DeVry ACC 312 Week 6 Homework Exercises 2014

Week Six - Homework Exercises E21-14, E21-21 and P21-4

E21-14 In preparation for developing its statement of cash flows for the year ended December 31, 2013, Millennium Solutions, Inc., collected the following information ($ in millions):

Payment for the early extingushments of

long-term notes (book value: $50 million) $54

Sales of common shares 176

Retirement of common shares 122

Loss on sale of equipment 2

Proceeds from safe of equipment 8

Issuance of short-term note payable for cash 10

Acquisition of building for cash 7

Purchase of marketable securities (not a cash equivalent) 5

Purchase of marketable securities (considered a cash equivalent) 1

Cash payment for 3-year insurance policy 3

Collection of note receivable with interest (principal amount, $11) 13

Declaration of cash dividends 33

Distribution of cash dividends declared in 2012 30

Required: 1. In Millennium’s statement of cash flows, what were net cash inflows (or outflows) from investing activities for 2013?

2. In Millennium’s statement of cash flows, what were net cash inflows (or outflows) from financing activities for 2013?

E21-21 The income statement and a schedule reconciling cash flows from operating activities to net income are provided below ($ in 000s) for Peach Computers.

PEACH COMPUTERS Reconciliation of Net Income

Income Statement To Net Cash Flows from Operating Activites

For the Year Ended December 31, 2013

Sales $305 Net income $22

Cost of goods sold (185) Adjustments for Noncash Effects

Gross margin 120 Depreciation expense 11

Salaries expense $41 Loss on sale of land 5

Insurance expense 19 Changes in operating assets and liabilities:

Depreciation expense 11 Decrease in accounts receivable 6

Loss on sale of land 5 76 Increase in inventory (13)

Income before tax 44 Decrease in accounts payable (8)

Income tax expense (22) Increase in salaries payable 5

Net income $22 Decrease in prepaid insurance 9

Increase in income tax payable 20

Net cash flows from operating activities $57

Required: 1. Calculate each of the following amounts for Peach Computers:

a. Cash received from customers during the reporting period.

b. Cash paid to suppliers of goods during the reporting period.

c. Cash paid to employees during the reporting period.

d. Cash paid for insurance during the reporting period.

e. Cash paid for income taxes during the reporting period.

2. Prepare the cash flows from operating activities section of the statement of cash flows (direct method).

P21-4 The comparative balance sheets for 2013 and 2012 and the statement of income for 2013 are given below for Dux Company. Additional information from Dux’s accounting records is provided also.

DUX COMPANY

Comparative Balance Sheets

December 31, 2013 and 2012

($ in 000s)

2013 2012

Assets

Cash $33 $20

Accounts receivable 44 47

Dividends receivable 3 2

Inventory 55 50

Long-term investment 15 10

Land 70 40

Buildings and equipment 225 250

Less: Accumulated depreciation (25) (50)

$420 $369

Liabilities

Accounts payable $13 $20

Salaries payable 2 5

Interest payable 4 2

Income tax payable 7 8

Notes payable 30 0

Bonds payable 95 70

Less: Discount on bonds (2) (3)

Shareholders' Equity

Common stock 210 200

Paid-in capital---excess of par 24 20

Retained earnings 45 47

Less: Treasury stock (8) 0

$420 $369

Revenues

Sales revenue $200

Dividend revenue 3 $203

Expenses

Cost of goods sold 120

Salaries expense 25

Depreciation expense 5

Interest expense 8

Loss on sale of building 3

Income tax expense 17 178

Net income $25

Additional information from the accounting records:

a. A building that originally cost $40,000, and which was three-fourths depreciated, was sold for $7,000.

b. The common stock of Byrd Corporation was purchased for $5,000 as a long-term investment.

c. Property was acquired by issuing a 13%, seven-year, $30,000 note payable to the seller.

d. New equipment was purchased for $15,000 cash.

e. On January 1, 2013, bonds were sold at their $25,000 face value.

f. On January 19, Dux issued a 5% stock dividend (1,000 shares). The market price of the $10 par value common stock was $14 per share at that time.

g. Cash dividends of $13,000 were paid to shareholders.

h. On November 12, 500 shares of common stock were repurchased as treasury stock at a cost of $8,000.

Required: Prepare the statement of cash flows of Dux Company for the year ended December 31, 2013. Present cash flows from operating activities by the direct method. (You may omit the schedule to reconcile net income to cash flows from operating activities.)