EXERCISE 183 BLUES TRAVELER CO. Partial Statement of Cash Flows For the Year Ended December 31, 2005 Cash flows from operating activities Net income......................................................... $163,000 Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense................................ Increase in accounts receivable............... Decrease in inventory............................... Decrease in prepaid expenses................. Increase in accrued expenses payable.... Decrease in accounts payable.................. 31,000 Net cash provided by operating activities.................................................. $194,000
$30,000) (25,000) 15,000) 5,000) 10,000) (4,000 )
EXERCISE 185 (a)
WILL SMITH COMPANY Statement of Cash Flows For the Year Ended December 31, 2005 Cash flows from operating activities Net income................................................. $125,000 ) Adjustments to reconcile net income to net cash provided by operating
activities Depreciation expense........................ Increase in accounts receivable....... Decrease in inventories..................... Decrease in accounts payable.......... 11,000 ) Net cash provided by operating activities.......................................... 136,000 ) Cash flows from investing activities Sale of land................................................. Purchase of equipment............................. Net cash used by investing activities.......................................... (40,000 ) Cash flows from financing activities Payment of cash dividends....................... Redemption of bonds................................ Issuance of common stock....................... Net cash used by financing activities.......................................... (60,000 ..................................................... ) Net increase in cash.......................................... 36,000 ) Cash at beginning of period............................. 22,000 ) Cash at end of period........................................ 58,000 ) (b)
$24,000) (9,000) 9,000) (13,000 )
20,000) (60,000 ) (40,000) (50,000) 30,000)
Free cash flow: Cash from operations – capital expenditures – cash dividends $136,000 – $60,000 – $40,000 = $36,000
$
PROBLEM 185B (a)
JAMES LYMAN COMPANY Statement of Cash Flows For the Year Ended December 31, 2005 Cash flows from operating activities Net income............................................................. $18,000 Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense............................ Increase in accounts receivable........... Increase in inventory............................. Decrease in accounts payable.............. Decrease in income taxes payable....... (17,000 ............................................................) Net cash provided by operating activities.............................................. 1,000 Cash flows from investing activities Sale of equipment.......................................... Purchase of equipment................................. Net cash provided by investing activities.............................................. 4,000 Cash flows from financing activities Issuance of bonds......................................... Payment of cash dividends.......................... Net cash provided by financing activities.............................................. 3,000 ............................................................
Net increase in cash............................................. 8,000
$10,000 (9,000) (3,000) (10,000) (5,000)
11,000 (7,000 )
10,000 (7,000 )
Cash at beginning of period................................. 16,000 Cash at end of period............................................ $24,000 (b)
$1,000 – $7,000 – $7,000 = ($13,000)