Cash flow problem
The Carpet Company’s 2008 and 2007 balance sheets included the following items:
December 31
2008 2007
Debits
Cash .......................................................................................... $10,500 $ 4,000
Accounts receivable...................................................................... 8,000 9,000
Merchandise inventory.................................................................. 21,000 18,000
Equipment..................................................................................... 18,000 15,000
Totals................................................................................ $57,500 $46,000
Credits
Accumulated depreciation, equipment.......................................... $ 4,000 $ 3,000
Accounts payable.......................................................................... 7,000 5,000
Taxes payable............................................................................... 1,000 2,000
Dividends payable......................................................................... 1,500 0
Common stock, $10 par value....................................................... 27,000 25,000
Contributed capital in excess of par, common stock..................... 6,000 5,000
Retained earnings......................................................................... 11,000 6,000
Totals................................................................................ $57,500 $46,000
The Carpet Company’s income statement was as follows:
CARPET COMPANY
Income Statement
For the Year Ended December 31, 2008
Sales .......................................................................................... $61,000
Cost of goods sold........................................................................ $40,000
Wages and other operating expenses........................................... 6,300
Income taxes expense.................................................................. 4,200
Depreciation expense................................................................... 1,500 52,000
Net income.................................................................................... $ 9,000
Additional information includes the following:
a. Equipment costing $3,500 was purchased during the year.
b. Fully depreciated equipment that cost $500 was discarded and its cost and
accumulated depreciation were removed from the accounts.
c. Two hundred shares of stock were sold and issued at $15 per share.
d. The company declared $4,000 of cash dividends and paid $2,500.
, CLASSIFYING ACTIVITIES IN THE STATEMENT OF CASH FLOWS
OPERATING ACTIVITIES
Cash inflows from Cash outflows to
Sale of goods or services Suppliers of goods and
Interest services
Dividends Salaries and wages
Sale of trading securities Government for taxes
Other operating receipts Lenders for interest
Settlement of lawsuits Purchase trading securities
INVESTING ACTIVITIES
Cash inflows from Cash outflows to
Sale of long-term productive assets Purchase of long-term
productive assets
Sale of available-for-sale securities, notes Purchase available-for-sale
and held-to maturity securities securities and held-to
maturity
securities
Collection of principal on loans Make loans to another entity
to other entities
FINANCING ACTIVITIES
Cash inflows from Cash outflows to
Sale of capital stock or owner Shareholders as dividends (or
investment owner’s withdrawal)
Issuance of bonds and notes Repay debts (loans)
Issuing short-term and long-term debt Purchase treasury stock
NONCASH INVESTING AND FINANCING ACTIVITIES
Retirement of debt by issuing equitystock
Conversion of preferred stock to common stock
Leasing of assets in a capital lease transaction
Purchase of a long-term asset by issuing a note or a bond
Exchange of noncash assets for other noncash assets
Purchase of noncash assets by issuing equity or debt
>>> Determine the cash flows from operating, investing and
financing
The Carpet Company’s 2008 and 2007 balance sheets included the following items:
December 31
2008 2007
Debits
Cash .......................................................................................... $10,500 $ 4,000
Accounts receivable...................................................................... 8,000 9,000
Merchandise inventory.................................................................. 21,000 18,000
Equipment..................................................................................... 18,000 15,000
Totals................................................................................ $57,500 $46,000
Credits
Accumulated depreciation, equipment.......................................... $ 4,000 $ 3,000
Accounts payable.......................................................................... 7,000 5,000
Taxes payable............................................................................... 1,000 2,000
Dividends payable......................................................................... 1,500 0
Common stock, $10 par value....................................................... 27,000 25,000
Contributed capital in excess of par, common stock..................... 6,000 5,000
Retained earnings......................................................................... 11,000 6,000
Totals................................................................................ $57,500 $46,000
The Carpet Company’s income statement was as follows:
CARPET COMPANY
Income Statement
For the Year Ended December 31, 2008
Sales .......................................................................................... $61,000
Cost of goods sold........................................................................ $40,000
Wages and other operating expenses........................................... 6,300
Income taxes expense.................................................................. 4,200
Depreciation expense................................................................... 1,500 52,000
Net income.................................................................................... $ 9,000
Additional information includes the following:
a. Equipment costing $3,500 was purchased during the year.
b. Fully depreciated equipment that cost $500 was discarded and its cost and
accumulated depreciation were removed from the accounts.
c. Two hundred shares of stock were sold and issued at $15 per share.
d. The company declared $4,000 of cash dividends and paid $2,500.
, CLASSIFYING ACTIVITIES IN THE STATEMENT OF CASH FLOWS
OPERATING ACTIVITIES
Cash inflows from Cash outflows to
Sale of goods or services Suppliers of goods and
Interest services
Dividends Salaries and wages
Sale of trading securities Government for taxes
Other operating receipts Lenders for interest
Settlement of lawsuits Purchase trading securities
INVESTING ACTIVITIES
Cash inflows from Cash outflows to
Sale of long-term productive assets Purchase of long-term
productive assets
Sale of available-for-sale securities, notes Purchase available-for-sale
and held-to maturity securities securities and held-to
maturity
securities
Collection of principal on loans Make loans to another entity
to other entities
FINANCING ACTIVITIES
Cash inflows from Cash outflows to
Sale of capital stock or owner Shareholders as dividends (or
investment owner’s withdrawal)
Issuance of bonds and notes Repay debts (loans)
Issuing short-term and long-term debt Purchase treasury stock
NONCASH INVESTING AND FINANCING ACTIVITIES
Retirement of debt by issuing equitystock
Conversion of preferred stock to common stock
Leasing of assets in a capital lease transaction
Purchase of a long-term asset by issuing a note or a bond
Exchange of noncash assets for other noncash assets
Purchase of noncash assets by issuing equity or debt
>>> Determine the cash flows from operating, investing and
financing
