P18-8a-8b

PROBLEM 18-88 (a)

Indirect method f

KIT-N-KABOODLE COMPANY LTD. Cash Flow Statement For the Year Ended December 31,2003

Cash flows from operating activities Net income Adjustments to reconcile net inconie to net cash provided by operating activities: Amortization expense lncrease in accounts receivable ..................... Decrease in income taxes payable Decrease i n merchandise inventory Increase in accounts payable Net cash provided by operating activities

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...................................... ................. ............... ..........................

Cash flows from investing activities Sale of equipment

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Cash flows from financing activities 'Redemption of bonds .............................................. $(6,000) Issue of common shares 4,000 Payment of dividends (3,000) Net cash used by financing activities

......................................... .............................................. ....... Net increase in cash and cash equivalents ................... Cash and cash equivalents, January 1 .......................... Cash and cash equivalents, December 31.....................

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PROBLEM 48-88 (Continued) (b) Direct method KIT-N-KABOODLE COMPANY LTD. Cash Flow Statement For the Year Ended December 31,2003 Cash flows from operating activities (1) $206,000 Cash receipts from customers Cash payments TO suppliers $166,000 (2) 18,500 (3) For operating expenses For interest 2,000 For income tax 7,000 (4) 193,500 Net cash provided by operating activities 12,500

............................... ..................................................... .................................. ....................................................... .................................................

Cash flows from investing activities Sale of equipment

....................................................

Cash flows from financing activities Redemption of bonds Issue of common shares Payment of dividends Net cash used by financing activities

.............................................. ......................................... .............................................. ....... Net increase in cash and cash equivalents ................... Cash and cash equivalents, January 1 .......................... Cash and cash equivalents, December 31.....................

$(6,000) 4,000 (3,000)

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PROBLEM 18-8B (Continued) -#

(b) (Continued) Calculations:

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(1) Cash receipts from customers

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Sales Less: Increase in accounts receivable Cash receipts from customers

$220,000 14,000 $206.000

(2) Cash payments to suppliers

................................................................ .................................................... ...................................................... ........................................ ....................................................

Cost of goods sold Less: Decrease in inventory Cost of goods purchased Less: Increase in accounts payable Cash payments to suppliers

$180,000 10.000 170,000 4,000 $166.000

(3) Cash payments for operating expenses

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Operating expenses Less: Amortization expense [$20,000 - ($24,000 $9,500) = $5,5001 Cash payments for operating expenses

$24,000 5,500 $18?500

(4) Cash payments for income tax

................................................................... .................................... .................................................

Income tax expense Add: Decrease in income tax payable Cash payments for income tax

$4,000 3,000

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PROBLEM 18-8A (a) Indirect method ST. ALBAN'S COMPANY LTD. Cash Flow Statement For the Year Ended December 31,2003

Cash flows from operating activities Net income ...................................................................... Adjustments to reconcile net income to net cash provided by operating activities: Amortization expense ..................................... Increase in accounts receivable .................... lncrease in inventory ...................................... Decrease in accounts payable ....................... Decrease in income tax payable .................... Net cash provided by operating activities

.

$11,000 (6,000) (3,000) (7,000) (5,000)

Cash flows from investing activities Sale of equipment ................................................... Purchase of equipment .......................................... Net cash provided by investing activities

$10,000 (7,000)

Cash flows from financing activities Issue of bonds ....................................................... Payment of cash dividends .................................... Net cash provided by financing activities

$10,000 (9.000)

Net increase in cash and cash equivalents .................. Cash and cash equivalents, January 1......................... Cash and cash equivalents, December 31 ...................

PROBLEM 18-8A (Continued) (b) Direct method ST. ALBAN'S COMPANY LTD. Cash Flow Statement For the Year Ended December 31,2003

Cash flows from operating activities Cash receipts from customers ......................... Cash payments To suppliers ................................................ $190,000 (2) 23,000 (3) For operating expenses ............................. 2,000 For interest.................................................. For income tax ...................................... 12.000 (4) Net cash provided by operating activities

.

Cash flows from investing activities Sale of equipment .............................................. $10,000 Purchase of equipment ..................................... (7,000) Net cash provided by investing activities Cash flows from financing activities Issue of bonds ................................................... $10,000 Payment of cash dividends (9,000) Net cash provided by financing activities

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Net increase in cash and cash equivalents ............. Cash and cash equivalents, January I.................... Cash and cash equivalents, December 31 ..............

3,000

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PROBLEM 18-8A (Continued)

Cash current debt coverage

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$7,000 = 0.2 times $41,000 + $53,0001

2.

Cash return on sales

3.

Cash flow per share

Cash total debt coverage

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$7,000 = 0.1 times $61,ooo + $63,000 1