BE23-3 Ryker Corporation is preparing its 2008 statement of cash flows, using the indirect method. Presented below is a list of items that may affect the statement. Using the code below, indicate how each item will affect Ryker’s 2008 statement of cash flows.
Code Letter Effect
A Added to net income in the operating section
D Deducted from net income in the operating section
R-I Cash receipt in investing section
P-I Cash payment in investing section
R-F Cash receipt in financing section
P-F Cash payment in financing section
N Noncash investing and/or financing activity
Items
____ (a) Increase in accounts receivable. ____ (j) Increase in accounts payable.
____ (b) Decrease in accounts receivable. ____ (k) Decrease in accounts payable.
____ (c) Issuance of stock. ____ (l) Loan from bank by signing note.
____ (d) Depreciation expense. ____ (m) Purchase of equipment using a note.
____ (e) Sale of land at book value. ____ (n) Increase in inventory.
____ (f) Sale of land at a gain. ____ (o) Issuance of bonds.
____ (g) Payment of dividends. ____ (p) Retirement of bonds payable.
____ (h) Purchase of land and building. ____ (q) Sale of equipment at a loss.
____ (i) Purchase of available-for-sale ____ (r) Purchase of treasury stock.
investment.
E23-13 (SCF—Direct Method) Brecker Inc., a greeting card company, had the following statements
prepared as of December 31, 2008.
BRECKER INC.
COMPARATIVE BALANCE SHEET
AS OF DECEMBER 31, 2008 AND 2007
12/31/08 12/31/07
Cash $ 6,000 $ 7,000
Accounts receivable 62,000 51,000
Short-term investments (Available-for-sale) 35,000 18,000
Inventories 40,000 60,000
Prepaid rent 5,000 4,000
Printing equipment 154,000 130,000
Accumulated depr.—equipment (35,000) (25,000)
Copyrights 46,000 50,000
Total assets $313,000 $295,000
Accounts payable $ 46,000 $ 40,000
Income taxes payable 4,000 6,000
Wages payable 8,000 4,000
Short-term loans payable 8,000 10,000
Long-term loans payable 60,000 69,000
Common stock, $10 par 100,000 100,000
Contributed capital, common stock 30,000 30,000
Retained earnings 57,000 36,000
Total liabilities & stockholders’ equity $313,000 $295,000
BRECKER INC.
INCOME STATEMENT
FOR THE YEAR ENDING DECEMBER 31, 2008
Sales $338,150
Cost of goods sold 175,000
Gross margin 163,150
Operating expenses 120,000
Operating income 43,150
Interest expense $11,400
Gain on sale of equipment 2,000 9,400
Income before tax 33,750
Income tax expense 6,750
Net income $ 27,000
Additional information:
1. Dividends in the amount of $6,000 were declared and paid during 2008.
2. Depreciation expense and amortization expense are included in operating expenses.
3. No unrealized gains or losses have occurred on the investments during the year.
4. Equipment that had a cost of $20,000 and was 70% depreciated was sold during 2008.
Instructions
Prepare a statement of cash flows using the direct method. (Do not prepare a reconciliation schedule.)
E23-14 (SCF—Indirect Method) Data for Brecker Inc. are presented in E23-13.
Instructions
Prepare a statement of cash flows using the indirect method.
CA23-4 (Analysis of Transactions’ Effect on SCF) Each of the following items must be considered in preparing a statement of cash flows for Sage Fashions Inc. for the year ended December 31, 2008.
1. Fixed assets that had cost $20,000 61⁄2 years before and were being depreciated on a 10-year basis, with no estimated scrap value, were sold for $5,250.
2. During the year, goodwill of $15,000 was considered impaired and was completely written off to expense.
3. During the year, 500 shares of common stock with a stated value of $25 a share were issued for $34 a share.
4. The company sustained a net loss for the year of $2,100. Depreciation amounted to $2,000 and patent amortization was $400.
5. Uncollectible accounts receivable in the amount of $2,000 were written off against the Allowance for Doubtful Accounts.
6. Investments (available-for-sale) that cost $12,000 when purchased 4 years earlier were sold for $10,600. The loss was considered ordinary.
7. Bonds payable with a par value of $24,000 on which there was an unamortized bond premium of $2,000 were redeemed at 103. The gain was credited to ordinary income.
Instructions
For each item, state where it is to be shown in the statement and then how you would present the necessary information, including the amount. Consider each item to be independent of the others. Assume that correct entries were made for all transactions as they took place.
The company deposits $300,000 on December 31, 2007, which will earn interest at 10% compounded
quarterly, to help in the retirement of this debt. In addition, the company wants to know
how much should be deposited at the end of each quarter for 10 years to ensure that $1,300,000
is available at the end of 2017. (The quarterly deposits will also earn at a rate of 10%, compounded
quarterly.) (Round to even dollars.)
password: shiv
Code Letter Effect
A Added to net income in the operating section
D Deducted from net income in the operating section
R-I Cash receipt in investing section
P-I Cash payment in investing section
R-F Cash receipt in financing section
P-F Cash payment in financing section
N Noncash investing and/or financing activity
Items
____ (a) Increase in accounts receivable. ____ (j) Increase in accounts payable.
____ (b) Decrease in accounts receivable. ____ (k) Decrease in accounts payable.
____ (c) Issuance of stock. ____ (l) Loan from bank by signing note.
____ (d) Depreciation expense. ____ (m) Purchase of equipment using a note.
____ (e) Sale of land at book value. ____ (n) Increase in inventory.
____ (f) Sale of land at a gain. ____ (o) Issuance of bonds.
____ (g) Payment of dividends. ____ (p) Retirement of bonds payable.
____ (h) Purchase of land and building. ____ (q) Sale of equipment at a loss.
____ (i) Purchase of available-for-sale ____ (r) Purchase of treasury stock.
investment.
E23-13 (SCF—Direct Method) Brecker Inc., a greeting card company, had the following statements
prepared as of December 31, 2008.
BRECKER INC.
COMPARATIVE BALANCE SHEET
AS OF DECEMBER 31, 2008 AND 2007
12/31/08 12/31/07
Cash $ 6,000 $ 7,000
Accounts receivable 62,000 51,000
Short-term investments (Available-for-sale) 35,000 18,000
Inventories 40,000 60,000
Prepaid rent 5,000 4,000
Printing equipment 154,000 130,000
Accumulated depr.—equipment (35,000) (25,000)
Copyrights 46,000 50,000
Total assets $313,000 $295,000
Accounts payable $ 46,000 $ 40,000
Income taxes payable 4,000 6,000
Wages payable 8,000 4,000
Short-term loans payable 8,000 10,000
Long-term loans payable 60,000 69,000
Common stock, $10 par 100,000 100,000
Contributed capital, common stock 30,000 30,000
Retained earnings 57,000 36,000
Total liabilities & stockholders’ equity $313,000 $295,000
BRECKER INC.
INCOME STATEMENT
FOR THE YEAR ENDING DECEMBER 31, 2008
Sales $338,150
Cost of goods sold 175,000
Gross margin 163,150
Operating expenses 120,000
Operating income 43,150
Interest expense $11,400
Gain on sale of equipment 2,000 9,400
Income before tax 33,750
Income tax expense 6,750
Net income $ 27,000
Additional information:
1. Dividends in the amount of $6,000 were declared and paid during 2008.
2. Depreciation expense and amortization expense are included in operating expenses.
3. No unrealized gains or losses have occurred on the investments during the year.
4. Equipment that had a cost of $20,000 and was 70% depreciated was sold during 2008.
Instructions
Prepare a statement of cash flows using the direct method. (Do not prepare a reconciliation schedule.)
E23-14 (SCF—Indirect Method) Data for Brecker Inc. are presented in E23-13.
Instructions
Prepare a statement of cash flows using the indirect method.
CA23-4 (Analysis of Transactions’ Effect on SCF) Each of the following items must be considered in preparing a statement of cash flows for Sage Fashions Inc. for the year ended December 31, 2008.
1. Fixed assets that had cost $20,000 61⁄2 years before and were being depreciated on a 10-year basis, with no estimated scrap value, were sold for $5,250.
2. During the year, goodwill of $15,000 was considered impaired and was completely written off to expense.
3. During the year, 500 shares of common stock with a stated value of $25 a share were issued for $34 a share.
4. The company sustained a net loss for the year of $2,100. Depreciation amounted to $2,000 and patent amortization was $400.
5. Uncollectible accounts receivable in the amount of $2,000 were written off against the Allowance for Doubtful Accounts.
6. Investments (available-for-sale) that cost $12,000 when purchased 4 years earlier were sold for $10,600. The loss was considered ordinary.
7. Bonds payable with a par value of $24,000 on which there was an unamortized bond premium of $2,000 were redeemed at 103. The gain was credited to ordinary income.
Instructions
For each item, state where it is to be shown in the statement and then how you would present the necessary information, including the amount. Consider each item to be independent of the others. Assume that correct entries were made for all transactions as they took place.
The company deposits $300,000 on December 31, 2007, which will earn interest at 10% compounded
quarterly, to help in the retirement of this debt. In addition, the company wants to know
how much should be deposited at the end of each quarter for 10 years to ensure that $1,300,000
is available at the end of 2017. (The quarterly deposits will also earn at a rate of 10%, compounded
quarterly.) (Round to even dollars.)
password: shiv
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