Solution Manual: Chapter 6 Statement of Cash Flow

Chapter 6

Statement of Cash Flows

PROBLEM 1: TRUE OR FALSE
1. TRUE 6. TRUE
2. FALSE 7. FALSE
3. FALSE 8. TRUE
4. TRUE 9. TRUE
5. TRUE 10. FALSE

PROBLEM 2: FOR CLASSROOM DISCUSSION
1. D

2. D

3. A

4. B

5. D

6. B

7. C

8. B

9. D

10. A

11. A

12. B

13. D

14. C

15. D

16. Solution:

Bell Industries

1

, Statement of Cash Flows
For the Year Ended December 31, 2002

Cash flows from operating activities:
Net income ............................ ₱ 50,000(1)
Adjustments:
Depreciation expense ................ ₱ 25,000
Increase in accounts receivable ..... (8,000)
Decrease in merchandise 13,000
inventory ...
Decrease in accounts payable ........ (10,000) 20,000
Net cash provided by operating
activities ........................... ₱70,000

Cash flows from financing activities:
Payment of cash dividends ........... ₱(40,000)
Net cash used in financing activities (40,000)
Net increase in cash .................... ₱ 30,000
Cash at beginning of year ............... 10,000
Cash at end of year ..................... ₱ 40,000

(1)


Retained earnings
20,000 beg.
Dividends
Net income (squeeze)
declared 40,000 50,000


end. 30,000



17. Solution:


Sage Corporation
Statement of Cash Flows
For the Year Ended December 31, 2002

Cash flows from operating activities:
Net income .............................. ₱ 45,000
Adjustments:
- Gain on sale of investment in bonds ₱ (2,250)
- Gain on sale of equipment ........... (750)
+ Depreciation expense ................ 75,000
- Increase in accounts receivable ..... (3,750)
- Increase in merchandise (24,000)
inventory ...
+ Decrease in prepaid insurance ....... 375
- Decrease in accounts payable ........ (82,875)

2