Question

17) Yellow Company reported net income of $520,000 for the year ended 12/31/21. Included in the computation of net income were: depreciation expense, $85,000; amortization of a patent, $40,000; income from an investment in common stock of XYZ Inc., accounted for under the equity method, $62,000; and amortization of a bond discount, $17,000. Yellow also paid an $60,000 dividend during the year. The net cash provided (used) by operating activities would be reported at ______

18) Apple, Inc. reported net income of $65,000 for the year ended December 31, 2021. Included in net income were depreciation expense of $20,200 and a gain on sale of equipment of $5,400. The equipment had an historical cost of $70,000 and accumulated depreciation of $55,000. Each of the following accounts increased during 2021:

Land $13,000

Prepaid rent $13,600

Available-for-sale securities $3,000

Bonds payable $20,000

What is the amount of cash provided by or used by investing activities for Apple, Inc. for the year ended December 31, 2021?

19) Maine Company reported net income of $580,000 for the year ended 12/31/21. Included in the computation of net income were: depreciation expense, $82,000; amortization of a patent, $55,000; income from an investment in common stock of Blue Inc., accounted for under the equity method, $72,000; and amortization of a bond discount, $15,000. Maine paid a $104,000 dividend during the year. The net cash provided by operating activities would be reported at________

20) Rangers Co. provided the following information on selected transactions during 2021:

Purchase of land by issuing bonds $1,300,000

Proceeds from issuing bonds 2,500,000

Purchases of inventory 3,800,000

Purchases of treasury stock 460,000

Dividends paid to common stockholders 340,000

Proceeds from issuing common stock 1,600,000

Proceeds from sale of equipment 280,000

The net cash provided (used) by financing activities during 2021 is ________

21) The following information on selected cash transactions for 2021 has been provided by Giants Company:

Proceeds from sale of land $290,000

Proceeds from long-term borrowings 480,000

Purchases of plant assets 246,000

Purchases of inventories 1,020,000

Proceeds from sale of Giants common stock 385,000

What is the cash provided (used) by investing activities for the year ended December 31, 2021, as a result of the above information?

Answer 1

17)

In this question, the Net Income of the company is given and we have to find out the cash provided for operating activities only. Hence, all the non cash expenses like depreciation, amortsation and expenses from financing or investing activities are to be added back to the Net Income and the income from financing and investing activities should be subtracted to get the cash used for operating activities.

Yellow Company
Calculation of Cash provided for Operating activities for the year ended 31st December, 2021
Particulars	Amount	Amount
Net Income		$ 520,000.00
Add:
Depreciation expense being a non cash expense	$ 85,000.00
Amortisation of patent being a non cash expens	$ 40,000.00
Amortisation of a bond discount being the discount from investing activities	$ 17,000.00	$ 142,000.00
Less:
Income from investment in common stock	$ 62,000.00	$    62,000.00
Net Cash flow from operating activities	$ 600,000.00

The amount paid as a dividend is a distribution after Net Income is arrived, hence the same won't effect the cash flows.

18)

Apple, Inc.
Calculation of Cash provided for investing activities for the year ended 31st December, 2021
Particulars	Amount	Amount
Cash received from sale of eqipment (Note: 1)	$ 20,400.00	$ 20,400.00
Less:
Purchase of land	$ 13,000.00
Available for sale securities	$   3,000.00
Purchase of Bonds payable	$ 20,000.00	$ 36,000.00
Net Cash flow from Investing activities	$ (15,600.00)

Note: 1

Calculation of receipts on sale of equipment

It is given that,

Cost = $ 70,000

Accumulated Depreciation = $ 55,000

Gain on sale = $ 5,400

Now we all know that,

Gain/(Loss) = Sale value - Carrying value

= Sale value - (Cost - Accumulated Depreciation)

$ 5,400 = Sale Value - ($ 70,000 - $ 55,000)

$ 5,400 = Sale Value - ($ 15,000)

Sale Value = $ 15,000+$ 5,400

Sale Value = $20,400

Note : 2

Increase in the values of Prepaid rent, Gain on sale of equipment are not part of investing activities.

19)

Marine Company
Calculation of Cash provided for operating activities for the year ended 31st December, 2021
Particulars	Amount	Amount
Net Income		$ 580,000.00
Add:
Depreciation expense being a non cash expense	$ 82,000.00
Amortisation of a bond discount being the discount from investing activities	$ 15,000.00
Amortisation of patent being a non cash expens	$ 55,000.00	$ 152,000.00
Less:
Income from investment in common stock	$ 72,000.00	$    72,000.00
Net Cash provided for operating activities	$ 660,000.00

In this question, the Net Income of the company is given and we have to find out the cash provided for operating activities only. Hence, all the non cash expenses like depreciation, amortsation and expenses from financing or investing activities are to be added back to the Net Income and the income from financing and investing activities should be subtracted to get the cash used for operating activities.

Also, dividend is an after Net Income payment and it wont effcet the Net Income.

20)

Rangers Co
Calculation of Cash provided by Financing activities for the year ended 31st December, 2021
Particulars	Amount	Amount
1. Receipts
Proceeds from issue of common stock	$ 1,600,000.00	$ 1,600,000.00
2. Payments
Dividend Paid	$   340,000.00
Purchase of Treasury Stock	$   460,000.00	$   800,000.00
Net Cash provided by Financing activities ( 1-2)	$   800,000.00

The following other items given in the question are not included for following reasons:

a) Purchase of land by issuing bonds : It is to be understood that purchase of an asset by issuing bonds doesn't result in any cash flow as such.However, it increased both Liabilities and Assets.

b) Purchases of Inventory : Whne we say inventory, it means it relates to operations of the business and hence, it cannot be part of Financing activities.

c) Proceeds from sale of equipment: The amount recieved from sale of eqipment is a cash flow from investing activities.

21)

Giants Company
Calculation of Cash provided by Investing activities for the year ended 31st December, 2021
Particulars	Amount	Amount
1. Receipts
Proceeds from sale of land	$   290,000.00	$   290,000.00
2. Payments
Purchases of Plant assets	$   246,000.00	$   246,000.00
Net Cash provided by Investing activities ( 1-2)	$      44,000.00

The following other items given in the question are not included for following reasons:

a) Proceeds from Long term borrowing : These are cash flows generated from the financing activities of the business.

b) Purchases of Inventory: When we say inventory, it means it relates to operations of the business and hence, it cannot be part of Financing activities.

c) Proceeds from sale of common stock: These are cash flows generated from the financing activities of the business.