ACCT5001 S1 2010 Week 12 Self-Study Solutions

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Computations:

(1) Cash receipts from customers:Sales $250,000

Deduct: Increase in accounts receivable (14,000)

Cash receipts from customers $236,000

(2) Cash payments to suppliers:

Cost of goods sold $210,000

Deduct: Decrease in inventory (10,000)

Cost of purchases 200,000

Deduct: Increase in accounts payable (1,000)

Cash payments to suppliers $199,000

(3) Cash payments of operating expenses:

Operating expenses $24,000

Deduct: Depreciation * (5,500)

Cash payments for operating expenses $18,500

(4) Cash payments for income taxes:

Income tax expense $4,000

Add: Decrease in income taxes payable 3,000

Cash payments for income taxes $7,000

*Accumulated Depreciation

Equipment sold 9,500 Balance, Beginning of year 24,000

Depreciation Expense 5,500

Closing Balance 20,000

29,500 29,500

Opening Balance 20,000

ACCT5001 S1 2010 Self-Study Solutions Week 12

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(b)

OReilly Ltd

Note to Statement of cash flows

for the year ended 31 December 2009

Reconciliation of profit to cash provided by operating activities.

Cash flows from operating activities:

Profit $10,000

Adjustments to reconcile profit to net cash

provided by operating activities:

Depreciation expense $5,500

Increase in accounts receivable (14,000)

Decrease in income taxes payable (3,000)

Decrease in inventory 10,000

Increase in accounts payable 1,000 (500)

Net cash provided by operating activities $9,500

(c) (1)(a)]Part[

500,9$

Per 1:284.0

2

**000,34$*000,33$

*$25,000 + $8,000 **$26,000 + $3,000 + $5,000

(2) $9,500 $250,000 = 3.8%

(3) $9,500 times15.0

2

**000,61$*000,66$

*$25,000 + $8,000 + $33,000 **$26,000 + $3,000+ $5,000 + $27,000

(d) The ratios calculated in part (c) suggest that OReilly Ltds cash generated from

operating activities in 1 year is 28.4% of its short term obligations. It generates

enough cash in 1 year from operating activities to meet 28.4% of the obligations that

are due within 1 year and its cash generated from operating activities is 15% of its

total liabilities. It would appear that OReilly Ltd may have to liquidate some of its

productive assets in order to meet its short term obligations.

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PROBLEM SET A 11.5*

(a)

Tasman Oak Ltd

Statement of Cash Flows

for the year ended 31 March 2010

Cash flows from operating activities:

Cash receipts from customers $284,200 (1)

Cash payments:

To suppliers $100,410 (2)For operating expenses 15,110 (3)

For income taxes 7,000

For interest 2,230 (124,750)

Net cash provided by operating activities 159,450

Cash flows from investing activities:

Purchase of investments (14,000)

Sale of machinery 1,500

Purchase of machinery (85,000)

Net cash used by investing activities (97,500)

Cash flows from financing activities:

Issue of shares 35,000

Redemption of debentures (15,000)

Payment of cash dividends (22,350)

Net cash used by financing activities (2,350)

Net increase in cash 59,600

Cash at beginning of period 38,400

Cash at end of period $98,000

ACCT5001 S1 2010 Self-Study Solutions Week 12

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Computations:

(1) Cash receipts from customers:

Sales $342,000

Deduct: Increase in accounts receivable (57,800)

Cash receipts from customers $284,200

(2) Cash payments to suppliers:

Cost of goods sold $115,460

Add: Increase in inventory 9,650

Cost of purchases 125,110

Deduct: Increase in accounts payable (24,700)

Cash payments to suppliers $100,410

(3) Cash payments for operating expenses:

Operating expenses excluding depreciation $12,410

Add: Increase in prepaid expenses $2,400

Decrease in accrued expenses

payable300

2,700

Cash payments for operating expenses $15,110

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(b)

Tasman Oak Ltd

Note to Statement of Cash Flows

(Indirect method)

for the year ended 31 March 2010

Reconciliation of profit to cash provided by operating activities.

Cash flows from operating activities:

Profit $150,900

Adjustments to reconcile profit to net cash

provided by operating activities:

Depreciation expense $46,500

Loss on sale of machinery 7,500

Increase in accounts receivable (57,800)

Increase in inventory (9,650)

Increase in accounts payable 24,700

Decrease in accrued expenses payable (300)

Increase in prepaid expenses (2,400) 8,550

Net cash provided by operating activities $159,450

ACCT5001 S1 2010 Self-Study Solutions Week 12

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PROBLEM SET A 11.9

(a)

WA Manufacturing Pty Ltd

Statement of Cash Flows

for the year ended 30 June 2011

Cash flows from operating activities:

Cash receipts from customers $270,200 (1)

Cash payments:To suppliers $114,290 (2)

For operating expenses 21,400 (3)

For income taxes 7,270

For interest 5,440 148,400

Net cash provided by operating activities $121,800

Cash flows from investing activities:

Sale of investments 2,400

Sale of plant and equipment 15,550

Purchase of plant and equipment (92,000) (4)

Net cash used by investing activities (74,050)

Cash flows from financing activities:

Proceeds from issue of shares 50,000

Proceeds from issue of debentures 30,000

Payment of cash dividends (80,000)

Net cash provided by financing activities nil

Net increase in cash 47,750

Cash at beginning of period 47,250

Cash at end of period $95,000

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Computations:

(1) Cash receipts from customers:

Sales $300,000

Deduct: Increase in accounts receivable (29,800)

Cash receipts from customers $270,200

(2) Cash payments to suppliers:

Cost of goods sold $99,460

Add: Increase in inventory 19,250

Cost of purchases 118,710

Deduct: Increase in accounts payable (4,420)

Cash payments to suppliers $114,290

(3) Cash payments for operating expenses:

Operating expenses $14,670

Add: Decrease in accrued expenses payable 6,730

Cash payments for operating expenses $21,400

(4)

Plant and Equipment

Balance, Beginning of year 205,000 Equipment sold 47,000

Cash (purchase of equipment) 92,000 Closing Balance 250,000

297,000 297,000

Opening Balance 250,000

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(b)

WA Manufacturing Pty Ltd

Note to Statement of Cash Flows

(Indirect Method)

For the year ended 30 June 2011

Reconciliation of profit to cash provided by operating activities.

Cash flows from operating activities:

Profit $132,210

Adjustments to reconcile profit to net cash

provided by operating activities:

Depreciation expense $49,700

Gain on sale of equipment (8,750)

Increase in accounts receivable (29,800)

Increase in inventory (19,250)

Increase in accounts payable 4,420

Decrease in accrued expenses payable (6,730) (10,410)

Net cash provided by operating activities $121,800