STATEMENT OF CASH FLOWS

EXERCISES
Ex. 1
A comparative balance sheet for Rocker Company appears below:
ROCKER COMPANY
Comparative Balance Sheet
Dec. 31, 2017 Dec. 31, 2016
Assets
Cash $ 34,000 $11,000
Accounts receivable 18,000 13,000
Inventory 25,000 17,000
Prepaid expenses 6,000 9,000
Long-term investments -0- 17,000
Equipment 60,000 33,000
Accumulated depreciation—equipment (20,000) (15,000)
Total assets $123,000 $85,000

Liabilities and Stockholders' Equity

Accounts payable $ 17,000 $ 7,000
Long term loans (Bonds) 36,000 45,000
Issued and paid up capital 40,000 23,000
Retained earnings 30,000 10,000
Total liabilities and stockholders' equity $123,000 $85,000

Additional information:
1. Net income for the year ending December 31, 2017 was $35,000.
2. Cash dividends of $15,000 were declared and paid during the year.
3. Long-term investments that had a cost of $17,000 were sold for $14,000.
4. Sales for 2017 were $120,000.

Instructions
Prepare a statement of cash flows for the year ended December 31, 2017, using the indirect method.
Solution 1
ROCKER COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017

Cash flows from operating activities

Net income................................................................................... $35,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation expense ......................................................... $ 5,000
Loss on sale of long-term investments ................................ 3,000
Increase in accounts receivable ......................................... (5,000)
Decrease in prepaid expenses ........................................... 3,000
Increase in inventories ........................................................ (8,000)
Increase in accounts payable ............................................. 10,000 8,000
Net cash provided by operating activities ........................... 43,000
Cash flows from investing activities
Sale of long-term investments ..................................................... 14,000
Purchase of equipment ............................................................... (27,000)
Net cash used by investing activities .................................. (13,000)
Cash flows from financing activities
Issuance of common stock .......................................................... 17,000
Retirement of bonds payable ...................................................... (9,000)
Payment of cash dividends ......................................................... (15,000)
Net cash used by financing activities .................................. (7,000)
Net increase in cash ............................................................................ 23,000
Cash at beginning of period ................................................................. 11,000
Cash at end of period .......................................................................... $34,000
Ex. 2
Planner Corporation's comparative balance sheets are presented below.
PLANNER CORPORATION
Comparative Balance Sheets
December 31
2017 2016
Cash $ 21,570 $ 10,700
Accounts receivable 18,200 23,400
Land 18,000 26,000
Building 70,000 70,000
Accumulated depreciation (15,000) (10,000)
Total $112,770 $120,100
Accounts payable $ 12,370 $31,100
Issued and paid up capital 75,000 69,000
Retained earnings 25,400 20,000
Total $112,770 $120,100

Additional information:
1. Net income was $27,900. Dividends declared and paid were $22,500.
2. All other changes in noncurrent account balances had a direct effect on cash flows, except the
change in accumulated depreciation. The land was sold for $5,900.

Instruction
(a) Prepare a statement of cash flows for 2017 using the indirect method.
Solution 2
(a)
PLANNER CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2017

Cash flows from operating activities

Net income........................................................................ $27,900
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation expense .......................................... $ 5,000
Loss on sale of land ............................................. 2,100
Decrease in accounts receivable .......................... 5,200
Decrease in accounts payable ............................. (18,730) (6,430)
Net cash provided by operating activities ........................ 21,470
Cash flows from investing activities
Sale of land .................................................................... 5,900
Cash flows from financing activities
Issuance of common stock ............................................. $ 6,000
Payment of dividends ..................................................... (22,500)
Net cash used by financing activities .............................. (16,500)
Net increase in cash ................................................................... 10,870
Cash at beginning of period ........................................................ 10,700
Cash at end of period ................................................................. $21,570
Ex. 3
Miroz Corporation's comparative balance sheets are presented below.
MIROZ CORPORATION
Comparative Balance Sheets
December 31
2017 2016
Cash $ 18,700 $ 22,700
Accounts receivable 24,700 22,300
Investments 25,000 16,000
Equipment 59,000 70,000
Accumulated depreciation (14,500) (10,000)
Total $112,900 $121,000
Accounts payable $ 13,600 $11,100
Long term loans (Bonds) 6,000 30,000
Issued and paid up capital 50,000 45,000
Retained earnings 43,300 34,900
Total $112,900 $121,000

Additional information:
1. Net income was $17,700. Dividends declared and paid were $9,300.
2. Equipment which cost $11,000 and had accumulated depreciation of $2,000 was sold for
$4,000.
3. All other changes in noncurrent account balances had a direct effect on cash flows, except the
change in accumulated depreciation.

Instruction
(a) Prepare a statement of cash flows for 2017 using the indirect method.
Solution 3
(a) MIROZ CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2017

Cash flows from operating activities

Net income ................................................................... $17,700
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation expense ......................................... $ 6,500*
Loss on sale of equipment .................................. 5,000**
Increase in accounts payable ............................. 2,500
Increase in accounts receivable.......................... (2,400) 11,600
Net cash provided by operating activities ...................... 29,300
Cash flows from investing activities
Sale of equipment ......................................................... 4,000
Purchase of investments ............................................... (9,000)
Net cash used by investing activities ............................. (5,000)
Cash flows from financing activities
Issuance of common stock ............................................ $ 5,000
Retirement of bonds .................................................... (24,000)
Payment of dividends .................................................. (9,300)
Net cash used by financing activities ........................... (28,300)
Net decrease in cash ............................................................... (4,000)
Cash at beginning of period ..................................................... 22,700
Cash at end of period .............................................................. $ 18,700
*[$14,500 – ($10,000 – $2,000)] **[$4,000 – ($11,000 – $2,000)]