Part A -
Cannon Company has the following information for the year ending December 31, 2015.
- Long-term debt of $18,000 was issued for cash.
- Cash paid for labor during 2015 amounted to $489,500.
- During the year, Cannon experienced a pension outflow of $14,000.
- Dividends of $34,000 were received.
- Cannon's cash balance at the beginning of 2015 was $975,000; at the end of 2015 the cash balance was $839,500.
- The company made an investment of $310,000 in an affiliate company.
- A lease payment of $110,000 was made on November 1, 2015. There is no asset recorded in connection with the lease.
- During the year, Cannon collected $780,000 cash from customers.
- Cash paid for income taxes amounted to $56,000 for all of 2015.
- During 2015, Cannon discontinued its consumer electronics division. The business was sold resulting in a $12,000 net cash inflow.
1. Prepare Cannon Company's statement of cash flows for the year ending December 31, 2015 using the indirect method.
2. Explain how the indirect statement of cash flows that you prepared would differ under IFRS rules. Assume this is a nonfinancial entity.
Part B -
The following Income Statement and Operating Cash Flow information pertain to Receivership Inc.'s operations for the year ended December 31, 2014. Prepare the net cash flow from operating activities section of the cash flow statement using the direct method.
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Income statement for the year ended December 31, 2014
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Revenues
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1,328
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COGS
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587
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Rent expenses
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152
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|
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Wages expenses
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136
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|
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Insurance expenses
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53
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|
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Other SG&A (includes depreciation expenses)
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198
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Interest expenses
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30
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Gain on sale of asset
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(5)
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|
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1,151
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Income before tax
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177
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Tax
|
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62
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Net income
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115
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Cash flow provided by operating activities (indirect method), for the year ended December 31, 2014
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Net income
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115
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Depreciation
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32
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Gain on sale of asset
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(5)
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142
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Increases/decreases in A/R
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26
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|
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Inventories
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(35)
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Prepaid rent
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13
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A/P
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28
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Wages payable
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(20)
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Tax payable
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5
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Interest payable
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(2)
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Advances from customers
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(3)
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Other accrued SG&A
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5
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|
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17
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Net cash provided by operating activities
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159
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Part C - The following information and financial statements excerpts pertain to Liquidity Inc.
a. All short term investments (securities available for sale) were purchased on 12/31/14 and sold during 2015.
b. The company entered a lease agreement on 12/31/15.
c. Fixed assets with a net book value of $15 were sold during the year.
d. The company repaid the current portion of long-term debt during the year.
e. Dividend was declared and partially paid.
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2014
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2015
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Assets
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Cash
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54
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45
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Short term investments
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95
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0
|
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Accounts receivable
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45
|
85
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Inventory
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52
|
75
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Prepaid general expenses
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11
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15
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Fixed assets under capital lease, net
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0
|
50
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Fixed assets, net
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165
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228
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422
|
498
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Liabilities and stockowners' equity
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|
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Accounts payable
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38
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48
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Wages payable
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12
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6
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Tax payable
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3
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5
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Dividend payable
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0
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4
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Current portion of long term debt
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10
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12
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Obligations under capital leases
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0
|
50
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Long term debt
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183
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180
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Common stock
|
150
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163
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Retained earnings
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26
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30
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422
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498
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2014
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2015
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Revenues, net
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426
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Cost of goods sold
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310
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Gross margin
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116
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General expenses
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30
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Wages expenses
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42
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Depreciation expense
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24
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Interest expense
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11
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Loss on sale of fixed assets
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3
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Gain on sale of securities available for sale
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-12
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Tax expenses
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8
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106
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Net income
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10
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1. Prepare the statement of cash flows for the year 2015 using the direct method.
2. Reconcile net income and net cash flows from operating activities for the year 2015.