Prepare cannon companys statement of cash flows for the


Assignment

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.

Income statement for the year ended December 31, 2014

Revenues


1,328

COGS

587 


Rent expenses

152 


Wages expenses

136 


Insurance expenses

53 


Other SG&A (includes depreciation expenses)

198 


Interest expenses

30 


Gain on sale of asset

-5




1,151

Income before tax

 

177

Tax


62

Net income

 

115

Cash flow provided by operating activities (indirect method), for the year ended December 31, 2014

Net income

 

115 

Depreciation

 

32 

Gain on sale of asset

 

-5



142 

Increases/decreases inA/R

26 


Inventories

-35


Prepaid rent

13 


A/P

28 


Wages payable

-20


Tax payable


Interest payable

-2


Advances from customers

-3


Other accrued SG&A




17

Net cash provided by operating activities

 

159

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.


2014

2015

Assets

 


Cash

54

45

Short term investments

95

0

Accounts receivable

45

85

Inventory

52

75

Prepaid general expenses

11

15

Fixed assets under capital lease, net

0

50

Fixed assets, net

165

228


422

498

Liabilities and stockowners' equity

 

 

Accounts payable

38

48

Wages payable

12

6

Tax payable

3

5

Dividend payable

0

4

Current portion of long term debt

10

12

Obligations under capital leases

0

50

Long term debt

183

180

Common stock

150

163

Retained earnings

26

30


422

498


2014

2015







Revenues, net

 

426

Cost of goods sold

 

310

Gross margin

 

116

General expenses

30


Wages expenses

42


Depreciation expense

24


Interest expense

11


Loss on sale of fixed assets

3


Gain on sale of securities available for sale

-12


Tax expenses

8




106

Net income

 

10

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.

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