Problem 16-1A Statement of cash flows (indirect method) L.O. A1, P1, P2, P3 Kazaam Company, a merchandiser, recently completed its calendar-year 2011 operations. For the year, (1) all sales are credi

Problem 16-1A Statement of cash flows (indirect method) L.O. A1, P1, P2, P3

Kazaam Company, a merchandiser, recently completed its calendar-year 2011 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s balance sheets and income statement follow.

KAZAAM COMPANY

Comparative Balance Sheets

December 31, 2011 and 2010

2011 2010

Assets

Cash $ 49,200 $ 73,500

Accounts receivable 65,890 56,000

Merchandise inventory 276,000 252,000

Prepaid expenses 1,250 1,700

Equipment 159,000 106,000

Accum. depreciation-Equipment (37,000) (46,000)

Total assets $ 514,340 $ 443,200

Liabilities and Equity

Accounts payable $ 54,140 $ 112,000

Short-term notes payable 10,000 8,000

Long-term notes payable 70,000 49,000

Common stock, $5 par value 162,250 150,750

Paid-in capital in excess of par, common stock 34,500 0

Retained earnings 183,450 123,450

Total liabilities and equity $ 514,340 $ 443,200

KAZAAM COMPANY

Income Statement

For Year Ended December 31, 2011

Sales $ 582,500

Cost of goods sold 281,000

Gross profit 301,500

Operating expenses

Depreciation expense $ 20,000

Other expenses 134,000 154,000

Other gains (losses)

Loss on sale of equipment 6,000

Income before taxes 141,500

Income taxes expense 25,500

Net income $ 116,000

Additional Information on Year 2011 Transactions

a. The loss on the cash sale of equipment was $6,000 (details in b).

b. Sold equipment costing $46,500, with accumulated depreciation of $29,000, for $11,500 cash.

c. Purchased equipment costing $99,500 by paying $25,000 cash and signing a long-term note payable for the balance.

d. Borrowed $2,000 cash by signing a short-term note payable.

e. Paid $53,500 cash to reduce the long-term notes payable.

f. Issued 2,300 shares of common stock for $20 cash per share.

g. Declared and paid cash dividends of $56,000.

Required:

1. Prepare a complete statement of cash flows; report its operating activities using the indirect method. (Amounts to be deducted should be indicated with a minus sign. Omit the “$” sign in your response.)

KAZAAM COMPANY

Statement of Cash Flows

For Year Ended December 31, 2011

Cash flows from operating activities

$

Adjustments to reconcile net income to net

cash provided by operating activities:

(NOTE: 6 ENTRIES CHOOSING FROM THE FOLLOWING CATEGORIES ALONG WITH THE $AMT DEBIT/CREDIT :

CASH PAID DIVIDENDS, LOSS ON DISPOSAL OF EQUIPMENT, DECREASE IN PREPAID EXPENSES, CASH PAID FOR EQUIPMENT, DEPRECIATION EXPENSE, INCREASE IN ACCOUNTS RECEIVEABLE, INCREASE IN INVENTORY AND DECREASE IN ACCOUNTS PAYABLE)

_____________________ $________

_____________________ $________

_____________________ $________

_____________________ $________

_____________________ $________

_____________________ $________

Net cash (SELECT ONE: USED IN/PROVIDED BY) operating activities

Cash flows from investing activities $______________

(NOTE: TWO ENTRIES MADE FROM THE FOLLOWING CATEGORIES ALONG WITH THE AMT $ DEBIT:

CASH PAID FOR EQUIPMENT, DEPRECIATION EXPENSE, CASH PAID ON LONG-TERM NOTE, INCREASE IN INVENTORY, INCREASE IN ACCOUNTS RECEIVABLE, CASH RECEIVED ON SALE OF EQUIPMENT, CASH PAID FOR DIVIDENDS, AND DECREASE IN ACCOUNTS PAYABLE)

____________ $______________

____________ $______________

Net cash (SELECT ONE: USED IN/PROVIDED BY) investing activities

Cash flows from financing activities $______________

(NOTE: 4 ENTRIES MADE ALONG WITH AMT $$ DEBIT FROM THE FOLLOWING CATEGORIES: INCREASE IN INVENTORY, CASH RECEIVED FROM SALE ON EQUIPMENT, CASH PAID FOR EQUIPMENT, CASH RECEIVED FROM ISSUING STOCK, DEPRECIATION EXPENSE, CASH PAID ON LONG-TERM NOTE, CASH PAID FOR DIVIDENDS AND CASH BORROWED ON SHORT-TERM NOTE)

_____________________ $________

_____________________ $________

_____________________ $________

_____________________ $________

Net cash (SELECT ONE: USED IN/PROVIDED BY) financing activities $______________

(NOTE: 1 ENTRY ALONG WITH AMT $$$ CHOOSE FROM THE FOLLOWING CATEGORIES ALONG WITH AMT $$ CREDIT: DECREASE IN PREPAID EXPENSES, NET DECREASE IN CASH, CASH PAID FOR DIVIDENDS, DEPRECIATION EXPENSE, CASH BORROWED ON SHORT-TERM NOTE, NET INCREASE IN CASH, INCREASE IN INVENTORY, CASH PAID ON LONG-TERM NOTE)

________________ $_________________

Cash balance at beginning of 2011 $________

_________

Cash balance at end of 2011 $________

Problem 16-7A Computing cash flows from operations (indirect) L.O. P2

Rapture Company’s 2011 income statement and selected balance sheet data at December 31, 2010 and 2011.

RAPTURE COMPANY

Income Statement

For Year Ended December 31, 2011

Sales revenue $ 62,400,000

Expenses

Cost of goods sold 21,000,000

Depreciation expense 5,500,000

Salaries expense 11,000,000

Rent expense 2,500,000

Insurance expense 1,400,000

Interest expense 1,900,000

Utilities expense 1,100,000

Net income $ 18,000,000

RAPTURE COMPANY

Selected Balance Sheet Accounts

At December 31 2011 2010

Accounts receivable $370,000 $ 384,000

Inventory 104,000 83,000

Accounts payable 110,000 118,000

Salaries payable 40,000 27,000

Utilities payable 13,000 10,000

Prepaid insurance 9,000 10,000

Prepaid rent 14,000 18,000

Required:

Prepare the cash flows from operating activities section only of the company’s 2011 statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign. Enter your answer in thousands of dollars. Omit the “$” sign in your response.)

RAPTURE COMPANY

Cash Flows from Operating Activities—Indirect Method

For Year Ended December 31, 2011

Cash flows from operating activities

SELECT: NET INCOME OR NET LOSS $__________

Adjustments to reconcile net income to net cash provided by operating activities

NOTE THAT 8 ENTRIES ALONG WITH AMOUNT $$ ARE CHOSEN FROM THE FOLLOWING CATEGORIES:

DEPRECIATION EXPENSE

INCREASE IN UTILITIES PAYABLE

DECREASE IN PREPAID RENT

DECREASE IN ACCOUNTS PAYABLE

INCREASE IN SALARIES PAYABLE

DECREASE PREPAID INSURANCE

DECREASE IN ACCONTS RECEIVABLE

INCREASE IN PREPAID RENT

INCREASE IN MERCHANDISE INVENTORY

INCREASE IN PREPAID INSURANCE

_____________________ $________

_____________________ $________

_____________________ $________

_____________________ $________

_____________________ $________

_____________________ $________

_____________________ $________

_____________________ $________ ______________

Net cash (SELECT ONE: USED IN/PROVIDED BY) operating activities $_______________

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