Question

Exhibit 6.12 shows a simplified statement of cash flows for a period. Numbers appear on 11 of the lines in the statement. Other lines are various subtotals and grand totals; ignore these in the remainder of the problem. Assume that the accounting cycle is complete for the period and that the firm has prepared all of the financial statements. It then discovers that it has overlooked a transaction. It records that transaction in the accounts and corrects all of the financial statements. For each of the following transactions, indicate which of the numbered lines of the statement of cash flows change, and state the amount and direction of the change. If net income, line (3), changes, be sure to indicate whether it decreases or increases. Ignore income tax effects. record the transaction in the accounts. Then, for each line of the journal entry, identify the line of Exhibit 6.12 affected.)

Exhibit 6.12.
OPERATIONS
Cash Receipts from Customers . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . (1)
Less: Cash Payments to Suppliers, Employees, and Others. . . . . . . . . . −(2)
Cash Flow from Operations [= (1) – (2)]. . . . . . . . . . . . . . . . . . . . . . . . . −S1
Reconciliation of Net Income to Cash Flow from Operations
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3)
Additions to Net Income to Compute Cash Flow from Operations .. . . . . +(4)
Subtractions from Net Income to Compute Cash Flow from Operations . −(5)
Cash Flow from Operations [= (3) + (4) – (5)] . . . . . . . . . . . . . . . . . . . . . . . S1
INVESTING
Proceeds from Dispositions of “Investing” Assets . . . . . . . . . . . . . . . . . . . +(6)
Cash Used to Acquire “Investing” Assets. . . . . . . . . . . . . . . . . . . . . . . . . . −(7)
Cash Flow from Investing [= (6) – (7)] . . . . . . . . . . . . . . . . . . . . . . . . . . .. . S2
FINANCING
Cash Provided by Increases in Debt or Capital Stock . . . . . . . . . . . . . . .. . +(8)
Cash Used to Reduce Debt or Capital Stock . . . . . . . . . . . . . . . . . . . . . . . −(9)
Cash Used for Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . −(10)
Cash Flow from Financing [= (8) – (9) – (10)] . . . . . . . . . . . . . . . . . . . . . . S3
Net Change in Cash [= S1 + S2 + S3]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11)
Cash, Beginning of the Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . S4
Cash, End of the Period [= (11) + S4] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S5

a. Amortization of a patent, treated as an expense, $600.
b. Acquisition of a factory site financed by issuing capital stock with a market value of $50,000 in exchange.
c. Purchase of inventory on account for $7,500; assume inventory had increased for the year before the firm recorded this overlooked transaction.
d. Purchase of inventory for cash of $6,000; assume inventory had increased for the year before the firm recorded this overlooked transaction.
e. Uninsured fire loss of merchandise inventory totaling $1,500; assume inventory had increased for the year before the firm recorded this overlooked transaction.
f. Collection of an account receivable totaling $1,450; assume accounts receivable had increased for the year before the firm recorded this overlooked transaction.
g. Issue of bonds for $10,000 cash.
h. Sale of equipment for cash at its carrying value of $4,500.



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  • CreatedMarch 04, 2014
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