Chapter 3
P3-42 Preparing Adjusting Entries, Financial Statements, and Closing Entries
Murdock Carpet Cleaners ended its first month of operations on June 30, 2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay. Monthly financial statements will be prepaid. The unadjusted account balances are as follows.
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Murdock Carpet Cleaners Unadjusted Trial Balances June 30, 2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay |
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Debit |
Credit |
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Cash |
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$1,180 |
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Accounts Receivable |
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450 |
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Prepaid Rent |
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3,100 |
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Supplies |
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2,520 |
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Equipment |
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4,440 |
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Accounts Payable |
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$760 |
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Common Stock |
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2,000 |
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Retained Earings |
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5,300 |
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Service Fee Earned |
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4,650 |
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Wage Expense |
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1,020 |
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$12,710 |
$12,710 |
Chapter 4
M4-26. Calculating Net Cash Flow From Operating Activities (Indirect Method)
The following information was obtained from Galena Company’s comparative balance sheets. Assume that Galena company’s 2013 income statement showeddepreciation expense of $8,000. Gain on the sale of investments of $9,000, and a net income of $45,000. Calculate the net cash flow from operating activities using the indirect method.
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31-Dec-13 |
31-Dec-12 |
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Cash |
$19,000 |
$9,000 |
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Accounts Receivable |
44,000 |
35,000 |
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Inventory |
55,000 |
49,000 |
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Prepaid Rent |
6,000 |
8,000 |
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Long-Term Investments |
21,000 |
34,000 |
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Plant assets |
150,000 |
106,000 |
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Accumulated depreciation |
40,000 |
32,000 |
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Accounts payable |
24,000 |
20,000 |
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Income tax payable |
4,000 |
6,000 |
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Common stock |
121,000 |
92,000 |
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Retained earnings |
106,000 |
91,000 |
M4-29. Classifying Cash Flow Statement Components and Determining Their Effects
The following table presents selected items from a recent cash flow statement of Nordstroms, Inc
- For each item, determine whether the amount would be disclosed in the cash flow statement under operating activities, investing activities, or financing activities. (Nordstrom uses the indirect method of reporting.)
- For each item, determine whether it will appear as a positive or negative in determining the net increase in cash and cash equivalents.
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1 |
Increase in accounts receivable |
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2 |
Capital expenditures |
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3 |
Proceeds from long-term borrowings |
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4 |
Increase in deferred income tax net liability |
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5 |
Principal payments on long-term borrowings |
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6 |
Increase in merchandise inventories |
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7 |
Decrease in prepaid expenses and other assets |
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8 |
Proceeds from issuances under stock compensation plans |
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9 |
Increase in accounts payable |
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# |
Net earnings |
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# |
Payments for repurchase of common stock |
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# |
Increase in accrued salaries, wages, and retained benefits |
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# |
Cash dividends paid |
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# |
Depreciation and amortization expenses |
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E4-39. Analyzing Investing and Financing Cash Flows
During 2013, Paxon Corporation’s long-term investments account (at cost) increased $15,000, which was the net result of purchasing stocks costing $80,000 and selling stocks costing $65,000 at a $6,000 loss. Also, it bonds payable account decreased $10,000, the net result of issuing $130,000 of bonds and retiring bonds with a book value of $140,000 at a $9,000 gain. What items and amounts appear in the (a) cash flows from investing activities and (b) cash flows from financing activities sections of its 2013 statement of cash flows?
C4-59. Interpreting the Statement of Cash Flows
The statement of cash flows for Daimler AG follows:
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Daimler AG Consolidated Statement of Cash Flows |
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(Millions of Euros) |
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Fiscal Year 2011 |
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Profit before income taxes |
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8,449 |
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Depreciation and amortization |
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3,575 |
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Other non-cash expenses and income |
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-122 |
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Gains (-)/ losses on disposals of assets |
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-102 |
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Change in operating assets and liabilities |
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Inventories |
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-2,328 |
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Trade Receivables |
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-620 |
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Trade payables |
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1,762 |
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Receivables from financial services |
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-4,526 |
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Vehicles on operating leases |
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-2,874 |
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other operating assets and liabilities |
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-1,093 |
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Income tax paid |
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-2,817 |
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Cash provided by/(used for) operating activities |
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-696 |
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Additions to property, plant and equipment |
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-4,158 |
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Additions to intangible assets |
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-1,718 |
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Proceeds from disposals of property, plant and equipment and intangible assets |
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252 |
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Investments in share property |
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-899 |
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Proceeds from disposals of share property |
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203 |
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Acquisitions of marketable debt securities |
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-5,478 |
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Proceeds from sales of marketable debt securities |
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5,241 |
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Other |
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20 |
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Cash provided by/(used for) investing activities |
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-6,537 |
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Change in short-term financing liabilities |
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2,589 |
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Additions to long-term financing liabilities |
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26,037 |
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Repayment of long-term financing liabilities |
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-20,560 |
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Dividend paid to sharholders of Daimler AG |
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-1,971 |
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Dividends paid to non-controlling interest |
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-278 |
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Proceeds from issuance of share capital |
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71 |
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Acquisitiion of treasury shares |
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-28 |
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Acquisition of non-controlling interest in subsidiaries |
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-18 |
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Cash provoded by/(used for) financing activities |
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5,842 |
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Effect of foreign exchange rate changes on cash and cash equivalents |
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64 |
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Net increase/(decrease) in cash and cash equivalents |
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-1,327 |
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Cash and cash equivalents at the beginning of the period |
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10,903 |
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Cash and cash equivalents at the end of the period |
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9,576 |
- Daimler begins in cash flow statement with net income of € 8,449 million, then adds € 3,375 million for depreciation and amortization. Why is Daimler adding depreciation and amortization to net income in this computation?
- Why does Daimler subtract €102 million of gains on disposals of assets in its indirect method cash flows from operating activities? If these gains are all created by disposals of property, plant and equipment and intangible assets, what was the book value of the assets Daimler disposed of during fiscal year 2011?
- Daimler shows a negative €2,328 million for inventories in the statement of cash flows. Does this mean that Daimler paid €2,328 million for inventories in 2011? Explain.
- Compute Daimler’s free cash flow for 2011. How did the company finance its investing activities?
- Daimler reports a cash outflow from operating activities of €696 million, despite reporting net income of €8,449 million. What principal activities account for this difference? Does this raise concerns about the health of Daimler AG?
