Question

Davis Inc. is a privately held company that uses ASPE. Davis had the following information available at March 31, 2012:
DAVIS INC.
Income Statement
For the Year Ended March 31, 2012
Davis Inc.’s partial list of comparative account balances as of March 31, 2012, and 2011, is as follows:
Additional data:
1. Bond interest expense includes $750 of bond discount amortized.
2. The investment income represents Davis Inc.’s reported income in its 40%-owned significantly influenced investment in Jessa Ltd. Davis received a $2,000 dividend from Jessa on February 15, 2012.
3. During the year, the company retired $500,000 of its outstanding bonds payable, paying out $16,600 less than the price at which the bonds were carried on the books.
4. In early January 2012, Davis renewed and signed a four-year operating lease, agreeing to pay $4,000 each month in rent. The lessor required the payment of the rent for the first and last months of the lease at that time.
5. The change in investment at FV-NI is from the change in the market value of the securities for the fiscal year 2012. There were no purchases or sales of these securities during the 2012 fiscal year.
Instructions
(a) What is the amount of Davis Inc.’s change in cash to be explained on the statement of cash flows for the year ended March 31, 2012?
(b) Prepare the “Cash provided by (used in) operations” section of the statement of cash flows, assuming that the indirect method is used and all necessary information has been provided.
(c) Identify the amounts that would be reported within this section if the direct method were used for the following items:
1. Cash paid to and on behalf of employees
2. Cash received from customers
3. Income taxes paid
4. Cash paid to suppliers for goods and services
5. Interest paid
(d) Calculate the sum of the cash flows in part (c). Should the sum of the cash flows in the direct format equal the amount arrived at in part (a) for “Cash provided by (used in) operations”? If not, why not? If it should, do the amounts equal each other? Why or why not?


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  • CreatedAugust 23, 2015
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