
$425,000 $296,000
Additional information:
1. Depreciation charged for the year was $28,000.
2. Dividends paid during the year were $10,000.
3. Net income as reported on the income statement for the year were $59,000.
4. Plant assets that cost $60,000 and were 80% depreciated were sold during 2012 for $8,000. The loss was incorrectly charged directly to Retained Earnings.
5. HTM securities carried at a cost of $43,000 on December 31, 2011 were sold in 2012 for $34,000. The loss was incorrectly charged directly to Retained Earnings.
Prepare the operating activities section of the Statement of Cash flows using the indirect method.
Question 6 (Segment Reporting)
Chinese Corporation is a diversified company that operates in five different industries: Cashew Chicken, Beef & Broccoli, Mongolian Beef, Sweet & Sour Pork, and Sesame Chicken. The following information relating to each segment is available for 2014.
Determine which of the segments are reportable.
SECTION B
Question 7 (Statement of Cash Flows – Direct Method)
Pepperoni Pizza uses the direct method to prepare its statement of cash flows. Pepperoni Pizza’s trial balances at December 31, 2014 and 2013, are as follows.
December 31, 2014 2013
Debits
Cash $ 84,000 $ 5,000
Accounts receivable 270,000 298,000
Inventory 187,000 171,000
Property, plant, & equipment 690,000 592,100
Cost of goods sold 1,205,000 1,080,000
Selling expenses 181,500 106,000
G&A expenses 285,000 189,500 Interest expense 8,500 10,200
Income tax expense 170,300 161,800
$3,081,300 $2,613,600
Credits
Allowance for doubtful accounts $ 9,600 $ 8,100 Accumulated depreciation 80,500 65,000
Trade accounts payable 95,000 118,500
Income taxes payable 21,000 8,600
Deferred income taxes 54,200 45,600 Unamortized bond premium 4,500 5,000
10% convertible bonds payable 100,000 100,000 Common stock 110,000 100,000 Additional paid-in capital 75,000 56,000
Retained earnings 425,700 318,300
Sales 2,105,800 1,788,500
$3,081,300 $2,613,600
Additional information:
Pepperoni Pizza purchased a major piece of equipment for $97,900 during 2014. Pepperoni Pizza allocated one-half of its depreciation expense to cost of goods sold and the remainder to general and administrative expenses. Bad debt expense for 2014 was $10,000 and is included in general and administrative expenses.
Determine what amounts Pepperoni Pizza should report in its statement of cash flows for the year ended December 31, 2014, for the following items.
(a) Cash collected from customers.
(b) Cash paid for income taxes.
(c) Cash paid to suppliers.
(d) Cash paid for general and administrative expenses.
(e) Cash paid for interest.
Question 8 (Statement of Cash Flows – Indirect Method)
Condensed financial data of chicken fingers and curly fries for 2014 and 2013 are presented below.
CHICKEN FINGERS & CURLY FRIES
COMPARATIVE BALANCE SHEET
AS OF DECEMBER 31,
2014 2013
Cash $ 800 $ 600
Investments –0– 200
Receivables 2,250 2,100
Inventory 1,600 1,200
Plant assets 1,600 1,200
Accumulated depreciation (600) (455)
$5,650 $4,845
Accounts payable $ 750 $1,200
Accrued liabilities 330 520
Bonds payable 800 1,000
Capital stock 1,500 1,400
Retained earnings 2,270 725
$5,650 $4,845
CHICKEN FINGERS & CURLY FRIES
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2014
Sales $15,200
Cost of goods sold 10,400
Gross margin 4,800
Selling and administrative expense 1,205
Income from operations 3,595
Other revenues and gains
Loss on sale of investments 50
Income before income tax 3,545
Income tax expense 1,400
Net income 2,145
Cash dividends 600
Income retained in business $ 1,545
During the year, $100 of common stock was issued in exchange for land. No plant assets were sold in 2014. Prepare a statement of cash flows using the indirect method.