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STATEMENT OF CASH FLOWS:  REPORTING THE EFFECTS OF OPERATING, INVESTING, AND FINANCING ACTIVITIES ON CASH FLOWS   T4-X

4.31 b. continued.

Accumulated

Accounts PayableDepreciationBonds Payable

1601,440180

6(8)(5)142b192(3)90(9)

1661,490270

Common StockRetained Earnings

8461,376

182(10)(2)94198a(1)

1,0281,480

a$198 = $1,940 + $14 – $826 – $602 – $192 – $4 – $132.

bJournal entry made at time of sale:

Cash (Plug)98

Accumulated Depreciation142

Loss on Sale of Equipment4

Property, Plant, and Equipment244

c.During Year 2, cash flow from operations was more than sufficient to fund capital expenditures and pay dividends.  The firm issued common stock and used the proceeds to retire debt and increase the amount of cash on hand.  During Year 3, expenditures on property, plant and equipment increased significantly.  Operating cash flows were insufficient to fund these capital expenditures and pay dividends, so the firm issued additional bonds and common stock.

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