Murdock carpet cleaners ended its first month of operations on june

Chapter 3

P3-42 Preparing Adjusting Entries, Financial Statements, and Closing Entries

Murdock Carpet Cleaners ended its first month of operations on June 30, 2014. Monthly financial statements will be prepaid. The unadjusted account balances are as follows.

 

Murdock Carpet Cleaners Unadjusted Trial Balances June 30, 2014

 

 

 

 

 

 

Debit

Credit

Cash

 

 

 

 

$1,180

 

Accounts Receivable

 

 

 

 

450

 

Prepaid Rent

 

 

 

 

3,100

 

Supplies

 

 

 

 

2,520

 

Equipment

 

 

 

 

4,440

 

Accounts Payable

 

 

 

 

 

$760

Common Stock

 

 

 

 

 

2,000

Retained Earings

 

 

 

 

 

5,300

Service Fee Earned

 

 

 

 

 

4,650

Wage Expense

 

 

 

 

1,020

 

 

 

 

 

 

$12,710

$12,710

 

Chapter 4

M4-26. Calculating Net Cash Flow From Operating Activities (Indirect Method)

The following information was obtained from Galena Company’s comparative balance sheets. Assume that Galena company’s 2013 income statement showeddepreciation expense of $8,000. Gain on the sale of investments of $9,000, and a net income of $45,000. Calculate the net cash flow from operating activities using the indirect method.

 

31-Dec-13

31-Dec-12

Cash

$19,000

$9,000

Accounts Receivable

44,000

35,000

Inventory

55,000

49,000

Prepaid Rent

6,000

8,000

Long-Term Investments

21,000

34,000

Plant assets

150,000

106,000

Accumulated depreciation

40,000

32,000

Accounts payable

24,000

20,000

Income tax payable

4,000

6,000

Common stock

121,000

92,000

Retained earnings

106,000

91,000

 

M4-29. Classifying Cash Flow Statement Components and Determining Their Effects

The following table presents selected items from a recent cash flow statement of Nordstroms, Inc

  1. For each item, determine whether the amount would be disclosed in the cash flow statement under operating activities, investing activities, or financing activities. (Nordstrom uses the indirect method of reporting.)
  2. For each item, determine whether it will appear as a positive or negative in determining the net increase in cash and cash equivalents.

1

Increase in accounts receivable

 

2

Capital expenditures

 

3

Proceeds from long-term borrowings

 

4

Increase in deferred income tax net liability

 

5

Principal payments on long-term borrowings

 

6

Increase in merchandise inventories

 

7

Decrease in prepaid expenses and other assets

 

8

Proceeds from issuances under stock compensation plans

 

9

Increase in accounts payable

 

#

Net earnings

 

#

Payments for repurchase of common stock

 

#

Increase in accrued salaries, wages, and retained benefits

 

#

Cash dividends paid

 

#

Depreciation and amortization expenses

 

 

 

E4-39. Analyzing Investing and Financing Cash Flows

During 2013, Paxon Corporation’s long-term investments account (at cost) increased $15,000, which was the net result of purchasing stocks costing $80,000 and selling stocks costing $65,000 at a $6,000 loss. Also, it bonds payable account decreased $10,000, the net result of issuing $130,000 of bonds and retiring bonds with a book value of $140,000 at a $9,000 gain. What items and amounts appear in the (a) cash flows from investing activities and (b) cash flows from financing activities sections of its 2013 statement of cash flows?

 

 

 

 

C4-59. Interpreting the Statement of Cash Flows

The statement of cash flows for Daimler AG follows:

 

Daimler AG Consolidated Statement of Cash Flows

(Millions of Euros)

 

 

Fiscal Year 2011

Profit before income taxes

 

 

8,449

Depreciation and amortization

 

 

3,575

Other non-cash expenses and income

 

 

-122

Gains (-)/ losses on disposals of assets

 

 

-102

Change in operating assets and liabilities

 

 

 

Inventories

 

 

-2,328

Trade Receivables

 

 

-620

Trade payables

 

 

1,762

Receivables from financial services

 

 

-4,526

Vehicles on operating leases

 

 

-2,874

other operating assets and liabilities

 

 

-1,093

Income tax paid

 

 

-2,817

 

 

 

 

Cash provided by/(used for) operating activities

 

 

-696

Additions to property, plant and equipment

 

 

-4,158

Additions to intangible assets

 

 

-1,718

Proceeds from disposals of property, plant and equipment and intangible assets

 

 

252

Investments in share property

 

 

-899

Proceeds from disposals of share property

 

 

203

Acquisitions of marketable debt securities

 

 

-5,478

Proceeds from sales of marketable debt securities

 

 

5,241

Other

 

 

20

 

 

 

 

Cash provided by/(used for) investing activities

 

 

-6,537

Change in short-term financing liabilities

 

 

2,589

Additions to long-term financing liabilities

 

 

26,037

Repayment of long-term financing liabilities

 

 

-20,560

Dividend paid to sharholders of Daimler AG

 

 

-1,971

Dividends paid to non-controlling interest

 

 

-278

Proceeds from issuance of share capital

 

 

71

Acquisitiion of treasury shares

 

 

-28

Acquisition of non-controlling interest in subsidiaries

 

 

-18

 

 

 

 

Cash provoded by/(used for) financing activities

 

 

5,842

Effect of foreign exchange rate changes on cash and cash equivalents

 

 

64

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

 

-1,327

Cash and cash equivalents at the beginning of the period

 

 

10,903

 

 

 

 

Cash and cash equivalents at the end of the period

 

 

9,576

 

 

  1. Daimler begins in cash flow statement with net income of € 8,449 million, then adds € 3,375 million for depreciation and amortization. Why is Daimler adding depreciation and amortization to net income in this computation?
  2. Why does Daimler subtract €102 million of gains on disposals of assets in its indirect method cash flows from operating activities? If these gains are all created by disposals of property, plant and equipment and intangible assets, what was the book value of the assets Daimler disposed of during fiscal year 2011?
  3. Daimler shows a negative €2,328 million for inventories in the statement of cash flows. Does this mean that Daimler paid €2,328 million for inventories in 2011? Explain.
  4. Compute Daimler’s free cash flow for 2011. How did the company finance its investing activities?
  5. Daimler reports a cash outflow from operating activities of €696 million, despite reporting net income of €8,449 million. What principal activities account for this difference? Does this raise concerns about the health of Daimler AG?

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