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Acct 592 Spring 2005

The Statement of
Cash Flows

Purposeofastatementofcashflows:
To provide information about the cash inflows and outflows of an entity
during a period.
To summarize the operating, investing, and financing activities of the
business.

The cash flow statement helps users to assess a companys


liquidity, financial flexibility, operating capabilities, and risk.
The statement of cash flows is useful because it provides
answers to the following important questions:
Where did cash come from?
What was cash used for?
What was the change in the cash balance?

Specifically, the information in a statement of cash flows, if


used with information in the other financial statements,
helps external users to assess:
1. A companys ability to generate positive future net
cash flows,
2. A companys ability to meet its obligations and pay
dividends,
3. A companys need for external financing,
4. The reasons for differences between a companys net
income and associated cash receipts and payments,
and
5. Both the cash and noncash aspects of a companys
financing and investing transactions.

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WhatcanwelearnfromSCFthatisnotalreadyavailablein
theotherfinancialstatements?
It provides answers to important questions like:
Where did cash come from?
What was cash used for?
What was the change in the cash balance?
Couldnt we just look the balance sheet?
The change in cash could be determined, but the statement
of cash flows provides detailed information about a
companys cash receipts and cash payments during the
period.
Many things you want to know about a company is summarized in this one
statement
Operating, financing and investing cash flows
Net income does not always tell the whole story about
operating performance.
A statement of cash flows is an excellent forecasting tool.

Reviewofterms
Cash and cash equivalents
It is a short-term, highly liquid investment.
It must be readily convertible to cash and it must be so near to maturity that
there is insignificant risks of changes in value due to changes in interest rate.

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Noncashrevenuesandexpenses
Net income includes items that were neither cash inflow nor cash outflows:

Depreciation expense
Accretion expense on asset retirement obligation
Amortization of intangibles
Impairment loss on goodwill and intangibles
Earnings of affiliated companies accounted for using the equity method
Impairment losses on other noncurrent assets
Compensation expense related to stock options

Net income also includes gains and losses from investing and financing activities
Gain cash received (unless carrying value was zero)
Even when there is a loss, cash might have been received

Net income must be adjusted for these items to get the cash provided by operations part of the reconciling
schedule or indirect method

For other items, there are revenues/expenses as well as cash flows but the amounts are different:

Bond interest expense bond interest paid (if bonds were sold at premium or discount)
Sales were not all collected in cash (bad debts, other changes in Accounts Receivable)
Purchases were not necessarily paid for during period (change in Accounts Payable)
Income tax expense income taxes paid due to deferred tax assets/liabilities as well as income taxes
refunds receivable or unpaid taxes owed

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Company, Inc.
Statement of Cash Flows
For the year ended December 31, 199X

Cash Flows from Operating Activities


Cash received from customers
Cash received as interest income *
Cash received as dividend income
Cash paid for cost of goods sold *
Cash paid for selling expenses
Cash paid for general & administrative expenses
Cash paid for interest (including interest on capital leases)
Cash paid for income taxes
Cash that would have been paid for taxes except for excess tax deduction related to stock based
compensation
Net cash provided by (or used by) operating activities

Cash Flows from Investing Activities


Cash received from sale of property, plant, & equipment
Cash received from sale of investments
Cash received from repayment of note receivables
Cash paid to acquire property, plant, and equipment
Cash paid to acquire investments
Cash paid out as a loan
Net cash provided by (or used by) investing activities

Cash Flows from Financing Activities


Cash received as proceeds from issuance of debt
Cash received as proceeds from issuance of stock
Cash received as proceeds from reissuance of treasury stock
Cash paid to repay debt (principal payment)
Cash paid on principal related to capital leases
Cash paid to reacquire stock (purchase treasury stock)
Cash paid as dividends
Cash retained due to excess tax deduction related to stock options
Net cash provided by (or used by) financing activities

Net increase (decrease) in cash


Beginning cash and cash equivalents balance
=Ending cash and cash equivalents balance

Schedule of Noncash Investing and Financing Activities


Assets for Liabilities &/or Equity
Liabilities &/or Equity for Assets
Liabilities for Equity and Equity for Liabilities
Capital lease (acquisition of asset and obligation for lessee)
A reconciliation of net income to cash provided by operations

*Brackets indicate items that are normally combined

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OperatingActivities
(Usually associated with working capital accounts like Accounts
receivable, inventory, salaries payable, etc.)
Inflows:
From sale of goods and services
From receiving dividends investments
From receiving interest from investments or loans
From sale of trading securities
From reduced income taxes due to excess tax deduction related to
stock options

Outflows:
To suppliers for inventory and other materials
To employees for services
To other entities for services (insurance, etc.)
To government for taxes
To lenders for interest
To purchase trading securities

Interest expense is an operating item! Investment earnings (dividends & interest) is an operating item!
Buying and selling trading securities are operating activities! These things may not make sense to you so
memorize.

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InvestingActivities

(Usually associated with long-term assets)

Inflows:

From sale of property, plant and equipment

From sale of debt or equity investments of other entities*

From collections of principal on loans to other entities


Outflows:

To purchase property, plant and equipment

To purchase debt or equity securities of other entities

To make loans to other entities

*except investments classified as trading securities which are included in operating activities

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FinancingActivities
(Usually associated with long-term liability and equity items)
Inflows:

From issuance of debt (bonds and notes)


From issuance of equity securities
Common stock
Preferred stock
Re-issuance of treasury stock
Outflows:

To stockholders as dividends
To repay or retire long-term debt, including capital leases
for lessee (interest on leases is classified as operating)
To reacquire capital stock (treasury stock)

AnanomalyonSCF
Dividends are paid to stockholders and interest is paid to
bondholders.
Dividends paid are shown as outflows under financing
activities
However, FASB defined interest expense to be an operating
activity
Interest & dividend revenue are defined to be operating
activities, too.

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DirectversusIndirectPresentations
FASB Statement No. 95 allows two ways to calculate and
report a companys net cash flow from operating activities on
its statement of cash flows.

TheDirectMethod
Under the direct method, operating cash outflows are
deducted from operating cash inflows to determine the net
cash flow from operating activities.
If you choose the direct method, a reconciliation of cash provided by
operations to net income is a required disclosure.
This is the same schedule that appears in a statement prepared using the
indirect method

The required information items on a direct method statement of cash flow (per
FASB)
Operating Inflows
Cash collected from customers (including lessees, tenants, licensees,
and the like)
Interest and dividends received
Other operating cash receipts, if any
Operating outflows
Cash paid to employees and other suppliers of goods or services
(including insurance, advertising and the like)
Interest paid
Income taxes paid
Other operating cash payments, if any

TheIndirectMethod
Under the indirect method, net income is adjusted for
noncash items related to operations to compute the net cash
flow from operating activities.
If you choose to use the indirect method, you must also disclose interest paid
and income taxes paid during the year.

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Otherdisclosures
Under both methods (direct & indirect), you must disclose
noncash financing and investing activities
This can be on face of the statement or in the notes to the financial statements.
Examples:
Trade common stock for land
Convertible bonds converted to common stock

NoncashItems
Some financing and investing activities do not affect an
entitys cash flow.
Examples:
Trade common stock for land
Issue bonds in exchange for a building
Convertible bonds converted to common stock
Significant transactions should be disclosed separately.
The disclosure of significant noncash financing and investing
activities are required under both methods (direct & indirect)
The disclosure can be on face of the statement or in the
notes to the financial statements.

TheoreticalConsiderations

The direct method has the advantage of reporting operating cash inflows separately from
operating cash outflows, which may be useful in estimating future cash flows.

The direct method is more meaningful to most financial statement users and the tie in to net
income is also provided in a separate schedule which is the same as the indirect method
presentation.

Under the indirect method, adjustments are made to net income to arrive at cash flow from
operating activities. Thus, cash from operating activities is tied to net income.

An advantage of the indirect method is that income flows are converted from an accrual basis to
a cash flow basis. In this manner, the indirect method shows the quality of earnings by
providing information about intervals of leads and lags between income flows and operating cash
flows.

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Example 1 - Statement of Cash Flow DIRECT METHOD


Year Year
ending ending
Palouse Pottery 12/31/06 Ref Debit Ref Credit 12/31/07 Target
Cash 15,000 X 27,000 42,000 27,000

Accounts Receivable 40,000 37,500 (2,500)


Allowance for doubtful accounts (3,000) (4,500) (1,500)
Merchandise Inventory 25,000 43,000 18,000
Prepaid Expenses 3,000 6,000 3,000

Plant, property & equipment 215,000 236,000 21,000


Accumulated Depreciation (80,000) (82,000) (2,000)
215,000 278,000
Accounts Payable (23,000) (31,000) (8,000)
Salaries Payable (2,000) (9,000) (7,000)
Interest payable (2,000) (1,500) 500
Income Taxes Payable (1,500) (5,500) (4,000)
Dividends Payable 0 (8,000) (8,000)
Long term liabilities (25,000) (15,000) 10,000
Common stock, $1 par (100,000) (145,000) (45,000)
Retained Earnings (61,500) (63,000) (1,500)
(215,000) (278,000) 0
1997 1997
Closing entry for Rev/(Exp) Rec/(Disb)
Sales 93,000
Gain/(loss) on sale of PP&E (4,000)
Realized gain/(loss) - land 20,000
Cost of goods sold (35,000)
Salaries & other operating (37,000)
expenses
Bad debt expense (2,000)
Depreciation & amortization (11,000)
Interest expense (2,500)
Income taxes expense (7,000)
Net income (accrual basis) 14,500
Statement of Cash Flows (INFLOWS) (OUTFLOWS)
Operating Activities

Investing Activities

Financing Activities

Noncash Financing/Investing

CHANGE IN CASH X 27,000


Totals

Additional information:
a. Wrote off $500 accounts receivable as uncollectible d. Sold land for $30,000 that had been acquired for $10,000
b. Sold operational assets for $4,000 cash that had cost e. Paid a $10,000 long-term note installment
$17,000 and had a book value of $8,000 f. Purchase plant, property & equipment for $48,000 cash.
c. Declared a cash dividend of $13,000 g. Issued common stock for $45,000 cash.

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Example 1 - Statement of Cash Flow INDIRECT METHOD
Year Year
ending ending
Palouse Pottery 12/31/06 Ref Debit Ref Credit 12/31/07 Target
Cash 15,000 X 27,000 42,000 27,000

Accounts Receivable 40,000 37,500 (2,500)


Allowance for doubtful accounts (3,000) (4,500) (1,500)
Merchandise Inventory 25,000 43,000 18,000
Prepaid Expenses 3,000 6,000 3,000

Plant, property & equipment 215,000 236,000 21,000


Accumulated Depreciation (80,000) (82,000) (2,000)
215,000 278,000
Accounts Payable (23,000) (31,000) (8,000)
Salaries Payable (2,000) (9,000) (7,000)
Interest payable (2,000) (1,500) 500
Income Taxes Payable (1,500) (5,500) (4,000)
Dividends Payable 0 (8,000) (8,000)
Long term liabilities (25,000) (15,000) 10,000
Common stock, $1 par (100,000) (145,000) (45,000)
Retained Earnings (61,500) (63,000) (1,500)
(215,000) (278,000) 0
Statement of Cash Flows (INFLOWS) (OUTFLOWS)
Operating Activities

Investing Activities

Financing Activities

Noncash Financing/Investing

CHANGE IN CASH X 27,000


Totals

Additional information:
a. Wrote off $500 accounts receivable as uncollectible d. Sold land for $30,000 that had been acquired for $10,000
b. Sold operational assets for $4,000 cash that had cost e. Paid a $10,000 long-term note installment
$17,000 and had a book value of $8,000 f. Purchase plant, property & equipment for $48,000 cash.
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Acct 592 Spring 2005
c. Declared a cash dividend of $13,000 g. Issued common stock for $45,000 cash.
Example 2 - Statement of Cash Flow
Year Year
ending ending
Moscow Moving & Storage 12/31/06 Ref Debit Ref Credit 12/31/07 Target
Cash 15,000 5,000 (10,000)

Accounts Receivable 30,000 28,500 (1,500)


Allowance for doubtful accounts (1,500) (2,000) (500)
Merchandise Inventory 10,000 17,000 7,000
Prepaid Expenses 4,500 500 (4,000)

Plant, property & equipment 220,100 289,100 69,000


Accumulated Depreciation (20,000) (16,000) 4,000
258,100 322,100
Accounts Payable (10,000) (13,000) (3,000)
Salaries Payable (3,000) (1,000) 2,000
Interest payable 0 (1,000) (1,000)
Long term liabilities (30,000) (10,000) 20,000

Common stock, $1 par (100,000) (181,000) (81,000)


Retained Earnings (115,100) (116,100) (1,000)
(258,100) (322,100) 0
1997 1997
Closing entry for Rev/(Exp) Receipt/(Disb)
Sales 80,000
Gain/(loss) on sale of PP&E (2,000)
Cost of goods sold (35,000)
Salaries & other operating (26,000)
expenses
Bad debt expense (1,000)
Depreciation & amortization (5,000)
Interest expense (2,000)
Income taxes expense (3,000)
Net income (accrual basis) 6,000
Statement of Cash Flows (INFLOWS) (OUTFLOWS)
Operating Activities

Investing Activities

Financing Activities

Noncash Financing/Investing

CHANGE IN CASH
Totals

Additional Information
a. Wrote off $500 accounts receivable as uncollectible d. Issued common stock for $36,000 cash
b. Sold operational assets for $4,000 cash e. Paid a $20,000 long-term note installment
(cost $15,000, acc'd depreciation $9,000) f. Purchased operational assets, $39,000 cash
c. Declared and paid a cash dividend, $5,000 g. Acquired land in exchange for 1,000 shares of
common stock worth $45 each

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Reconciliation of Net Income to Cash Provided by Operations


or the Indirect Method

Example 2
Moscow Moving & Storage
Statement of Cash Flow Worksheet
Reconciliation Schedule (Indirect method) Ref
Net income

Cash provided by operations

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Example 3
Avery Slings & Arrows, Inc.
Avery Slings & Arrows
Income Statement
For year ending 12/31/04

Sales 6,600,000
Earnings of affiliates (equity method) 150,000
Realized loss on sale of equipment (65,000)
Realized gain on sale of investments 53,000
Interest and dividend revenue 15,000
Total revenues 6,753,000

Cost of goods sold 3,490,000


Salaries and wages 632,000
Other operating expenses 421,000
Bad debt expense 45,000
Depreciation expense 757,000
Amortization of intangibles 5,000
Accretion expense 25,000
Interest expense 935,000
Income tax expense 177,000 6,487,000
Net income 266,000

Prepare a statement of cash flows (direct method) including the required reconciling schedule and any other required
disclosures for Avery Slings & Arrows, Inc. Information from the balance sheet and income statement have been
entered into a worksheet for your convenience. In addition to completing the worksheet, you MUST prepare a formal
statement with headings, subtotals, etc. for full credit.

ADDITIONAL INFORMATION
a. During the year, ASA paid $2,767,000 in cash for land, building, and equipment.
b. On August 5, 2004, ASA issued 25,000 shares of common stock for $42 per share.
c. ASA purchased $273,000 in marketable securities during the year.
d. Equipment costing $500,000 was sold during the year for $59,000. The book value was $124,000.
e. During the year, AAS declared cash dividends in the amount of $203,000.
f. On April 1, 2004, the holders of $1,500,000 in convertible bonds elected to convert their bonds to common
stock. The conversion ratio was 25 shares of common stock for each share $1,000 face value bond.
g. The noncurrent investment represents 30% of the outstanding securities of the investee. This investment is
accounted for on the equity method. During 2004, ASA received $29,000 in dividends from the investment.
h. On May 1, 2004, ASA acquired equipment under a capital lease. At the inception of the lease, the present
value of the minimum lease payments was $648,000.
i. ASA acquired a patent on a new process for $500,000 on October 15, 2004.
j. During 2004, ASA sold marketable securities which it had acquired for $222,000 for $275,000.
k. In February, ASA issued 150,000 shares of common stock in a 50% stock dividend.
l. ASA issued $3,000,000 in bonds at face value on August 1, 2004.
m. ASA sold 500 shares of treasury stock which it had acquired for $20 per share for $46 per share on January 18,
2004.
n. In October, ASA acquired 1,000 shares of treasury stock at $38 per share.
o. Bad debts in the amount of $33,000 were written off during the year.

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Avery Slings & Arrows


Balance Sheet
12/31/04 12/31/03
Current Assets
Cash 2,261,000 2,850,000
Securities Available for Sale (at market) 258,000 100,000
Accounts Receivable (net) 1,947,000 1,900,000
Merchandise Inventory 602,000 900,000
Prepaid Expenses 4,000 50,000
5,072,000 5,800,000
Noncurrent Assets
Investments in affiliated companies (equity method) 2,121,000 2,000,000
Land, building & equipment 20,715,000 17,800,000
Less Accumulated Depreciation (2,181,000) (1,800,000)
Intangible Assets 568,000 73,000
Total assets 26,295,000 23,873,000

Current Liabilities
Accounts Payable 347,000 650,000
Salaries Payable 18,000 21,000
Interest payable 156,000 55,000
Income Taxes Payable 45,000 32,000
Dividends Payable 128,000 60,000
694,000 818,000
Noncurrent Liabilities
Bonds Payable 7,000,000 4,000,000
Premium/Discount on Bonds Payable 642,000 656,000
Convertible Bonds Payable 1,500,000 3,000,000
Lease obligation 2,108,000 1,825,000
Asset retirement obligation 275,000 250,000
Deferred Income Taxes 122,000 75,000
Other long term liabilities 590,000 2,590,000
12,237,000 12,396,000

Stockholder's Equity
Common stock, $10 par 5,125,000 3,000,000
Additional paid in capital - common 3,525,000 1,600,000
Other paid in capital 13,000 0
Unrealized (gain)/loss AFS invest 27,000 (80,000)
Treasury stock (at cost) (38,000) (10,000)
Retained Earnings 4,712,000 6,149,000
13,364,000 10,659,000

Total liabilities and equity 26,295,000 23,873,000

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Avery Slings & Arrows Year ending Year ending


12/31/03 Ref Debit Ref Credit 12/30/04 Target
Cash 2,850,000 x 589,000 2,261,000 (589,000)
Securities Available for Sale 180,000 231,000 51,000

Allowance to adjust to market (80,000) 27,000 107,000

Accounts receivable (net) 1,900,000 1,947,000 47,000

Merchandise Inventory 900,000 602,000 (298,000)

Prepaid Expenses 50,000 4,000 (46,000)

Investments in affiliated
2,000,000 2,121,000 121,000
companies (equity method)

Land, building & equipment


17,800,000 20,715,000 2,915,000

Accumulated Depreciation (1,800,000) (2,181,000) (381,000)

Intangible Assets 73,000 568,000 495,000

Total assets 23,873,000 26,295,000

Accounts Payable (650,000) (347,000) 303,000

Salaries Payable (21,000) (18,000) 3,000

Interest payable (55,000) (156,000) (101,000)

Income Taxes Payable (32,000) (45,000) (13,000)

Dividends Payable (60,000) (128,000) (68,000)

Bonds Payable (4,000,000) (7,000,000) (3,000,000)

(Premium)/Discount on Bonds
(656,000) (642,000) 14,000
Payable

Convertible Bonds Payable (3,000,000) (1,500,000) 1,500,000

Lease obligation (1,825,000) (2,108,000) (283,000)

Asset retirement obligation (250,000) (275,000) (25,000)

Deferred Income Taxes (75,000) (122,000) (47,000)

Other long term liabilities (2,590,000) (590,000) 2,000,000

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Avery Slings & Arrows Year ending Year ending


12/31/03 Ref Debit Ref Credit 12/30/04 Target
Common stock, $10 par (3,000,000) (5,125,000) (2,125,000)

Additional paid in capital


(1,600,000) (3,525,000) (1,925,000)
common

Unrealized (gain)/loss AFS invest 80,000 (27,000) (107,000)

Treasury stock (at cost) 10,000 38,000 28,000

Other paid in capital 0 (13,000) (13,000)

Retained Earnings (6,149,000) (4,712,000) 1,437,000

(23,873,000) (26,295,000)

Closing entry for 2004 2004


Revenue/ Re Operating Cash Inflows/
(Expense) f Ref (Outflows)
Sales 6,600,000
Earnings of affiliated companies 150,000
Gain/(loss) on sale of equipment (65,000)
Gain/(loss) sale of patent 0
Realized gain/(loss) sale of land 0
Realized gain/(loss) on
investments 53,000
Interest and dividend revenue 15,000
Cost of goods sold (3,490,000)

Salaries and wages (632,000)


Other operating expenses (421,000)
Bad debt expense (45,000)
Depreciation expense (757,000)
Amortization of intangibles (5,000)
Accretion expense (25,000)
Interest expense (935,000)

Income taxes expense (177,000)

Net income (accrual basis) 266,000

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Avery Slings & Arrows INFLOWS OUTFLOWS


Cash provided by operations:

Reconciling schedule:
Net income 266,000

Cash provided by operations

Investing Activities 0

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Avery Slings & Arrows INFLOWS OUTFLOWS

Financing Activities 0

Noncash Financing/Investing

CHANGE IN CASH 589,000 x


Totals 0

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Avery Slings & Arrows


Statement of Cash Flows
For year ended December 31, 2004

Inflows Outflows Net


Cash provided by operations
Cash collected from customers 6,508,000
Interest & dividends received 44,000
Cash paid for merchandise (3,495,000)
Cash paid to employees (635,000)
Other operating disbursements (375,000)
Interest paid (848,000)
Income taxes paid (117,000)
6,552,000 (5,470,000) 1,082,000

Cash provided by investing activities


Proceeds from sale of equipment 59,000
Cash outlay to acquire equipment (2,767,000)
Cash outlay to acquire patent (500,000)
Proceeds from sale of securities 275,000
Cash outlay to buy securities (273,000)
334,000 (3,540,000) (3,206,000)

Cash provided by financing activities


Dividends paid (135,000)
Sold treasury stock 23,000
Purchased treasury stock (38,000)
Payments on long term debt (2,000,000)
Payments on capital leases (365,000)
Common stock issued 1,050,000
Proceeds from issuing nonconvertible bonds 3,000,000
4,073,000 (2,538,000) 1,535,000

Change in cash (589,000)


Beginning balance - Cash 2,850,000
Ending balance - Cash 2,261,000

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Avery Slings & Arrows


Statement of Cash Flows
For year ended December 31, 2004

Non-cash financing and investing activities


Capital lease 648,000
Preferred bonds converted to common stock 1,500,000

Schedule to reconcile net income to cash provided by operations


Net Income 266,000
Depreciation 757,000
Amortization & impairment of intangibles 5,000
Accretion expense 25,000
Amortization of bond premium (14,000)
Realized loss on sale of equipment 65,000
Realized gain on sale of investments (53,000)
Equity method investments earnings in excess of dividends (121,000)
Increase in deferred income taxes 47,000
Change in working capital accounts:
Net accounts receivable (47,000)
Merchandise Inventory 298,000
Prepaid Expenses 46,000
Accounts Payable (303,000)
Salaries Payable (3,000)
Interest Payable 101,000
Income Taxes Payable 13,000
Cash provided by operations: 1,082,000

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Acct. 301 - Statement of Cash Flows - Homework 4


Wenatchee Whirlpool World
Balance Sheet
12/31/96 12/31/95
Current Assets
Cash 2,837,600 2,000,000
Securities Available for Sale (at market) 390,000 150,000
Accounts Receivable 1,752,000 1,900,000
Allowance for doubtful accounts (120,500) (110,000)
Merchandise Inventory 1,145,000 875,000
Prepaid Operating Expenses 84,000 62,000
6,088,100 4,877,000

Noncurrent Assets
Investments (equity method) 3,097,000 3,000,000
Plant, property & equipment 16,420,000 10,800,000
Accumulated Depreciation (829,000) (600,000)
Intangible Assets 71,500 128,000
TOTAL ASSETS 24,847,600 18,205,000

Current Liabilities
Accounts Payable 880,000 750,000
Salaries Payable 20,000 15,000
Income Taxes Payable 13,400 27,000
Dividends Payable 35,000 60,000
Current portion long term debt 29,000 21,000
977,400 873,000
Noncurrent Liabilities
Bonds Payable 10,000,000 5,000,000
Discount on Bonds (247,000) (270,000)
Deferred Income Taxes 180,000 88,000
Other long term liabilities 562,000 3,000,000
10,495,000 7,818,000

Stockholder's Equity
Convertible preferred, $100 par 500,000 2,000,000
Common stock, $10 par 3,100,000 1,500,000
Additional paid in capital 3,950,000 1,200,000
Unrealized (gain)/loss investments 27,000 78,000
Retained Earnings 5,798,200 4,736,000
13,375,200 9,514,000
Total liabilities and equity 24,847,600 18,205,000

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Acct 592 Spring 2005

Wenatchee Whirlpool World


Income Statement
For year ending 12/31/96

Sales 6,200,000
Earnings of affiliated company (equity method) 115,000
Gain/(loss) on sale of PP&E (40,000)
Realized gain/(loss) on investments 108,000
Realized gain on sale of patent 950,000
Interest and dividend revenue 13,000
Total revenues 7,346,000

Cost of goods sold 3,600,000


Salaries and wages 590,000
Other operating expenses 345,000
Bad debt expense 38,500
Depreciation & amortization expense 250,500
Interest expense 669,400
Income taxes expense 740,400 6,233,800

Net income 1,112,200

Additional information:

a. On February 25, WWW sold an internally developed patent for $1,000,000. The patent was carried on the
books at unamortized legal fees amounting to $50,000 at date of sale.
b. On March 31, WWW issued $5,000,000 in bonds at face value. The semi-annual bonds have a coupon rate
of 10% per annum.
c. During the year, WWW disposed of various items of equipment with a total book value of $65,000 and
original cost of $80,000. The amount received was $25,000 in cash.
d. During the third quarter, shareholders holding 15,000 shares of the preferred stock converted them into
common stock. The conversion ratio was 6 shares of common for each share of preferred.
e. On July 20, WWW sold 50,000 shares of its common stock for $41 per share.
f. By the end of the year, WWW had written off as uncollectible a total of $28,000 in accounts receivable.
g. An existing factory with equipment was acquired during the year. The acquisition cost was allocated as
follows: $772,000 to land, $3,450,000 to building and 678,000 to equipment.
h. WWW acquired a parcel of land adjoining the new factory by giving the owner 20,000 shares of its
common stock. At the date of the transaction, the market value of the stock was $40 per share.
i. During the year WWW purchased $875,000 in marketable securities and sold securities which had cost
$584,000. The market value of the portfolio at the end of the year was $390,000.
j. WWW owns 30% of a company which manufactures parts that WWW uses in its production process.
WWW received $18,000 in dividends from this partially owned company during 1996.
k. Dividends declared during the year totaled $50,000.

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Acct 592 Spring 2005

Homework 4 - Acct 315


Worksheet Year Year
ending ending
Wenatchee Whirlpool World 12/31/95 Ref Debit Ref Credit 12/31/96 Target
Cash 2,000,000 837,600 2,837,600 837,600
Securities Available for Sale (at 150,000 390,000 240,000
market)
Accounts Receivable 1,900,000 1,752,000 (148,000)

Allowance for doubtful accounts (110,000) (120,500) (10,500)

Merchandise Inventory 875,000 1,145,000 270,000

Prepaid Operating Expenses 62,000 84,000 22,000

Investments in affiliated 3,000,000 3,097,000 97,000


companies (equity method)
Plant, property & equipment 10,800,000 16,420,000 5,620,000

Accumulated Depreciation (600,000) (829,000) (229,000)

Intangible Assets 128,000 71,500 (56,500)

18,205,00 24,847,60
0 0
Accounts Payable (750,000) (880,000) (130,000)

Salaries Payable (15,000) (20,000) (5,000)

Income Taxes Payable (27,000) (13,400) 13,600

Dividends Payable (60,000) (35,000) 25,000

Current portion long term debt (21,000) (29,000) (8,000)

Bonds Payable (5,000,000) (10,000,000 (5,000,00


) 0)
Premium/Discount on Bonds 270,000 247,000 (23,000)
Payable
Deferred Income Taxes (88,000) (180,000) (92,000)

Other long term liabilities (3,000,000) (562,000) 2,438,000

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Acct 592 Spring 2005
Wenatchee Whirlpool World
12/31/95 ref Debit ref Credit 12/31/96 Target
Convertible preferred, $100 par (2,000,000) (500,000) 1,500,000

Common stock, $10 par (1,500,000) (3,100,000) (1,600,000


)

Additional paid in capital (1,200,000) (3,950,000) (2,750,000


)

Unrealized (gain)/loss (78,000) (27,000) 51,000


investments
Retained Earnings (4,736,000) (5,798,200) (1,062,200
)
0 (18,205,00 (24,847,60
0) 0)

Closing entry for 1996 1996


Rev/(Exp) Receipt/
(Disb)
Sales 6,200,000

Earnings of affiliated companies 115,000


(equity method)
Gain/(loss) on sale of PP&E (40,000)

Realized gain/(loss) on 108,000


investments
Realized gain on sale of patent 950,000

Interest and dividend revenue 13,000

Cost of goods sold (3,600,000)

Salaries and wages (590,000)

Other operating expenses (345,000)

Bad debt expense (38,500)

Depreciation expense (244,000)


Amortization of intangible assets (6,500)
Interest expense (669,400)

Income taxes expense (740,400)

Net income (accrual basis) 1,112,200

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Acct 592 Spring 2005
Wenatchee Whirlpool World
Statement of Cash Flows INFLOWS OUTFLOWS (Subtotals)
Operating Activities

Investing Activities

Financing Activities

Noncash Financing/Investing

CHANGE IN CASH 837,600


Totals

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Acct 592 Spring 2005

StatementofCashFlowEasyPracticeProblems5&6
5. Ulliman Company
Prepare a statement of cash flow direct method including the reconciliation schedule. Most
information is provided on the attached workpaper.

Additional information:
a. Dividends declared and paid totaled $700.
b. On January 1, 1999 the 10% convertible bonds that had originally been issued at face value
were converted into 500 shares of common stock. The book value method was used to
account for the conversion.
c. Long-term nonmarketable investments that cost $1,600 were sold for $2,300.
d. The long-term note payable was paid by issuing 250 shares of common stock at the
beginning of the year.
e. Equipment with a cost of $2,000 and a book value of $300 was sold for $100.
f. Equipment was purchased at a cost of $16,200.
g. The 12% bonds payable were issued on September 1, 1999 at 97. They mature on
September 1, 2009. The company uses the straight-line method to amortize the discount.
h. Taxable income was less than pretax accounting income, resulting in a $396 increase in
deferred taxes payable.
i. Short-term marketable securities were purchased at a cost of $1,300. The portfolio was
increased by $300 to a $3,800 fair value at year end by adjusting the related allowance
account.

6. Driskoll Company
Prepare a statement of cash flow direct method including the reconciliation schedule. Most
information is provided on the attached workpaper.

Additional information:
a. Dividends were declared in the amount of $2,100.
b. Bonds payable with a face value, book value, and market value of $14,000 were retired on
June 30, 1999.
c. Bonds payable with a face value of $8,000 were issued at 90.25 on July 31, 1999, They
mature on July 31, 2004. The company uses the straight-line method to amortize the bond
discount.
d. Equipment with a cost of $4,000 and a book value of $1,400 was exchanged for an acre of
land valued at $2,700. No cash was exchanged. The transaction was properly considered to
be a dissimilar asset exchange.
e. Long-term investments in bonds being held to maturity with a cost of $1,000 were sold for
$800.
f. Sixty-five shares of common stock were exchanged for a patent. The common stock was
selling for $20 per share at the time of the exchange.
g. A tornado completely destroyed a small building that had an original cost of $8,000 and a
book value of $4,800. Settlement with the insurance company resulted in after-tax proceeds
of $2,200 and an extraordinary loss (net of income taxes) of $2,600.

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Acct 592 Spring 2005

5. Homework Assignment Ulliman Company


Uliman Company Year ending Worksheet Year ending
01/01/99 Ref Debit Ref Credit 12/31/99 Target
Cash 1,400 2,400 1,000
Accounts receivable (net) 2,800 2,690 (110)
Marketable securities (at cost) 1,700 3,000 1,300
Allowance for change in value 500 800 300
Merchandise Inventory 8,100 7,910 (190)
Prepaid Expenses 1,300 1,710 410
Investments (long-term) 7,000 5,400 (1,600)
Land 15,000 15,000 0
Buildings and equipment 32,000 46,200 14,200
Accumulated depreciation (16,000) (16,400) (400)
0 0 0
53,800 68,710

Accounts Payable (3,800) (4,150) (350)


Income Taxes Payable (2,400) (2,504) (104)
Wages payable (1,100) (650) 450
Interest payable 0 (400) (400)
12% bonds payable 0 (10,000) (10,000)
Premium/Discount on Bonds 0 290 290
Payable
Notes payable (long term) (3,500) 0 3,500
10% Convertible bonds (9,000) 0 9,000
Deferred Income Taxes (800) (1,196) (396)
Convertible preferred, $100 par 0 0 0
Common stock, $10 par (14,000) (21,500) (7,500)
Additional paid in capital (8,700) (13,700) (5,000)
Unrealized (gain)/loss (500) (800) (300)
investments
Retained Earnings (10,000) (14,100) (4,100)
(53,800) (68,710)
Closing entry for 1999 1999
Rev/ Receipt/(Disb)
(Exp)
Sales 39,930
Other revenue 0
Gain/(loss) on sale of PP&E (200)
Realized gain/(loss) on 700
investments
Interest and dividend revenue 820
Cost of goods sold (19,890)
Salaries & other operating (11,000)
expenses
Other operating expense (1,000)
Depreciation & amortization (2,100)
Interest expense (410)
Income taxes expense (2,050)
Net income (accrual basis) 4,800
(53,800)

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Acct 592 Spring 2005

5. Ulliman Company, continued


Statement of Cash Flows INFLOWS OUTFLOWS Subtotals
Operating Activities

Reconciliation Schedule:

Investing Activities

Financing Activities

Noncash Financing/Investing

CHANGE IN CASH
Totals

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Acct 592 Spring 2005

6. Homework Problem Driskoll Company


Driskoll Company Year ending Worksheet Year ending
12/31/99 Ref Debit Ref Credit 12/31/99 Target
Cash 2,700 3,520 820
Accounts receivable (net) 5,900 6,215 315
Inventories 15,300 15,530 230
Prepaid Expenses 1,400 1,000 (400)
Investments (long-term) 8,300 7,300 (1,000)
Land 16,300 19,000 2,700
Buildings 68,700 60,700 (8,000)
Acc'd depreciation - Bldg (35,000) (34,500) 500
Equipment 29,600 25,600 (4,000)
Acc'd depreciation - Equip (14,200) (14,700) (500)
Patents 8,700 9,185 485
107,700 98,850

Accounts Payable (8,900) (9,195) (295)


Interest payable (630) (300) 330
Wages payable (2,500) (2,600) (100)
Bonds payable (23,000) (17,000) 6,000
Discount on bonds 0 715 715
Common stock, $10 par (22,000) (22,650) (650)
Additional paid in capital (15,320) (15,970) (650)
Unrealized (gain)/loss 0 0 0
investments
Retained Earnings (35,350) (31,850) 3,500
(107,700) (98,850)
ok ok
Closing entry for 1999 1999
Rev/(Exp) Receipt/(Disb)
Sales 49,550
Gain/(loss) on exchange of assets 1,300
Realized gain/(loss) on (200)
investments
Interest and dividend revenue 790
Cost of goods sold (23,800)
Salaries & other operating (16,510)
expenses
Other operating expense (1,100)
Depreciation - buildings (2,700)
Depreciation - equipment (3,100)
Patent amortization (815)
Interest expense (1,715)
Income taxes expense (500)
Extraordinary loss (net of taxes) (2,600)
Net income (accrual basis) (1,400)

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Acct 592 Spring 2005

6. Driskoll Company, continued


Statement of Cash Flows INFLOWS OUTFLOWS Subtotals
Operating Activities

Reconciliation Schedule:

Investing Activities

Financing Activities

Noncash Financing/Investing

CHANGE IN CASH
Totals

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Acct 592 Spring 2005
7. Statement of Cash Flow Problem
from final exam, Spring 1998
Albion Altimeters Inc. Albion Altimeters Inc.
Balance Sheet 12/31/97 12/31/96 Income Statement
Current Assets For year ending 12/31/97
Cash 310,200 400,000
Securities Available for Sale (at 1,112,000 500,000 Sales 3,600,000
market) Gain/(loss) on sale of PP&E (30,000)
Accounts Receivable 781,000 900,000 Interest and dividend revenue 15,000
Allowance for doubtful accounts (33,200) (27,000) Total revenues 3,585,000
Merchandise Inventory 829,000 850,000
Prepaid Operating Expenses 38,800 25,000 Cost of goods sold 2,100,000
3,037,800 2,648,000 Salaries and wages 650,000
Other operating expenses 230,000
Noncurrent Assets Bad debt expense 17,200
Plant, property & equipment 3,562,000 1,880,000 Depreciation & amortization expense 30,000
Accumulated Depreciation (355,000) (350,000) Interest expense 87,700
TOTAL ASSETS 6,244,800 4,178,000 Income taxes expense 180,200 3,295,100

Net income 289,900


Current Liabilities
Accounts Payable 413,000 350,000
Salaries Payable 7,200 8,500 Required:
Income Taxes Payable 23,500 27,000 Use the additional information (below) and the worksheet provided to
Dividends Payable 0 25,000 prepare the statement of cash flow using the direct method. For full credit,
443,700 410,500 use the pages provided to prepare the formal statement in addition to the
Noncurrent Liabilities worksheet.
Bonds Payable 1,000,000 1,000,000
Premium/Discount on Bonds Payable 118,000 124,000 Additional information:
Deferred Income Taxes 103,700 88,000 a. AA declared dividends of $75,000 on June 30, 1997.
1,221,700 1,212,000 b. On Sept. 3, AA sold equipment with a book value of $65,000 for
$35,000 in cash. The original cost of the item was $90,000.
Stockholder's Equity c. AA purchased for cash plant, property & equipment for $1,740,000.
Common stock, $10 par 1,510,000 1,000,000 d. On May 15, AA issued 50,000 shares of common stock at $35 each.
Additional paid in capital 1,972,000 700,000 e. AA wrote off $11,000 of bad debts during 1997.
Acc'd other comprehensive income* 13,000 (14,000) f. AA purchased for cash $585,000 in marketable securities on Apr. 1.
Retained Earnings 1,084,400 869,500 g. On Oct. 10, AA issued 1,000 shares of stock in exchange for a
4,579,400 2,555,500 parcel of land. At that date, the market price of the stock was $32.
Total liabilities and equity 6,244,800 4,178,000

* Other comprehensive income is composed of the holding gains/losses


related to available for sale securities.

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Acct 592 Spring 2005

7. Statement of Cash Flow Problem


Worksheet Year ending Year ending
Albion Altimeters Inc. 12/31/96 Ref Debit Ref Credit 12/31/97 Target
Cash 400,000 89,800 310,200 (89,800)
Securities Available for Sale (at market) 500,000 1,112,000 612,000

Accounts Receivable 900,000 781,000 (119,000)

Allowance for doubtful accounts (27,000) (33,200) (6,200)


Merchandise Inventory 850,000 829,000 (21,000)
Prepaid Operating Expenses 25,000 38,800 13,800
Plant, property & equipment 1,880,000 3,562,000 1,682,000

Accumulated Depreciation (350,000) (355,000) (5,000)

4,178,000 6,244,800
Accounts Payable (350,000) (413,000) (63,000)
Salaries Payable (8,500) (7,200) 1,300
Income Taxes Payable (27,000) (23,500) 3,500
Dividends Payable (25,000) 0 25,000
Bonds Payable (1,000,000) (1,000,000) 0
Premium/Discount on Bonds Payable (124,000) (118,000) 6,000
Deferred Income Taxes (88,000) (103,700) (15,700)
Common stock, $10 par (1,000,000) (1,510,000) (510,000)

Additional paid in capital (700,000) (1,972,000) (1,272,000)

Acc'd other comprehensive income 14,000 (13,000) (27,000)


Retained Earnings (869,500) (1,084,400) (214,900)
0 (4,178,000) (6,244,800) (2,066,800)

Closing entry for 1997 Rev/(Exp) Ref Debit Ref Credit Receipt/(Disb)
Sales 3,600,000
Gain/(loss) on sale of PP&E (30,000)
Interest and dividend revenue 15,000
Cost of goods sold (2,100,000)

Salaries and wages (650,000)


Other operating expenses (230,000)
Bad debt expense (17,200)
Depreciation expense (30,000)
Interest expense (87,700)
Income taxes expense (180,200)

Net income (accrual basis) 289,900

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Acct 592 Spring 2005

7. Albion Altimeters
Statement of Cash Flows INFLOWS OUTFLOWS (Subtotals)
Operating Activities

Investing Activities

Financing Activities

Noncash Financing/Investing

CHANGE IN CASH 89,800


Totals

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Acct 592 Spring 2005

Albion Altimeters
Statement of Cash Flow
For year ended 12-31-97

Cash provided by operations

Cash provided by investing activities

Cash provided by financing activities

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Acct 592 Spring 2005

Albion Altimeters
Statement of Cash Flow
For year ended 12-31-97

Reconciling schedule

Notes:

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Acct 592 Spring 2005

Acct315StatementofCashFlow
HomeworkProblem#8

Instructions:
Prepare the statement of cash flow for Endicott Engines Inc. (attached) using the direct method.
Show all your work on clearly labeled and well-organized worksheet (provided) or equivalent
printout. Label your work and answers clearly. You must submit a worksheet if you want me to
be able to follow your thought process (in case your answer is wrong). If the problem doesnt
balance, you may plug something (clearly labeled as a plug) and still obtain most of the
available points. If you are using spreadsheet software, please explain your computations since I
cannot tell what formulas you incorporated into the cells from looking at the printout. The Excel
worksheet is available on the course web page: http://www.academic.uidaho.edu/Acct301.

NOTE: For full credit, you must prepare the statement of cash flow in good form (direct
method) with all necessary disclosures including a reconciling schedule and disclosures about
noncash financing and investing activities.

Endicott Engines Inc.


Income Statement
For year ending 12/31/02

Sales 6,500,000
Earnings of affiliated companies (equity method) 125,000
Gain/(loss) on sale of PP&E (30,000)
Realized gain/(loss) on investments 192,000
Realized gain on sale of patent 450,000
Interest and dividend revenue 15,000
Total revenues 7,252,000

Cost of goods sold 3,800,000


Salaries and wages 610,000
Other operating expenses 354,000
Bad debt expense 47,200
Depreciation & amortization expense 261,000
692,100
Income taxes expense 572,700 6,337,000

Net income 915,000

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Acct 592 Spring 2005

Endicott Engines Inc.

Additional information:

a. On February 19, EEI sold an internally developed patent for $500,000.


b. On April 3, EEI issued $6,000,000 in bonds at face value. The semi-annual bonds have a
coupon rate of 10% per annum.
c. During the year, EEI disposed of various items of equipment with a total book value of
$60,000 and original cost of $80,000. The amount received was $30,000 in cash.
d. During the third quarter, shareholders holding 10,000 shares of the preferred stock
converted them into common stock. The conversion ratio was 8 shares of common for
each share of preferred.
e. On July 20, EEI sold 25,000 shares of its common stock for $43 per share.
f. By the end of the year, EEI had written off as uncollectible a total of $35,000 in accounts
receivable.
g. An existing factory with equipment was acquired during the year. The acquisition cost
was allocated as follows: $750,000 to land, $4,000,000 to building and 600,000 to
equipment.
h. EEI acquired a parcel of land adjoining the new factory by giving the owner 10,000
shares of its common stock. At the date of the transaction, the market value of the stock
was $45 per share.
i. New equipment for the factory was obtained under a capital lease. The present value of
the minimum lease payments was $722,000.
j. During the year EEI purchased $900,000 in marketable securities and sold securities
which had cost $600,000. The market value of the portfolio at the end of the year was
$536,000.
k. EEI owns 40% of a company that manufactures parts that EEI uses in its production
process. EEI received $20,000 in dividends from this partially owned company during
2002.
l. Dividends declared during the year totaled $100,000.

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Acct 592 Spring 2005

Endicott Engines Inc.


Balance Sheet 12/31/02 12/31/01

Current Assets
Cash 1,308,200 1,500,000
Securities Available for Sale 536,000 300,000
Accounts Receivable 2,145,000 2,000,000
Allowance for doubtful accounts (122,200) (110,000)
Merchandise Inventory 1,165,000 975,000
Prepaid Operating Expenses 63,000 50,000
5,095,000 4,715,000

Noncurrent Assets
Investments (partially owned companies) 2,605,000 2,500,000
Plant, property & equipment 17,142,000 10,700,000
Accumulated Depreciation (934,000) (700,000)
Intangible Assets 93,000 150,000
TOTAL ASSETS 24,001,000 17,365,000

Current Liabilities
Accounts Payable 1,050,000 800,000
Salaries Payable 43,000 18,000
Income Taxes Payable 24,000 35,000
Dividends Payable 85,000 60,000
1,202,000 913,000
Noncurrent Liabilities
Bonds Payable 11,000,000 5,000,000
Discount on Bonds (277,000) (300,000)
Deferred Income Taxes 142,000 90,000
Lease obligations 749,000 323,000
Other long term liabilities 570,000 3,000,000
12,184,000 8,113,000

Stockholder's Equity
Convertible preferred, $100 par 1,000,000 2,000,000
Common stock, $10 par 2,150,000 1,000,000
Additional paid in capital 2,575,000 1,200,000
Unrealized (gain)/loss investments 27,000 91,000
Retained Earnings 4,863,000 4,048,000
10,615,000 8,339,000
Total liabilities and equity 24,001,000 17,365,000

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Acct 592 Spring 2005
Endicott Engines Inc.
Year ending Year ending
Worksheet
Endicott Engines Inc. 12/31/01 Ref Debit Ref Credit 12/31/02 Target
Cash 1,500,000 191,800 1,308,200 (191,800)
Securities Available for Sale 300,000 536,000 236,000

Accounts Receivable 2,000,000 2,145,000 145,000

Allowance for doubtful accounts (110,000) (122,200) (12,200)

Merchandise Inventory 975,000 1,165,000 190,000

Prepaid Operating Expenses 50,000 63,000 13,000

Investments (equity method) 2,500,000 2,605,000 105,000

Plant, property & equipment 10,700,000 17,142,000 6,442,000

Accumulated Depreciation (700,000) (934,000) (234,000)

Intangible Assets 150,000 93,000 (57,000)

17,365,000 24,001,000
Accounts Payable (800,000) (1,050,000) (250,000)

Salaries Payable (18,000) (43,000) (25,000)

Income Taxes Payable (35,000) (24,000) 11,000

Dividends Payable (60,000) (85,000) (25,000)

Bonds Payable (5,000,000) (11,000,000) (6,000,000)

Premium/Discount on Bonds Payable 300,000 277,000 (23,000)

Deferred Income Taxes (90,000) (142,000) (52,000)

Lease obligations (323,000) (749,000) (426,000)

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Acct 592 Spring 2005
Endicott Engines Inc.
12/31/01 Ref Debit Ref Credit 12/31/02 Target
Other long term liabilities (3,000,000) (570,000) 2,430,000

Convertible preferred, $100 par (2,000,000) (1,000,000) 1,000,000

Common stock, $10 par (1,000,000) (2,150,000) (1,150,000)

Additional paid in capital (1,200,000) (2,575,000) (1,375,000)

Unrealized (gain)/loss investments (91,000) (27,000) 64,000

Retained Earnings (4,048,000) (4,863,000) (815,000)

0 (17,365,000) (24,001,000)
Closing entry for 2002: Rev/(Exp) Receipt/(Disb)
Sales 6,500,000

Earnings of affiliated company (equity 125,000


method)
Gain/(loss) on sale of PP&E (30,000)

Realized gain/(loss) on investments 192,000

Realized gain on sale of patent 450,000

Interest and dividend revenue 15,000

Cost of goods sold (3,800,000)

Salaries and wages (610,000)

Other operating expenses (354,000)

Bad debt expense (47,200)

Depreciation expense (254,000)


Amortization of intangible assets (7,000)
Interest expense (692,100)

Income taxes expense (572,700)

Net income (accrual basis) 915,000


Endicott Engines Inc.
Statement of Cash Flows INFLOWS OUTFLOW
S
Operating Activities

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Investing Activities

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Endicott Engines Inc.
Financing Activities

Noncash Financing/Investing

CHANGE IN CASH 191,800


Totals

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Statement of Cash Flow Examples - Solutions
Example 1 - completed Year Year
worksheet ending ending
Palouse Pottery 12/31/96 Ref Debit Ref Credit 12/31/97 Target
Cash 15,000 x 27,000 42,000 27,000
i 2,000
Accounts Receivable 40,000 a 500 37,500 (2,500)
Allowance for doubtful accounts (3,000) a 500 j 2,000 (4,500) (1,500)
Merchandise Inventory 25,000 k 18,000 43,000 18,000
Prepaid Expenses 3,000 L 3,000 6,000 3,000
d 10,000
Plant, property & equipment 215,000 f 48,000 b 17,000 236,000 21,000
Accumulated Depreciation (80,000) b 9,000 m 11,000 (82,000) (2,000)
215,000 278,000
Accounts Payable (23,000) n 8,000 (31,000) (8,000)
Salaries Payable (2,000) o 7,000 (9,000) (7,000)
Interest payable (2,000) p 500 (1,500) 500
Income Taxes Payable (1,500) q 4,000 (5,500) (4,000)
Dividends Payable 0 h 5,000 c 13,000 (8,000) (8,000)
Long term liabilities (25,000) e 10,000 (15,000) 10,000
Common stock, $1 par (100,000) g 45,000 (145,000) (45,000)
Retained Earnings (61,500) c 13,000 x 14,500 (63,000) (1,500)
(215,000) x (278,000) 0
1997 1997
Closing entry for Rev/(Exp) Receipt/(Disb)
Sales 93,000 i 2,000 95,000
Gain/(loss) on sale of PP&E (4,000) b 4,000 0
Realized gain/(loss) - land 20,000 d 20,000 0
Cost of goods sold (35,000) n 8,000 k 18,000 (45,000)
Salaries & other operating (37,000) o 7,000 L 3,000 (33,000)
expenses
Bad debt expense (2,000) j 2,000 0
Depreciation & amortization (11,000) m 11,000 0
Interest expense (2,500) p 500 (3,000)
Income taxes expense (7,000) q 4,000 (3,000)
Net income (accrual basis) 14,500 X 14,500 X 11,000 11,000 Operating
Cash
Statement of Cash Flows (INFLOWS) (OUTFLOW
S)
Operating Activities X 11,000 11,000

Investing Activities (14,000)


Sold operational asset b 4,000
Sold land d 30,000
Purchased Plant, Property & f 48,000
Equipment

Financing Activities 30,000


Paid long-term debt e 10,000
Issued common stock g 45,000
Paid cash dividend h 5,000
Noncash Financing/Investing

CHANGE IN CASH X 27,000 27,000


Totals 276,500 276,500

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SolutionsforExampleProblems

Example 1 for Acct 301


Solution:
Palouse Pottery
Statement of Cash Flows
For year ended 31-Dec-97
Inflows Outflows Net
Cash provided by operations
Cash collected from customers 95,000
Interest & dividends received 0
Cash paid for merchandise (45,000)
Cash paid to employees (20,000)
Other operating disbursements (13,000)
Interest paid (3,000)
Income taxes paid (3,000)
Subtotals 95,000 (84,000) 11,000

Cash provided by investing activities


Purchase plant, property & equipment (48,000)
Sale of plant, property & equipment 4,000
Sale of land 30,000
Subtotals 34,000 (48,000) (14,000)

Cash provided by financing activities


Dividends paid (5,000)
Long-term debt retired (10,000)
Common stock issued 45,000
Subtotals 45,000 (15,000) 30,000

Change in cash 27,000


Beginning balance - Cash 15,000
Ending balance - Cash 42,000

Schedule to reconcile net income to cash provided by operations


Net Income 14,500
Depreciation & amortization 11,000
Realized gains/losses PP&E 4,000
Realized gain/loss - land sale (20,000)
Change in working capital accounts:
Net accounts receivable 4,000
Merchandise Inventory (18,000)
Prepaid Expenses (3,000)
Accounts Payable 8,000
Salaries Payable 7,000
Income Taxes Payable 4,000
Interest Payable (500)
Cash provided by operations: 11,000

Non-cash financing and investing activities


None

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Example 1 for Acct 301 INDIRECT METHOD SOLUTION


Statement of Cash Flow Worksheet
Year
Year ending ending
Palouse Pottery 12/31/96 Ref Debit Ref Credit 12/31/97 Target
Cash 15,000 x 27,000 42,000 27,000
Accounts Receivable 40,000 2,500 37,500 (2,500)
Allowance for doubtful accounts (3,000) 1,500 (4,500) (1,500)
Merchandise Inventory 25,000 18,000 43,000 18,000
Prepaid Expenses 3,000 3,000 6,000 3,000
Plant, property & equipment 215,000 f 48,000 b,d 27,000 236,000 21,000
Accumulated Depreciation (80,000)b 9,000 11,000 (82,000) (2,000)
215,000 278,000
Accounts Payable (23,000) 8,000 (31,000) (8,000)
Salaries Payable (2,000) 7,000 (9,000) (7,000)
Interest payable (2,000) 500 (1,500) 500
Income Taxes Payable (1,500) 4,000 (5,500) (4,000)
Dividends Payable 0c 5,000 c 13,000 (8,000) (8,000)
Long term liabilities (25,000)e 10,000 (15,000) 10,000
Common stock, $1 par (100,000) g 45,000 (145,000) (45,000)
Retained Earnings (61,500)c 13,000 h 14,500 (63,000) (1,500)
(215,000) (278,000) 0
(OUTFLOW
Statement of Cash Flows (INFLOWS) S)
Operating Activities 11,000
Net income h 14,500
Add back loss on sale of equipment b 4,000
Minus gain on sale of land d 20,000
depreciation 11,000

Change in working capital


accounts:
A/R (net) 4,000
Inventory 18,000
Prepaid expenses 3,000
A/P 8,000
Salaries payable 7,000
Interest payable 500
Income taxes payable 4,000

Investing Activities
Sold equipment b 4,000
Sold land d 30,000
Purchase PP&E f 48,000

Financing Activities
Dividends paid c 5,000
Payment on LT debt e 10,000
Issued common stock g 45,000
Noncash Financing/Investing

CHANGE IN CASH X 27,000


Totals
265,000 265,000

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Example 2 for Acct 301 - S97
Statement of Cash Flow Worksheet
Year ending Year ending
Moscow Moving & Storage 12/31/96 Ref Debit Ref Credit 12/31/97 Target
Cash 15,000 x 10,000 5,000 (10,000)
j 1,000
Accounts Receivable 30,000 a 500 28,500 (1,500)
Allowance for doubtful accounts (1,500) a 500 h 1,000 (2,000) (500)
Merchandise Inventory 10,000 k 7,000 17,000 7,000
Prepaid Expenses 4,500 L 4,000 500 (4,000)
g 45,000
Plant, property & equipment 220,100 f 39,000 b 15,000 289,100 69,000
Accumulated Depreciation (20,000) b 9,000 i 5,000 (16,000) 4,000
258,100 322,100
Accounts Payable (10,000) m 3,000 (13,000) (3,000)
Salaries Payable (3,000) n 2,000 (1,000) 2,000
Interest payable 0 o 1,000 (1,000) (1,000)
Long term liabilities (30,000) e 20,000 (10,000) 20,000
g 45,000
Common stock, $1 par (100,000) d 36,000 (181,000) (81,000)
Retained Earnings (115,100) c 5,000 x 6,000 (116,100) (1,000)
(258,100) (322,100) 0
1997 1997
Closing entry for Rev/(Exp) Receipt/(Disb)
Sales 80,000 j 1,000 81,000
Gain/(loss) on sale of PP&E (2,000) b 2,000 0
Cost of goods sold (35,000) m 3,000 k 7,000 (39,000)
Salaries & other operating expenses (26,000) L 4,000 n 2,000 (24,000)
Bad debt expense (1,000) h 1,000 0
Depreciation & amortization (5,000) i 5,000 0
Interest expense (2,000) o 1,000 (1,000)
Income taxes expense (3,000) (3,000)
Net income (accrual basis) 6,000 x 6,000 x 14,000 14,000 Operating Cash
Statement of Cash Flows (INFLOWS) (OUTFLOWS)
Operating Activities x 14,000 14,000

Investing Activities
Sold operational assets b 4,000 (35,000)
Purchased operational assets f 39,000

Financing Activities 11,000


Paid cash dividend c 5,000
Issued common stock d 36,000
Paid long term debt e 20,000
Noncash Financing/Investing
Acquired land in exchange for stock g 45,000 g 45,000
CHANGE IN CASH x 10,000 x (10,000)
Totals 259,500 259,500
0 0
Additional Information 0 0
a. Wrote off $500 accounts receivable as uncollectible d. Issued common stock for $36,000 cash
b. Sold operational assets for $4,000 cash e. Paid a $20,000 long-term note installment
(cost $15,000, acc'd depreciation $9,000) f. Purchased operational assets, $39,000 cash
c. Declared and paid a cash dividend, $5,000 g. Acquired land in exchange for 1000 shares worth $45 each
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Acct 592 Spring 2005

Example 2 for Acct 301 - Solution:


Moscow Moving & Storage
Statement of Cash Flows
For year ended 31-Dec-97
Inflows Outflows Net
Cash provided by operations
Cash collected from customers 81,000
Interest & dividends received 0
Cash paid for merchandise (39,000)
Cash paid to employees (14,000)
Other operating disbursements (10,000)
Interest paid (1,000)
Income taxes paid (3,000)
Subtotals 81,000 (67,000) 14,000

Cash provided by investing activities


Purchase plant, property & equipment (39,000)
Sale of plant, property & equipment 4,000
Sale of land
Subtotals 4,000 (39,000) (35,000)

Cash provided by financing activities


Dividends paid (5,000)
Long-term debt retired (20,000)
Common stock issued 36,000
Subtotals 36,000 (25,000) 11,000

Change in cash (10,000)


Beginning balance Cash 15,000
Ending balance Cash 5,000

Schedule to reconcile net income to cash provided by operations


Net Income 6,000
Depreciation & amortization 5,000
Realized gains/losses PP&E 2,000
Change in working capital accounts:
Net accounts receivable 2,000
Merchandise Inventory (7,000)
Prepaid Expenses 4,000
Accounts Payable 3,000
Salaries Payable (2,000)
Interest Payable 1,000
Cash provided by operations: 14,000

Non-cash financing and investing activities


Acquired land in exchange for common stock

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Example 3 workpaper solution


Avery Slings & Arrows Year ending Year ending
0 12/31/03 Ref Debit Ref Credit 12/30/04 Target
Cash 2,850,000 x 589,000 2,261,000 (589,000)
Securities Available for Sale 180,000 c 273,000 J 222,000 231,000 51,000
Allowance to adjust to market (80,000) r 107,000 27,000 107,000
Accounts Receivable 2,000,000 s 92,000 o 33,000 2,059,000 59,000
Allowance for doubtful accounts (100,000) o 33,000 o 45,000 (112,000) (12,000)
Merchandise Inventory 900,000 s 298,000 602,000 (298,000)
Prepaid Expenses 50,000 s 46,000 4,000 (46,000)
Investments in affiliated companies 2,000,000 g 150,000 g 29,000 2,121,000 121,000
(equity method)
Land, building & equipment 17,800,000 a 2,767,000 d 500,000 20,715,000 2,915,000

g 648,000
Accumulated Depreciation (1,800,000) d 376,000 p 757,000 (2,181,000) (381,000)
Intangible Assets 73,000 I 500,000 p 5,000 568,000 495,000
Total assets 23,873,000 26,295,000

Accounts Payable (650,000) t 303,000 (347,000) 303,000


Salaries Payable (21,000) t 3,000 (18,000) 3,000
Interest payable (55,000) t 101,000 (156,000) (101,000)
Income Taxes Payable (32,000) t 13,000 (45,000) (13,000)
Dividends Payable (60,000) e 135,000 e 203,000 (128,000) (68,000)
Bonds Payable (4,000,000) L 3,000,000 (7,000,000) (3,000,000)
Premium/Discount on Bonds Payable (656,000) u 14,000 (642,000) 14,000
Convertible Bonds Payable (3,000,000) f 1,500,000 (1,500,000) 1,500,000
Lease obligation (1,825,000) v 365,000 g 648,000 (2,108,000) (283,000)
Asset retirement obligation (250,000) q 25,000 (275,000) (25,000)
Deferred Income Taxes (75,000) w 47,000 (122,000) (47,000)
Other long term liabilities (2,590,000) y 2,000,000 (590,000) 2,000,000
Convertible preferred, $100 par 0 0 0
Common stock, $10 par (3,000,000) b 250,000 (5,125,000) (2,125,000)
f 375,000
k 1,500,000

Additional paid in capital - common (1,600,000) b 800,000 (3,525,000) (1,925,000)


f 1,125,000

Unrealized (gain)/loss AFS invest 80,000 r 107,000 (27,000) (107,000)


Treasury stock (at cost) 10,000 n 38,000 m 10,000 38,000 28,000
Other paid in capital 0 m 13,000 (13,000) (13,000)
k 1,500,000
Retained Earnings (6,149,000) e 203,000 X 266,000 (4,712,000) 1,437,000
(23,873,000) (26,295,000)

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Avery Slings & Arrows


Closing entry for 2004 Ref Debits Ref Credits 2004
Rev/(Exp) Receipt/
(Disb)
Sales 6,600,000 s 92,000 6,508,000
Earnings of affiliates (equity method) 150,000 g 150,000 0
Gain/(loss) on sale of PP&E (65,000) d 65,000 0
Realized gain/(loss) on investments 53,000 J 53,000 0
Interest and dividend revenue 15,000 g 29,000 44,000
Cost of goods sold (3,490,000) s 298,000 t 303,000 (3,495,000)
Salaries and wages (632,000) t 3,000 (635,000)
Other operating expenses (421,000) s 46,000 (375,000)
Bad debt expense (45,000) o 45,000 0
Depreciation expense (757,000) p 757,000 0
Amortization of intangibles (5,000) p 5,000 0
Accretion expense (25,000) q 25,000 0
Interest expense (935,000) t 101,000 u 14,000 (848,000)
w 47,000
Income taxes expense (177,000) t 13,000 (117,000)
Net income (accrual basis) 266,000 X 266,000 X 1,082,000 1,082,000
INFLOWS OUTFLOWS
Cash provided by operations: X 1,082,000 1,082,000

Reconciling schedule:
Net income 266,000
Depreciation 757,000
Amortization & impairment of 5,000
intangibles
Accretion expense 25,000
Bond premiums/discounts (14,000)
Realized gains/losses PP&E 65,000
Realized gain/loss investments (53,000)
Equity method investments (121,000)
Deferred income taxes 47,000
Change in working capital:
Net accounts receivable (47,000)
Merchandise Inventory 298,000
Prepaid Expenses 46,000
Accounts Payable (303,000)
Salaries Payable (3,000)
Interest payable 101,000
Income Taxes Payable 13,000

Cash provided by operations 1,082,000


off by 0

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Acct 592 Spring 2005

Avery Slings & Arrows Ref Inflows Ref Outflows

Investing Activities (3,206,000)


Purchased PP&E a 2,767,000
Purchased marketable securities c 273,000
Sold equipment d 59,000
Purchased patent I 500,000
Sold investments J 275,000

Financing Activities 1,535,000


Issued common stock b 1,050,000
Paid dividends e 135,000
Issued bonds L 3,000,000
Sold treasury stock m 23,000
Purchased treasury stock n 38,000
Payments on capital leases v 365,000
Payments on long-term debt y 2,000,000

Noncash Financing/Investing
Bonds converted into stock f 1,500,000 f 1,500,000
Capital lease h 648,000 648,000
Stock dividend K

CHANGE IN CASH 589,000 x


Totals 20,930,000 20,930,000 (589,000) Change in
Cash
ok 0 0 half
0 double
0 divide by 9

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Solution
Example 4- Acct 315
Worksheet Year ending Year ending
Wenatchee Whirlpool World 12/31/95 Ref Debit Ref Credit 12/31/96 Target
Cash 2,000,000 X 837,600 2,837,600 837,600
o 51,000
Securities Available for Sale (at market) 150,000 I 875,000 I 584,000 390,000 240,000
p 120,000
Accounts Receivable 1,900,000 f 28,000 1,752,000 (148,000)
Allowance for doubtful accounts (110,000) f 28,000 m 38,500 (120,500) (10,500)
Merchandise Inventory 875,000 p 270,000 1,145,000 270,000
Prepaid Operating Expenses 62,000 p 22,000 84,000 22,000
Investments (equity method) 3,000,000 l 115,000 j 18,000 3,097,000 97,000

h 800,000
Plant, property & equipment 10,800,000 g 4,900,000 c 80,000 16,420,000 5,620,000
Accumulated Depreciation (600,000) c 15,000 n 244,000 (829,000) (229,000)
n 6,500
Intangible Assets 128,000 a 50,000 71,500 (56,500)
18,205,000 24,847,600
Accounts Payable (750,000) p 130,000 (880,000) (130,000)
Salaries Payable (15,000) p 5,000 (20,000) (5,000)
Income Taxes Payable (27,000) q 13,600 (13,400) 13,600
Dividends Payable (60,000) k 75,000 k 50,000 (35,000) 25,000
Current portion long term debt (21,000) s 8,000 (29,000) (8,000)
Bonds Payable (5,000,000) b 5,000,000 (10,000,000) (5,000,000)
Premium/Discount on Bonds Payable 270,000 r 23,000 247,000 (23,000)
Deferred Income Taxes (88,000) q 92,000 (180,000) (92,000)
s 2,430,000
Other long term liabilities (3,000,000) s 8,000 (562,000) 2,438,000
12/31/95 ref Debit ref Credit 12/31/96 Target
Convertible preferred, $100 par (2,000,000) d 1,500,000 (500,000) 1,500,000
h 200,000
e 500,000
Common stock, $10 par (1,500,000) d 900,000 (3,100,000) (1,600,000)
h 600,000
e 1,550,000
Additional paid in capital (1,200,000) d 600,000 (3,950,000) (2,750,000)
Unrealized (gain)/loss investments (78,000) o 51,000 (27,000) 51,000
Retained Earnings (4,736,000) k 50,000 X 1,112,200 (5,798,200) (1,062,200)
0 (18,205,000) (24,847,600)

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Wenatchee Whirlpool World

Closing entry for 1996 1996


Rev/(Exp) Receipt/(Disb)
Sales 6,200,000 p 120,000 6,320,000
Earnings of affiliated company (equity 115,000 l 115,000 0
method)
Gain/(loss) on sale of PP&E (40,000) c 40,000 0
Realized gain/(loss) on investments 108,000 I 108,000 0
Realized gain on sale of patent 950,000 a 950,000 0
Interest and dividend revenue 13,000 j 18,000 31,000
Cost of goods sold (3,600,000) p 130,000 p 270,000 (3,740,000)
Salaries and wages (590,000) p 5,000 (585,000)
Other operating expenses (345,000) p 22,000 (367,000)
Bad debt expense (38,500) m 38,500 0
Depreciation expense (244,000) n 244,000 0
Amortization of intangible assets (6,500) n 6,500 0
Interest expense (669,400) r 23,000 (646,400)
Income taxes expense (740,400) q 92,000 q 13,600 (662,000)
Net income (accrual basis) 1,112,200 X 1,112,200 X 350,600 350,600
Statement of Cash Flows INFLOWS OUTFLOWS (Subtotals)
Operating Activities X 350,600

Reconciling schedule:
Net Income 1,112,200
Depreciation & amortization 250,500
Bond premiums/discounts 23,000
Realized gains/losses PP&E 40,000
Realized gain/loss investments (108,000)
Gain on sale of patent (950,000)
Undistributed Earnings of Investees (97,000)
Deferred income taxes 92,000
Change in working capital accounts:
Net accounts receivable 158,500
Merchandise Inventory (270,000)
Prepaid Operating Expenses (22,000)
Accounts Payable 130,000
Salaries Payable 5,000
Income Taxes Payable (13,600)
Cash provided by operations: 350,600

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Investing Activities
Sale of patent a 1,000,000
Sale of equipment c 25,000
Purchase factory g 4,900,000
Purchase investment securities I 875,000
Sold investment securities I 692,000

Financing Activities
Issued bonds b 5,000,000
Issued common stock e 2,050,000
Dividends paid k 75,000
Long-term debt repaid s 2,430,000

Noncash Financing/Investing
Preferred converted to common stock d 1,500,000 d 1,500,000
Swap common stock for land h 800,000 h 800,000

CHANGE IN CASH X 837,600


Totals 25,237,000 25,237,000

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Solution
Working through the additional items of information:
a. On February 25, WWW sold an internally developed patent for $1,000,000. The patent was carried on the
books at unamortized legal fees amounting to $50,000 at date of sale.

Cash [Investing - inflow] 1,000,000


Intangible Assets 50,000
Realized gain on sale of patent 950,000
b. On March 31, WWW issued $5,000,000 in bonds at face value. The semi-annual bonds have a coupon rate
of 10% per annum.

Cash [Financing - inflow] 5,000,000


Bonds payable 5,000,000
c. During the year, WWW disposed of various items of equipment with a total book value of $65,000 and
original cost of $80,000. The amount received was $25,000 in cash. Accumulated depreciation would be
$15,000 (80,000 - 65,000)

Cash [Investing - inflow] 25,000


Accumulated depreciation 15,000
Loss on sale of plant, property & equipment 40,000
Plant, property and equipment 80,000
d. During the third quarter, shareholders holding 15,000 shares of the preferred stock converted them into
common stock. The conversion ratio was 6 shares of common for each share of preferred. Therefore 90,000
shares of common stock would be issues (6 * 15,000) with a par value of $900,000 ($10 par each). The book
value of the preferred was 1,500,000. Therefore, additional paid in capital to balance the journal entry
would be 600,000.

Convertible Preferred Stock, $100 par 1,500,000


Common stock, $10 par 900,000
Additional paid-in capital 600,000
e. On July 20, WWW sold 50,000 shares of its common stock for $41 per share. The proceeds would be
$2,050,000 (41 * 50,000) and the par value portion would be $500,000 with the rest as additional paid in
capital.

Cash [Financing - inflow] 2,050,000


Common stock, $10 par 500,000
Additional paid in capital 1,550,000
f. By the end of the year, WWW had written off as uncollectible a total of $28,000 in accounts receivable.

Allowance for doubtful accounts 28,000


Accounts receivable 28,000
g. An existing factory with equipment was acquired during the year. The acquisition cost was allocated as
follows: $772,000 to land, $3,450,000 to building and 678,000 to equipment. This totals to $4,900,000.

Plant, property and equipment 4,900,000


Cash [Investing outflow] 4,900,000

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h. WWW acquired a parcel of land adjoining the new factory by giving the owner 20,000 shares of its common
stock. At the date of the transaction, the market value of the stock was $40 per share. The value of the land
is $800,000 (20,000 * 40).

Plant, property and equipment 800,000


Common stock, $10 par 200,000
Additional paid in capital 600,000
i. During the year WWW purchased $875,000 in marketable securities and sold securities which had cost
$584,000. The market value of the portfolio at the end of the year was $390,000. From the income
statement, the gain on sale was 108,000. Therefore, the cash received from the sale of securities was
584+108 = $692,000

Investments - Securities available for sale 875,000


Cash [Investing outflow] 875,000
Cash [Investing inflow] 692,000
Investments - Securities available for sale 584,000
Gain on sale of investments 108,000
j. WWW owns 30% of a company which manufactures parts that WWW uses in its production process. WWW
received $18,000 in dividends from this partially owned company during 1996. Dividends received from
equity-method investments reduce the investment account and do NOT appear on the income statement.

Cash [Operating - dividends received] 18,000


Investments (partially-owned companies) 18,000
k. Dividends declared during the year totaled $50,000. Dividends declared reduce retained earnings and
increase dividends payable. The balancing number in dividends payable (if this account exists) will be the
dividends paid. If there is no dividends payable account, then the dividends declared = the dividends paid.

Retained earnings 50,000


Dividends payable 50,000
Dividends payable 75,000
Cash [Financing - outflow] 75,000

Starting through the income statement, looking for noncash items:

l. No deposit was made for share of earnings of partially owned companies. Therefore, this
account needs to be zeroed out by re-constructing the entry that recorded the share of
earnings.

Investments in partially owned company 115,000


Earnings of partially-owned company 115,000

m. No check was written for bad debt expense. Therefore, this account needs to be zeroed out by
re-constructing the entry that recorded bad debt expense for the year (the credit is always to
allowance for doubtful accounts.

Bad debt expense 38,500


Allowance for doubtful accounts 38,500

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Acct 592 Spring 2005

n. No checks are written to record depreciation expense and amortization of intangibles.


Therefore, these accounts need to be zeroed out by reconstructing the entry that recorded the
expenses.

Depreciation expense 244,000


Amortization of intangible assets 6,500
Accumulated depreciation 244,000
Intangible assets 6,500

Starting through the balance sheet to investigate accounts not yet balanced:

o. Securities available for sale (at market) doesnt balance by $51,000. However, this amount
appears in the owners equity section as the change in Unrealized (gain)/loss on investments.
Therefore, this amount must have been the adjusting entry for the allowance for change in
value account.

Unrealized gain/loss on investments 51,000


Investments in AFS securities (allowance) 51,000

p. The remaining difference in accounts receivable ($120,000) is the adjustment to sales to get
from accrual basis to cash basis. The difference in Merchandise Inventory is an adjustment to
cost of goods sold. The difference in prepaid operating expenses is an adjustment to other
operating expenses. The change in accounts payable would mostly be related to cost of goods
sold. The change in salaries payable affects salaries and wages expense.

Sales 120,000
Accounts receivable 120,000
Merchandise inventory 270,000
Cost of goods sold 270,000
Prepaid operating expenses 22,000
Other operating expenses 22,000
Accounts payable 130,000
Cost of goods sold 130,000
Salaries payable 5,000
Salaries and wages 5,000

q. Income tax expense is affected by two accounts on the balance sheet - income taxes payable
and deferred income taxes.

Income taxes payable 13,600


Income tax expense 13,600
Deferred income taxes 92,000
Income tax expense 92,000

r. Amortization of premiums and discounts on bonds payable impacts interest expense.

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Acct 592 Spring 2005

Interest expense 23,000


Discount on bonds payable 23,000

s. Long-term debt is presented in two numbers on balance sheet - current and noncurrent. These
accounts need to be combined to find out how much was borrowed or repaid during the year.
Take the change in one account to the other. The remaining amount to balance will be the
cash inflow or outflow.

Other long-term debt 8,000


Current portion of long-term debt 8,000

After this entry, the number necessary to balance other long-term debt is $2,430,000 which must
be the amount of long-term debt repaid during the year.

Other long-term debt 2,430,000


Cash [Financing - outflow] 2,430,000

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Example 4 - Acct 301


Solution
Wenatchee Whirlpool World
Statement of Cash Flows
For year ended 12/31/96

Inflows Outflows Net


Cash provided by operations
Cash collected from customers 6,320,000
Interest & dividends received 31,000
Cash paid for merchandise (3,740,000
)
Cash paid to employees (585,000)
Other operating disbursements (367,000)
Interest paid (646,400)
Income taxes paid (662,000)
Subtotals 6,351,000 (6,000,400 350,600
)

Cash provided by investing activities


Purchase plant, property & equipment (4,900,000
)
Sale of plant, property & equipment 25,000
Sale of patent 1,000,000
Marketable securities purchased (875,000)
Marketable securities sold 692,000
Subtotals 1,717,000 (5,775,000 (4,058,000
) )

Cash provided by financing activities


Dividends paid (75,000)
Long-term debt retired (2,430,000
)
Bonds issued 5,000,000
Common stock issued 2,050,000
Subtotals 7,050,000 (2,505,000 4,545,000
)

Change in cash 837,600


Beginning balance - Cash 2,000,000
Ending balance - Cash 2,837,600

Non-cash financing and investing activities


Preferred stock converted to common 1,500,000

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Land obtained by issue of common stock 800,000

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Example 3 - Acct 301 Solution


Wenatchee Whirlpool World
For year ended 12/31/96

Schedule to reconcile net income to cash provided by operations


Net Income 1,112,200
Depreciation & amortization 250,500
Bond premiums/discounts 23,000
Realized gains/losses PP&E 40,000
Realized gain/loss investments (108,000)
Gain on sale of patent (950,000)
Undistributed Earnings of Affiliates (97,000) *
Deferred income taxes 92,000
Change in working capital accounts:
Net accounts receivable 158,500 **
Merchandise Inventory (270,000)
Prepaid Operating Expenses (22,000)
Accounts Payable 130,000
Salaries Payable 5,000
Income Taxes Payable (13,600)
Cash provided by operations: 350,600

The following notes are explanations


and not part of a formal statement
of cash flow

* Earnings of affiliates (equity method) (115,000)


Dividends received (equity method affiliates) 18,000
(97,000)

** This is the easiest way to handle bad debts: just enter change in NET
A/R:
Change in Accounts 148,000
Receivable
Change in Allowance for Doubtful 10,500
Accounts
158,500
This is the more difficult
alternate:
Adjustment to sales (to get cash collected from 120,000
customers)
Bad debt expense 38,500
158,500

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What does not work is to include bad debt expense +


change in Accounts Receivable and change in Allowance!

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1. Homework Assignment Solution


Ulliman Company Year ending Worksheet Year ending
0 01/01/99 Ref Debit Ref Credit 12/31/99 Target
Cash 1,400 x 1,000 2,400 1,000
Accounts receivable (net) 2,800 L 110 2,690 (110)
Marketable securities (at cost) 1,700 j 1,300 3,000 1,300
Allowance for change in value 500 j 300 800 300
Merchandise Inventory 8,100 M 190 7,910 (190)
Prepaid Expenses 1,300 N 410 1,710 410
Investments (long-term) 7,000 d 1,600 5,400 (1,600)
Land 15,000 15,000 0
Buildings and equipment 32,000 g 16,200 f 2,000 46,200 14,200
Accumulated depreciation (16,000) f 1,700 k 2,100 (16,400) (400)
Total assets 53,800 68,710

Accounts Payable (3,800) O 350 (4,150) (350)


Income Taxes Payable (2,400) p 104 (2,504) (104)
Wages payable (1,100) q 450 (650) 450
Interest payable 0 r 400 (400) (400)
12% bonds payable 0 h 10,000 (10,000) (10,000)
Premium/Discount on Bonds Payable 0 h 300 s 10 290 290
Notes payable (long term) (3,500) e 3,500 0 3,500
10% Convertible bonds (9,000) c 9,000 0 9,000
Deferred Income Taxes (800) i 396 (1,196) (396)
Convertible preferred, $100 par 0 0 0
Common stock, $10 par (14,000) c&e 7,500 (21,500) (7,500)
Additional paid in capital (8,700) c&e 5,000 (13,700) (5,000)
Unrealized (gain)/loss investments (500) j 300 (800) (300)
Retained Earnings (10,000) b 700 XX 4,800 (14,100) (4,100)
Total liab & equity (53,800) (68,710)
ok ok
Closing entry for 1999 1999
Rev/(Exp) Receipt/(Disb)
Sales 39,930 L 110 40,040
Other revenue 0 0
Gain/(loss) on sale of PP&E (200) f 200 0
Realized gain/(loss) on investments 700 d 700 0
Interest and dividend revenue 820 820
Cost of goods sold (19,890) m&o 540 (19,350)
Salaries & other operating expenses (11,000) q 450 (11,450)
Other operating expense (1,000) N 410 (1,410)
Depreciation & amortization (2,100) k 2,100 0
Interest expense (410) r&s 410 0
Income taxes expense (2,050) i&p 500 (1,550)
Net income (accrual basis) 4,800 XX 4,800 xx 7,100 7,100

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Acct 592 Spring 2005

Ulliman Company
Statement of Cash Flows INFLOWS OUTFLOWS Subtotals
Operating Activities xx 7,100 7,100

Reconciliation Schedule:
Net Income 4,800
Loss on sale of equipment 200 f
Gain on sale of investments (700) d
Depreciation expense 2,100 k
Bond discount amortization 10 s
Deferred income taxes 396 i
Change in WC accounts:
Accounts receivable (net) 110
Merchandise Inventory 190
Prepaid Expenses (410)
Accounts Payable 350
Income Taxes Payable 104
Wages payable (450)
Interest payable 400
7,100

Investing Activities (15,100)


Investments sold d 2,300
sold equipment f 100
Purchased equipment g 16,200
Purchase mkt securities j 1,300

Financing Activities 9,000


Dividends paid b 700
Issued bonds at a discount h 9,700

Noncash Financing/Investing
LT debt retired by issue of common stock e
conversion of bonds to stock c

CHANGE IN CASH x 1,000 1,000


Totals 62,720 62,720

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Acct 592 Spring 2005

Ulliman Company
Statement of Cash Flows
For year ended December 31, 1999

Cash flows from operating activities


Collections from customers 40,040
Payments to suppliers (19,350)
Payments to employees (11,450)
Other operating payments (1,410)
Income taxes paid (1,550)
Dividends collected 820
Cash provided by operations 7,100

Cash flows from investing activities


Purchase of marketable securities (1,300)
Proceeds from sale of long-term investments 2,300
Disbursements to acquire equipment (16,200)
Proceeds from sale of equipment 100
Cash used by investing activities (15,100)

Cash flows from financing activities


Proceeds from issuance of bonds 9,700
Payment of dividends (700)
Cash provided by financing activities 9,000

Net increase in cash 1,000


Beginning balance in cash 1,400
Cash balance at 12-31-97 2,400

Noncash investing and financing activities


LT debt retired by issue of common stock 3,500
conversion of bonds to stock 9,000

Reconcilation of net income to cash provided by operations


Net income 4,800
Loss on sale of equipment 200
Gain on sale of investments (700)
Depreciation expense 2,100
Bond discount amortization 10
Deferred income taxes 396
Change in WC accounts:
Accounts receivable (net) 110
Merchandise Inventory 190
Prepaid Expenses (410)
Accounts Payable 350
Income Taxes Payable 104
Wages payable (450)
Interest payable 400
7,100

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2. Homework Assignment Solution


Driskoll Company Year ending Worksheet Year ending
12/31/99 Ref Debit Ref Credit 12/31/99 Target
Cash 2,700 x 820 3,520 820
Accounts receivable (net) 5,900 i 315 6,215 315
Inventories 15,300 j 230 15,530 230
Prepaid Expenses 1,400 k 400 1,000 (400)
Investments (long-term) 8,300 e 1,000 7,300 (1,000)
Land 16,300 d 2,700 19,000 2,700
Buildings 68,700 c 8,000 60,700 (8,000)
Acc'd depreciation - Bldg (35,000) c 3,200 g 2,700 (34,500) 500
Equipment 29,600 d 4,000 25,600 (4,000)
Acc'd depreciation - Equip (14,200) d 2,600 g 3,100 (14,700) (500)
Patents 8,700 f 1,300 h 815 9,185 485
107,700 98,850

Accounts Payable (8,900) L 295 (9,195) (295)


Interest payable (630) m 330 (300) 330
Wages payable (2,500) n 100 (2,600) (100)
Bonds payable (23,000) a 14,000 b 8,000 (17,000) 6,000
Discount on bonds 0 b 780 o 65 715 715
Common stock, $10 par (22,000) f 650 (22,650) (650)
Additional paid in capital (15,320) f 650 (15,970) (650)
Unrealized (gain)/loss investments 0 0 0
Retained Earnings (35,350) p 2,100 xx (1,400) (31,850) 3,500
(107,700) (98,850)
ok ok
Closing entry for 1999 1999
Rev/(Exp) Receipt/(Disb)
Sales 49,550 i 315 49,235
Gain/(loss) on exchange of assets 1,300 d 1,300 0
Realized gain/(loss) on investments (200) e 200 0
Interest and dividend revenue 790 790
Cost of goods sold (23,800) L 295 j 230 (23,735)
Salaries & other operating expenses (16,510) n 100 (16,410)
Other operating expense (1,100) k 400 (700)
Depreciation - buildings (2,700) g 2,700 0
Depreciation - equipment (3,100) g 3,100 0
Patent amortization (815) h 815 0
Interest expense (1,715) o 65 m 330 (1,980)
Income taxes expense (500) (500)
Extraordinary loss (net of taxes) (2,600) c 2,600 0
Net income (accrual basis) (1,400) xx (1,400) xx 6,700 6,700

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Acct 592 Spring 2005

Driskoll Company
Statement of Cash Flows INFLOWS OUTFLOWS Subtotals
Operating Activities xx 6,700 6,700

Reconciliation Schedule:
Net income (1,400)
Depreciation 5,800 g
amortization 815 h
Extraordinary loss (net of taxes) 2,600
Gain/(loss) on exchange of assets (1,300)
Realized gain/(loss) on investments 200
Amort of Bond Discount 65 o

change in WC accounts:
Accounts receivable (net) (315) i
Inventories (230) j
Prepaid Expenses 400 k
Accounts Payable 295 L
Interest payable (330) m
Wages payable 100 n
6,700

Investing Activities 3,000


Proceeds from insurance company c 2,200
Sale of long-term investment e 800

Financing Activities (8,880)


Retired bonds payable a 14,000
Proceeds of bond issue b 7,220
dividends paid p 2,100

Noncash Financing/Investing
Exchanged equipment for land d
Exchanged stock for patent f

CHANGE IN CASH x 820 820


Totals 54,170 54,170

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Acct 592 Spring 2005

Driskoll Company
Statement of Cash Flows
For year ended December 31, 1998

Cash flows from operating activities


Collections from customers 49,235
Payments to suppliers (23,735)
Payments to employees (16,410)
Other operating payments (700)
Income taxes paid (500)
Interest paid (1,980)
Dividends collected 790
Cash provided by operations 6,700

Cash flows from investing activities


Proceeds from insurance company 2,200
Proceeds from sale of long-term investments 800
Cash provided by investing activities 3,000

Cash flows from financing activities


Proceeds from issuance of bonds 7,220
Retire bonds payable (14,000)
Payment of dividends (2,100)
Cash used by financing activities (8,880)

Net increase in cash 820


Beginning balance in cash 2,700
Cash balance at 12-31-97 3,520

Noncash investing and financing activities


Exchanged stock for patent
Exchanged equipment for land

Reconcilation of net income to cash provided by operations


Net income (1,400)
Depreciation 5,800
amortization 815
Extraordinary loss (net of taxes) 2,600
Gain/(loss) on exchange of assets (1,300)
Realized gain/(loss) on investments 200
Amort of Bond Discount 65
Change in working capital accounts:
Accounts receivable (net) (315)
Inventories (230)
Prepaid Expenses 400
Accounts Payable 295
Interest payable (330)
Wages payable 100
6,700

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Acct 592 Spring 2005

Albion Altimeters Inc.


Statement of Cash Flows
For year ended 12/31/97
Inflows Outflows Net
Cash provided by operations
Cash collected from customers 3,708,000
Interest & dividends received 15,000
Cash paid for merchandise (2,016,000)
Cash paid to employees (651,300)
Other operating disbursements (243,800)
Interest paid (93,700)
Income taxes paid (168,000)
Subtotals 3,723,000 (3,172,800) 550,200

Cash provided by investing


activities
Purchase plant, property & equipment (1,740,000)
Sale of plant, property & equipment 35,000
Marketable securities purchased (585,000)
Marketable securities sold
Subtotals 35,000 (2,325,000) (2,290,000)

Cash provided by financing


activities
Dividends paid (100,000)
Common stock issued 1,750,000
Subtotals 1,750,000 (100,000) 1,650,000

Change in cash (89,800)


Beginning balance - Cash 400,000
Ending balance - Cash 310,200

Land obtained by issue


of common stock 32,000

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Acct 592 Spring 2005

Albion Altimeters Inc.


For year ended 12/31/97

Schedule to reconcile net income to cash provided by operations


Net Income 289,900
Depreciation & amortization 30,000
Bond premiums/discounts (6,000)
Realized gains/losses PP&E 30,000
Deferred income taxes 15,700
Change in working capital accounts:
Net accounts receivable 125,200 **
Merchandise Inventory 21,000
Prepaid Operating Expenses (13,800)
Accounts Payable 63,000
Salaries Payable (1,300)
Income Taxes Payable (3,500)
Cash provided by operations: 550,200

** Change in Accounts Receivable 119,000


Change in Allowance for Doubtful Accounts 6,200
125,200
This is the more difficult alternate:
Adjustment to sales (to get cash collected from customers) 108,000
Bad debt expense 17,200
125,200

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Acct 592 Spring 2005

Year
Worksheet Year ending ending
Albion Altimeters Inc. 12/31/96 Ref Debit Ref Credit 12/31/97
Cash 400,000 89,800 310,200
Securities Available for Sale (at r, 27,000
market) 500,000 f 585,000 1,112,000
J 11,000
Accounts Receivable 900,000 e 108,000 781,000
Allowance for doubtful accounts (27,000) e 11,000 i 17,200 (33,200)
Merchandise Inventory 850,000 k 21,000 829,000
Prepaid Operating Expenses 25,000 m 13,800 38,800
g, 32,000
Plant, property & equipment 1,880,000 c 1,740,000 b 90,000 3,562,000
Accumulated Depreciation (350,000) b 25,000 h 30,000 (355,000)
4,178,000 6,244,800
Accounts Payable (350,000) l 63,000 (413,000)
Salaries Payable (8,500) n 1,300 (7,200)
Income Taxes Payable (27,000) o 3,500 (23,500)
Dividends Payable (25,000) A 100,000 a 75,000 0
Bonds Payable (1,000,000) (1,000,000)
Premium/Discount on Bonds
Payable (124,000) p 6,000 (118,000)
Deferred Income Taxes (88,000) q 15,700 (103,700)
G 10,000
Common stock, $10 par (1,000,000) d 500,000 (1,510,000)
G 22,000
Additional paid in capital (700,000) d 1,250,000 (1,972,000)
Acc'd other comprehensive income 14,000 r 27,000 (13,000)
Retained Earnings (869,500) a 75,000 x 289,900 (1,084,400)
0 (4,178,000) (6,244,800)

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Acct 592 Spring 2005

Albion Altimeters
1997 1997
Receipt/
Closing entry for 1997 Rev/(Exp) Ref Debit Ref Credit (Disb)
Sales 3,600,000 j 108,000 3,708,000
Gain/(loss) on sale of PP&E (30,000) b 30,000 0
Interest and dividend revenue 15,000 15,000
k 21,000
Cost of goods sold (2,100,000) l 63,000 (2,016,000)
Salaries and wages (650,000) n 1,300 (651,300)
Other operating expenses (230,000) m 13,800 (243,800)
Bad debt expense (17,200) I 17,200 0
Depreciation expense (30,000) H 30,000 0
Interest expense (87,700) p 6,000 (93,700)
Income taxes expense (180,200) Q 15,700 o 3,500 (168,000)
Net income (accrual basis) 289,900 X 289,900 X 550,200 550,200
OUTFLO
Statement of Cash Flows INFLOWS WS (Subtotals)
Operating Activities X 550,200 550,200
Net income 289,900 X
Add depreciation expense 30,000 H
Add loss on sale of equipment 30,000 B
Amortization of discount on B/P (6,000) P
Deferred Income Taxes 15,700 Q
Change in working capital accounts:
Accounts Receivable 119,000
Allowance for doubtful accounts 6,200
Merchandise Inventory 21,000
Prepaid Operating Expenses (13,800)
Accounts Payable 63,000
Salaries Payable (1,300)
Income Taxes Payable (3,500)
550,200
Investing Activities (2,290,000)
Proceeds from sale of equipment b 35,000
Purchase building & equipment c 1,740,000
Purchase marketable securities f 585,000

Financing Activities 1,650,000


Dividends paid A 100,000
Proceeds from issuance of common stock d 1,750,000

Noncash Financing/Investing
Exchange common stock for land valued
at $32,000
CHANGE IN CASH 89,800
Totals 5,619,400 5,619,400 (89,800)
0

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Check figures for cash provided by operations:


Endicott Engines $ 462,000
Camperdown Company $2,647,000

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Final Exam Question Spring 2002


Balance Sheet 12/31/02 12/31/01
Required: Current Liabilities
Use the financial statements, the additional information (next page) and the Accounts Payable 930,000 750,000
worksheet provided to prepare the statement of cash flow using the direct method. Salaries Payable 2,000 5,000
For full credit, use the pages provided to prepare the formal statement in addition
to the worksheet. Income Taxes Payable 9,000 20,000
Dividends Payable 27,000 18,000
Camperdown Company 968,000 793,000
Balance Sheet 12/31/02 12/31/01 Noncurrent Liabilities
Bonds Payable 7,000,000 7,000,000
Current Assets Discount on Bonds Payable (605,000) (640,000)
Cash 183,000 100,000 Deferred Income Taxes 64,000 39,000
Securities Available for Sale (at cost) 727,000 367,000 Obligation under capital leases 403,000 380,000
Allowance to adjust to market value 13,000 (14,000) 6,862,000 6,779,000
Net accounts receivable 917,000 1,238,000
Merchandise Inventory 480,000 540,000 Stockholder's Equity
2,320,000 2,231,000 Convertible preferred stock 4,500,000 5,000,000
Common stock, $10 par 2,000,000 1,600,000
Noncurrent Assets Additional paid in capital 2,106,000 1,400,000
Plant, property & equipment 17,208,000 14,500,000 Acc'd other comprehensive
Accumulated Depreciation (2,527,000) (1,500,000) income 13,000 (14,000)
Investment in Edible Oils Inc. 2,023,000 2,000,000 Treasury stock (at cost) (26,000) (52,000)
Intangible Assets 480,000 500,000 Retained Earnings 3,081,000 2,225,000
TOTAL ASSETS 19,504,000 17,731,000 11,674,000 10,159,000
Total liabilities and equity 19,504,000 17,731,000

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Additional information:
Camperdown Company a. During the year, Camperdown Corporation paid quarterly dividends in
the total amount of $86,000.
Income Statement b. The preferred stock is convertible into 6 shares of common stock at the
For year ending 12/31/02 discretion of the stockholder. During the year, 5,000 shares of
preferred stock were converted into common stock.
Sales 10,000,000 c. Camperdown Corporation received $27,000 in dividends from Edible
Investment income 50,000 Oils Inc (equity method investment). The securities held in the
Gain/(loss) on sale of PP&E (45,000) available for sale portfolio paid no cash dividends during the year.
Realized gain/(loss) on d. During the year, Camperdown Corporation sold a piece of equipment
investments 10,000 for $25,000. The historical cost of the asset was $100,000 and the
Total revenues 10,015,000 book value was $70,000 at the date of sale.
e. On April 30, Camperdown Corporation issued 10,000 shares of
common stock for $60 per share.
Cost of goods sold 6,000,000
f. Camperdown Corporation acquired a new processing plant for a total
Salaries and wages 600,000 cost of $2,450,000. $2,000,000 was attributed to the building and the
Other operating expenses 250,000 remainder was attributed to the cost of the land.
Bad debt expense 21,000 g. Camperdown Corporation wrote off $5,000 in bad debts during the
Depreciation & amortization year.
expense 1,077,000 h. Camperdown Corporation sold marketable securities that had cost
Interest expense 565,000 $90,000 for $100,000.
Income taxes expense 551,000 9,064,000 i. Camperdown Corporation entered into a new capital lease
arrangement to obtain manufacturing equipment needed for the new
Net income 951,000 facility. The present value of the minimum lease payments was
$358,000 at the inception of the lease.
j. Half of the 1,000 shares of treasury stock were sold for
$64 per share. Camperdown Corporation uses the cost
method. The treasury stock on hand at the beginning of
the year was carried at $52 per share.

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Acct 592 Spring 2005

Statement of Cash Flow Problem


Worksheet Year ending Year ending
Camperdown Company 12/31/01 Ref Debit Ref Credit 12/31/02 Target
Cash 100,000 83,000 183,000 83,000

Securities Available for Sale (at cost) 367,000 727,000 360,000

Allowance to adjust to market value (14,000) 13,000 27,000

Net accounts receivable 1,238,000 917,000 (321,000)

Merchandise Inventory 540,000 480,000 (60,000)

Plant, property & equipment 14,500,000 17,208,000 2,708,000

Accumulated Depreciation (1,500,000) (2,527,000) (1,027,000)

Investment in Edible Oils Inc. 2,000,000 2,023,000 23,000

Intangible Assets 500,000 480,000 (20,000)


Total assets 17,731,000 19,504,000

Accounts Payable (750,000) (930,000) (180,000)

Salaries Payable (5,000) (2,000) 3,000

Income Taxes Payable (20,000) (9,000) 11,000

Dividends Payable (18,000) (27,000) (9,000)

Bonds Payable (7,000,000) (7,000,000) 0

Premium/Discount on Bonds Payable 640,000 605,000 (35,000)

Deferred Income Taxes (39,000) (64,000) (25,000)

Obligation under capital leases (380,000) (403,000) (23,000)

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Acct 592 Spring 2005

Statement of Cash Flow Problem


Worksheet Year ending Year ending
Camperdown Company 12/31/01 Ref Debit Ref Credit 12/31/02 Target

Convertible preferred, $100 par (5,000,000) (4,500,000) 500,000

Common stock, $10 par (1,600,000) (2,000,000) (400,000)

Additional paid in capital (1,400,000) (2,106,000) (706,000)

Acc'd other comprehensive income 14,000 (13,000) (27,000)

Treasury stock (at cost) 52,000 26,000 (26,000)

Retained Earnings (2,225,000) (3,081,000) (856,000)


Total Liab & owners equity (17,731,000) (19,504,000) (1,773,000)

Closing entry for 2002 2002


Inflow/
Rev/(Exp) Ref Debit Ref Credit (Outflow)

Sales 10,000,000

Earnings of investees (equity method) 50,000

Gain/(loss) on sale of PP&E (45,000)

Realized gain/(loss) on investments 10,000

Cost of goods sold (6,000,000)

Salaries and wages (600,000)

Other operating expenses (250,000)

Bad debt expense (21,000)

Depreciation & amortization expense (1,077,000)

Interest expense (565,000)

Income taxes expense (551,000)

Net income (accrual basis) 951,000

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Acct 592 Spring 2005

Camperdown Company

Statement of Cash Flows INFLOWS OUTFLOWS (Subtotals)


Operating Activities

Net income 951,000

Investing Activities

Financing Activities

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Acct 592 Spring 2005

Camperdown Company

INFLOWS OUTFLOWS (Subtotals)

Noncash Financing/Investing

CHANGE IN CASH 83,000


Totals

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Acct 592 Spring 2005

Camperdown Corporation
Statement of Cash Flow
For year ended 12-31-02

Cash provided by operations

Cash provided by investing activities

Cash provided by financing activities

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Acct 592 Spring 2005

Camperdown Corporation
Statement of Cash Flow
For year ended 12-31-02

Reconciling schedule

Notes

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