Clasify the following items as an operating, investing, or financing activity. Assume all items involve cash



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Chapter 18

Day 1:


Page 868 BE18-2

Clasify the following items as an operating, investing, or financing activity. Assume all items involve cash.



  1. purchase of equipment

  2. Sale of building

  3. Retired bonds

  4. Payment of dividends

  5. Issue of share capital


Page 869-870 E18-1

Eng Corporation had the following transactions during 2003:



  1. Purchased a machine for $30,000, giving a long-term note in exchange.

  2. Issued common shares for cash, $50,000.

  3. Collected $16,000 of accounts receivable.

  4. Declared and paid a cash dividend of $25,000.

  5. Sold a long-term investment with a cost of $15,000 for $10,000 cash.

  6. Retired bonds having a carrying value of $200,000 for $175,000.


Instructions

Analyze the transactions above an indicate whether each transaction resulted in a cash inflow or cash outflow from a) operating activities, b) investing activities, c) financing activities, or d) non-cash investing and financing activities.


Page 870 E18-2

Pesci Company reported net income of $195,000 for the year ended July 31, 2003. Pesci also reported an amortization expense of $45,000 and a loss of $5,000 on the sale of equipment. The comparative balance sheet shows an increase in accounts receivable of $15,000 for the year, an $8,000 increase in accounts payable, and a decrease in prepaid expenses of $4,000.


Instructions

Prepare the operating activities section of the cash flow statement for 2003. Use the indirect method.


Day 2:

Page 868 BE18-4

Dressmart.com Inc., reported net income of $2.5 million in 2003. Amortization expense for the year was $280,000, accounts receivable decreased by $350,000, and accounts payable decreased by $310,000. Calculate net cash provided by operating activities using the indirect method.


Page 868 BE18-6

The comparative balance sheet for the Harden Company shows the following changes in noncash current asset accounts:



  • Accounts Receivable decrease of $75,000

  • Prepaid Expenses increase of $12,000

  • Inventories increase of $30,000.

Calculate net cash provided by operating activities using the indirect method. Assume that net income is $220,000 for the year ended December 31, 2003.


Page 870 E18-4

The current sections of Invest.com Inc.’s balance sheets at December 31, 2002 and 2003, are presented below.


Invest.com Inc.

Balance Sheet (partial)

December 31




2003

2002

Current assets







Cash

$105,000

$99,000

Accounts receivable

110,000

89,000

Inventory

171,000

186,000

Prepaid expenses

27,000

32,000

Total current assets


$413,000

$406,000

Current liabilities







Accrued expenses payable

$15,000

$5,000

Accounts payable

85,000

92,000

Total current liabilities

$100,000

$97,000

Invest.com’s net income for 2003 was $163,000. Amortization expense was $30,000.


Instructions

Prepare the operating activities section on Invest.com Inc.’s cash flow statement for the year ended December 31, 2003, using the indirect method.


Page 874 P18-3A

Presented below is the comparative balance sheet for Cousin Tommy’s Toy Company as of December 31:


Cousin Tommy’s Toy Company

Balance Sheet

December 31


Asset

2003

2002

Cash

$39,000

$45,000

Accounts receivable

49,500

52,000

Inventory

151,450

142,000

Prepaid expenses

16,780

21,000

Land

100,000

130,000

Equipment

228,000

155,000

Accumulated amortization – equipment

(45,000)

(35,000)

Building

200,000

200,000

Accumulated amortization – building

(60,000)

(40,000)




$679,730

$670,000










Liabilities and Shareholders’ Equity







Accounts payable

$38,730

$40,000

Bonds Payable

250,000

300,000

Common Shares

191,000

180,000

Retained Earnings

$679,730

$670,000

Additional information:



  1. Operating expenses include amortization expense of $42,000.

  2. Land was sold for cash at cost.

  3. Cash dividends of $27,000 were paid.

  4. Equipment was purchased for $95,000 cash. IN addition, equipment costing $22,000 with a net book value of $10,000 was sold for $8,100 cash.

  5. Bonds were redeemed at face value by issuing common shares.


Instructions

Prepare a cash flow statement for te year ended December 31, 2003, using the indirect method.


Day 3:

Page 868 BE18-8

Westcoast Corporation has accounts receivable of $14,000 at January 1, 2003, and of $24,000 at December 31, 2003. Sales revenues were $470,000 for the year. What is the amount of cash receipts from a customers in 2003?


Page 868 BE18-9

Home Grocery Corporation reported income tax expense of $90,000 in its 2003 income statement, and income tax payable of $14,000 at December 31, 2002, and of $9,000 at December 31, 2003. What was the amount of cash payments made for income tax during 2003?


Page 869 BE18-10

Linux Corporation reports operating expense of $100,000, excluding amortization expense of $15,000, for 2003. During the year, prepaid expenses decreased by $6,600 and accrued expenses payable increased by $2,400. Calculate the cash payments for operating expenses in 2003.


Page 871 E18-9

The year 2003 accounting records of Frontier Airlines reveal the following transactions and events:




Payment of interest

$6,000

Collection of accounts receivable

$180,000

Cash sales

38,000

Payment of salaries and wages

65,000

Receipt of dividend revenue

14,000

Amortization expense

18,000

Payment of income tax

15,000

Proceeds from sale of aircraft

812,000

Net income

38,000

Purchase of equipment for cash

22,000

Payment of accounts payable for merchandise

90,000

Loss on sale of aircraft

3,000

Payment of dividends

14,000

Payment for land

74,000

Payment of other expenses

20,000


Instructions

Prepare the operating ctvities section of the cash flow statement, using the direct method. (Note: Not all of the above items will be used.)


Page 876 P18-7A

Condensed financial data of e-Perform.com Ltd. appear below:



e-Perform.com Ltd.

Balance Sheet

December 31


Assets

2003

2003

Cash

$92,700

$47,250

Accounts receivable

90,800

57,000

Inventories

121,900

102,650

Investments

84,500

87,000

Capital assets

250,000

205,000

Accumulated amortization

(49,500)

(40,000)



$590,400

$458,900











Liabilities and Shareholders’ Equity







Accounts payable

$57,700

$48,280

Accrued expenses payable

12,100

18,830

Bonds payable

100,000

70,000

Common Shares

250,000

200,000

Retained earnings

170,600

121,790




$590,400

$458,900


e-Perform.com Ltd

Income Statement

For the Year Ended December 31, 2003


Revenues







Sales

$297,500




Gain on sale of capital assets

8,750

$306,250

Expenses







Cost of goods sold

$99,460




Operating expenses

14,670




Amortization expense

49,700




Income tax expense

7,270




Interest expense

2,940

174,040

Net Income




$132,210

Additional Information:



  1. New capital assets costing $92,000 were purchased for cash during the year.

  2. Investments were sold at cost.

  3. Capital assets costing $47,000 were sold for $15,550.

  4. A cash dividend of $83,400 was declared and paid during the year.

  5. Accounts payable relate only to merchandise creditors.


Instructions

Prepare a cash flow statement using the direct method.


Day 4:

Page 869 BE18-11

For the year ended March 31, 2000, Alliance Atlantis Communications Inc. reported (in millions) cash provided by operating activities of $558.2; cash used by investing activities of $666.2; and cash provided by financing activities of $52.5. In addition, average current liabilities were $581.6; average total liabilities were $884.6; net sales and net income available to common shareholders were $771.6 and $37.0, respectively. The number of shares was 28.2. Calculate these values: a) cash current debt coverage, b) cash returns on sales, c) cash flow per share, and d) cash total debt coverage.


Page 872 E18-10

The comparative balance sheet for Véfour Company is presented below:


Véfour Company

Balance Sheet

December 31, 2003





December 31

Assets

2003

2002

Cash

$63,000

$22,000

Accounts receivable

85,000

76,000

Inventories

180,000

189,000

Land

75,000

100,000

Equipment

260,000

200,000

Accumulated amortization

(66,000)

(42,000)

Total

$597,000

$545,000










Liabilities and Shareholders’ Equity







Accounts payable

$34,000

$47,000

Bonds payable

150,000

200,000

Common shares

214,000

164,000

Retained earnings

199,000

134,000

Total

$597,000

$545,000

Additional information:



  1. Net income for 2003 was $125,000.

  2. Cash dividends of $60,000 were declared and paid.

  3. Bonds pyabale with a carrying value of $50,000 were redeemed for $50,000 cash.

  4. Common shares were issued for $50,000 cash.

  5. Land was sold at a gain of $5,000

  6. Net sales for the year were $978,000.


Instructions

  1. Prepare a cash flow statement for 2003 using the indirect method.

  2. Calculate the following cash-based ratios:

  1. Cash current debt coverage

  2. Cash return on sales

  3. Cash total debt coverage


Page 872 E18-11

Presented here is selected information (in thousands) for Reitmans (Canada) Limited and La Senza for the year ended January 29, 2000.







Reitmans

La Senza

Cash provided by operating activities

$32,548

$24,784

Cash provided by all activities

33,810

3,584

Average current liabilities

65,521

50,576

Average total liabilities

65,689

106,480

Sales

477,730

354,279

Number of shares

8,764

9,338


Instructions

Using the cash-based ratios presented in this chapter, compare a)the liquidity, b) the profitability, and c) the solvency of the two companies.

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