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1. The following information is available regarding the ending and beginning balances in
Accounts Payable, Inventory, and Accounts Receivable:

Accounts Accounts
Payable Inventory Receivable
Ending 80,000 40,000 80,000
Beginning 100,000 50,000 85,000
Change (20,000) (10,000) (5,000)

Net income for the period was $480,000, which included depreciation expense of
$100,000.

Required: Determine net cash from operations for the period.

2. Cooper Company reports the following for the year:

Net income 400,000


Increase or (decrease) in accounts receivable 60,000
Increase or (decrease) in prepaid insurance (3,000)
Increase or (decrease) in supplies 1,000
Increase or (decrease) in accounts payable 25,000
Depreciation (15,000)

Required: Assuming that no other relevant changes took place, determine cash flows
from operating activities.

3. The McGill Company has made the following balance sheet information available for use
in this problem:
Ending Beginning
Balance Balance
Accounts receivable $12,000 $19,000
Inventory 4,000 11,000
Supplies 1,000 2,500
Prepaid rent 3,500 3,000
Accounts payable 15,000 14,000
Unearned rent revenue 6,000 1,500
Salaries payable 1,000 2,000
During the year, the company recorded the following activities:
- the purchase of investment securities; $12,000
- the payment of cash dividends; $3,000
- the sale of land costing $40,000 for proceeds of $54,000
- the annual depreciation of plant and equipment; $9,000
- the issue of common stock for cash; $5,000
- annual accrual net income; $156,000
Required: Prepare McGill's annual statement of cash flows using the indirect method of
disclosing cash flows from operations.

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Case: Scott Company
The following are balance sheets for Scott Company as of the end of Years 1 and 2:
Balance Sheet
Year 2 Year 1
Cash 189 50
Accounts receivable 950 750
Inventory 500 300
Prepaid expenses 40 30
Plant assets 3,200 3,000
Accumulated depreciation (1,740) (1,800)
Total assets 3,139 2,330

Accounts payable 350 150


Interest payable 18 24
Taxes payable 370 320
Bonds payable 400 240
Paid-in capital 1,200 900
Retained earnings 801 696
Total liabilities & equity 3,139 2,330

The income statement for Year 2 was as follows:


Sales 1,800
Cost of goods sold (1,200)
Gross margin 600
Depreciation (240)
General expenses (60)
Operating income 300
Interest expense (30)
Income before taxes 270
Tax expense (90)
Net income 180
The following information is also available for Year 2:
a. Plant assets were sold for their book value of $700. The assets had originally cost
$1,000.
b. Cash dividends of $75 were paid during the year.
c. All accounts payable relate to inventory purchases.
d. All purchases of plant assets were cash transactions.
Construct cash flow statement

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3- ANS: The cash flows statement is as follows:

Cash From Operating Activities:


Net Income $156,000
Decrease in Accounts Receivable 7,000
Decrease in Inventory 7,000
Decrease in Supplies 1,500
Increase in Prepaid Rent (500)
Increase in Accounts Payable 1,000
Increase in Unearned Rent Revenue 4,500
Decrease in Salaries Payable (1,000)
Gain on Sale of Fixed Asset (14,000)
Depreciation Expense 9,000
Total Cash Flow from Operating Activities $170,500

Cash From Investing Activities:


Sale of Land $ 54,000
Purchase of Securities (12,000)
Total Cash Flow from Investing Activities 42,000

Cash From Financing Activities:


Cash Dividends $ (3,000)
Stock Issue 5,000
Total Cash Flow from Financing Activities 2,000
Net Cash Flow for the Period $214,500

4 -case : . Refer to Scott Company. Determine the amount of cash provided by Scott's
operating activities.
ANS: Cash provided by operations:
Net income 180
Add back depreciation 240
Less increase in other assets:
ARs (200)
Inventory (200)
Prepaid expenses (10)
Add increase in liabilities:
APs 200
Taxes Payable 50
Less decrease in liabilities:
Interest Payable (6)
Net from Operating 254

investing activities.

Sold plant assets 700


Bought plant assets (1,200)
Net from Investing (500)

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financing activities.

Paid dividends (75)


Issued bonds 160
Issued stock 300
Net from Financing 385