Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 1 - Introduction to Financial Statements - Problems - Set B: P1-4B

Answer

a) The SCF will include: Cash paid to suppliers Cash dividends paid Cash at beginning of period Cash paid to purchase equipment Cash received from customers Cash received from issuing bonds payable b) The net cash obtained from operating activities is not sufficient to fund the company's investments and dividend payments.

Work Step by Step

a) Preacher Corporation Statement of Cash Flows December 31, 2014 Cash flows from operating activities $\ \ \ \ \ $ Cash receipts from operating activities $\ \ \ \ \ \ \ \ \ \ $ $\$162,000$ $\ \ \ \ \ $ Cash payments for operating activities $\ \ \ \ \ \ \ \,\ \ \ $ $\underline{(154,000)}$ $\ \ \ \ \ $ $\ \ \ \ \ $ Net cash provided by operating activities $\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ $ $\$\ \ \ \ 8,000$ Cash flows from investing activities $\ \ \ \ \ $ Cash paid to purchase equipment $\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ $ $\ \ \ \underline{(20,000)}$ $\ \ \ \ \ $ $\ \ \ \ \ $ Net cash used by investing activities $\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ $ $\ \ \ (20,000)$ Cash flows from financing activities $\ \ \ \ \ $ Issuance of common stock $\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ $ $\ \ \ \ \ \ \ \ \ \ \ \ \ 0$ $\ \ \ \ \ $ Issuance of bonds payable $\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ $ $\ \ \ 40,000$ $\ \ \ \ \ $ Dividends paid $\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ $ $\underline{\ \ \ \ \ (2,000)}$ $\ \ \ \ \ $ $\ \ \ \ \ $ Net cash provided by financing activities $\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ $ $\underline{38,000}$ Net increase in cash $\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ $ $26,000$ Cash at beginning of period $\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ $ $\underline{11,000}$ Cash at end of period $\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ $ $\underline{\underline{37,000}}$ b) Cash on hand increased, but only because the company incurred debt in the form of bonds.
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