### Calculate the net amount of cash provided

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Question 1 - Using a Statement of Cash Flows

Wallace Company's statement of cash flows for the current year is summarized as follows.

Cash provided by operating activities \$275,000

Cash used in investing activities (140,000)

Cash provided by financing activities 45,000

Increase in cash during the year \$180,000

Cash balance, beginning of the year 75,000

Cash balance, end of the year \$255,000

a. Briefly explain what is included in each of the first three categories listed (i.e., the cash from operating, investing, and financing activities categories).

b. On the basis of the limited information presented, describe the company's change in cash position during the year and your interpretation of the strength of the company's current (end-of-year) cash position.

Question 2 - Computing Cash Flows

An analysis of the Marketable Securities control account of Fancher Products, Inc., shows the following entries during the year.

Balance, Jan. 1 \$290,000

Debit entries 125,000

Credit entries 140,000)

Balance, Dec. 31 \$275,000

In addition, the company's income statement includes a \$25,000 loss on sales of marketable securities. None of the company's marketable securities is considered a cash equivalent.

Compute the amounts that should appear in the statement of cash flows as:

a. Purchases of marketable securities.

b. Proceeds from sales of marketable securities.

Question 3 - Format of a Statement of Cash Flows

The accounting staff of Wyoming Outfitters, Inc., has assembled the following information for the current year ended December 31.

Cash and cash equivalents, Jan. 1 \$35,800

Cash and cash equivalents, Dec. 31 74,800

Cash paid to acquire plant assets 21,000

Proceeds from short-term borrowing 10,000

Collections on loans (excluding interest) 4,000

Proceeds from sales of plant assets 9,000

Dividends paid 55,000

Cash paid to suppliers and employees 635,000

Interest paid 19,000

Income taxes paid 71,000

Using this information, make the statement of cash flows. Include a proper heading for the financial statement, and classify the given information into the categories of operating activities, investing activities, and financing activities. Determine net cash flows from operating activities by the direct method. Place brackets around the dollar amounts of all cash disbursements.

Question 4 - An Analysis of Possible Reconciling Items

An analysis of the annual financial statements of O'Connell Corporation reveals the following.

a. The company had a \$5 million loss from a fire that destroyed an uninsured factory building.

b. Depreciation for the year amounted to \$9 million.

c. During the year, \$2 million in cash was transferred from the company's checking account into a money market fund.

d. Accounts receivable from customers increased by \$3.5 million over the year.

e. Cash received from customers during the year amounted to \$169 million.

f. Prepaid expenses decreased by \$1 million over the year.

g. Dividends declared during the year amounted to \$8 million; dividends paid during the year amounted to \$6 million.

h. Accounts payable (to suppliers of merchandise) increased by \$2.7 million during the year.

i. The liability for accrued income taxes payable amounted to \$5 million at the beginning of the year and \$3 million at year-end.

In the computation of net cash flows from operating activities by the indirect method, explain whether each of these items should be added to net income, deducted from net income, or omitted from the computation. Briefly explain your reasons for each answer.

Question 5 - Cash Flows from Investing Activities

Sorensen Company provides the following information related to its investing and financing activities for the current year.

Cash receipts:

Sale of common stock \$250,000

Sale of equipment (at \$34,000 loss) 156,000

Sale of land (at \$50,000 gain) 160,000

Cash payments:

Purchase of equipment \$178,000

Purchase of treasury stock 45,000

Retirement of debt 36,500

Dividends on preferred and common stock 75,000

a. Calculate the net amount of cash provided by or used for investing activities for the year.

b. What impact, if any, do the following facts have on your calculation? (1) Equipment was sold at a \$34,000 loss, and (2) land was sold at a \$50,000 gain.

c. Briefly explain your decision to exclude any of the items listed if they were not included in your calculation in part a.

Question 6 - Cash Flows from Financing Activities

Shepherd Industries had the following cash flows by major categories during the current year.

Cash provided by:

Receipts from customers \$560,000

Sale of bonds 420,000

Sale of treasury stock 52,000

Sale of equipment (at a \$56,000 loss) 236,000

Cash used for:

Payments to employees \$145,000

Payments to purchase inventory 190,000

Dividends on common stock 60,000

Purchase of treasury stock 20,000

Interest expense 82,000

a. Calculate the net amount of cash provided by or used for financing activities for the year.

b. Briefly justify why you excluded any of these items in your calculation in part a.

c. Briefly explain your treatment of interest expense in your calculation in part a.

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