Reference no: EM132239585

Refer to the financial statements of Campbell Soup Company in Appendix A

EXERCISE 1 Interpreting Differences between Income and cash from operations

Campbell Soup

Required:
Explain how Campbell Soup Company can have net income of $401.5 million, but generate $805.2 million in cash from operations in Year 11. Explain this in language understood by a gen¬eral businessperson. Illustrate your explanation by reference to the major reconciling items.

EXERCISE 2 Anal zing Operating Cash Flows

The following data are taken from the records of Saro Corporation and subsidiaries for Year 1:

Net income............................................................................ $10,000

Depreciation, depletion, and amortization  ..................................... 8,000

Disposals of property, plant, and equipment (book value) for cash  1,000

Deferred income taxes for Year 1 (noncurrent)  ................................. 400

Undistributed earnings of unconsolidated affiliates  ............................. 200

Amortization of discount on bonds payable  ....................................... 50

Amortization of premium on bonds payable  ...................................... 60

Decrease in noncurrent assets  ..................................................... 1,500

Cash proceeds from exercise of stock options  ................................. 300

Increase in accounts receivable  ....................................................... 900

Increase in accounts payable  ...................................................... 1,200

Decrease in inventories  .................................................................. 850

Increase in dividends payable  ......................................................... 300

Decrease in notes payable to banks  ............................................... 400

Required:

a. Determine the amount of cash flows from operations for Year 1 (use the indirect format).
b. For the following items, explain their meaning and implications, if any, in adjusting net income to arrive at cash flows from operations.
(1) Issuance of treasury stock as employee compensation.
(2) Capitalization of interest incurred.
(3) Amount charged to pension expense differing from the amount funded.

EXERCISE 3 Interpreting Cash Rows

Indicate if each transaction and event is (1) a source of cash. (2) a use of cash, and/or (3) an adjustment leading to a source or use of cash (assume an indirect format). List also its placement in the statement of cash flows: operations (0), financing (F), investing (I), noncash significant NCS), noncash nonsignificant (NCN), or no effect (NE).

EXERCISE 4 Interpreting Cash Flows

Indicate if each transaction and event is (1) a source of cash. (2) a use of cash, and/or (3) an ad-justment leading to a source or use of cash (assume an indirect format). List also its placement in the statement of cash flows: operations (0), financing (F), investing (I), noncash significant (NCS), noncash no significant (NCN), or no effect (NE)

Attachment:- Homework.rar