Chapter 21 Homework: ACCT3202 Spring 2016

(1). For each of the three independent situations below, prepare journal entries that summarize the selling and collection activities for the reporting period in order to determine the amount of cash received from customers and to explain the change in each account shown. All dollars are in millions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

In preparation for developing its statement of cash flows for the year ended December 31, 2016, Rapid Pac, Inc., collected the following information:

($ in millions)  Fair value of shares issued in a stock dividend$48.0

  Payment for the early extinguishment of

      long-term bonds (book value: $76.0 million)

81.0

  Proceeds from the sale of treasury stock (cost: $12.0 million)

17.0

  Gain on sale of land

2.1

  Proceeds from sale of land

6.3

  Purchase of Microsoft common stock

132.0

  Declaration of cash dividends

46.0

  Distribution of cash dividends declared in 2015

42.0

Required:1.

In Rapid Pac’s statement of cash flows, what were net cash inflows (or outflows) from investing activities for 2016? (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

2. In Rapid Pac’s statement of cash flows, what were net cash inflows (or outflows) from financing activities for 2016? (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

(3)

Comparative balance sheets for 2016 and 2015 and a statement of income for 2016 are given below for Metagrobolize Industries. Additional information from the accounting records of Metagrobolize also is provided.

METAGROBOLIZE INDUSTRIES

Comparative Balance Sheets

December 31, 2016 and 2015

($ in 000s)

2016

2015  Assets

  Cash$460  $190    Accounts receivable

470  

250    Inventory

620  

380    Land

625  

575    Building

800  

800       Less: Accumulated depreciation

(200) 

(170)   Equipment

2,800  

2,510       Less: Accumulated depreciation

(451) 

(420)   Patent

1,600  

1,800  

$6,724  $5,915  

  Liabilities

  Accounts payable$720  $470    Accrued expenses payable

210  

165    Lease liability—land

150  

0    Shareholders' Equity

  Common stock

2,650  

2,500    Paid-in capital—excess of par

500  

470    Retained earnings

2,494  

2,310  

$6,724  $5,915  

METAGROBOLIZE INDUSTRIES

Income Statement

For the Year Ended December 31, 2016

($ in 000s)  Revenues

     Sales revenue$2,807  

     Gain on sale of land

60  $2,867  

  Expenses

     Cost of goods sold$920  

     Depreciation expense—building

30  

     Depreciation expense—equipment

328  

     Loss on sale of equipment

10  

     Amortization of patent

200  

     Operating expenses

600  

2,088  

  Net income

$779  

Additional information from the accounting records:a.During 2016, equipment with a cost of $330,000 (90% depreciated) was sold.b.

The statement of shareholders' equity reveals reductions of $180,000 and $415,000 for stock dividends and cash dividends, respectively.

Required:

Prepare the statement of cash flows of Metagrobolize for the year ended December 31, 2016. Present cash flows from operating activities by the direct method. (Enter your answers in thousands (i.e., 5,000 should be entered as 5). Amounts to be deducted should be indicated with a minus sign.)

Portions of the financial statements for Parnell Company are provided below.

PARNELL COMPANY

Income Statement

For the Year Ended December 31, 2016

($ in 000s)  Revenues and gains:

       Sales$720

       Gain on sale of buildings11

$731

  Expenses and loss:

       Cost of goods sold$260

       Salaries112

       Insurance32

       Depreciation115

       Interest expense42

       Loss on sale of machinery10

571

  Income before tax

160

       Income tax expense

80

  Net income

$80

        PARNELL COMPANY

       Selected Accounts from Comparative Balance Sheets

       December 31, 2016 and 2015

       ($ in 000s)

  Year

  2016  2015  Change  Cash$126   $108   $18

  Accounts receivable316   224   92

  Inventory329   417   (88)    Prepaid insurance69   80   (11)    Accounts payable202   125   77

  Salaries payable118   101   17

  Deferred income tax liability76   60   16

  Bond discount180   208   (28)  

Required:1.

Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using the direct method. (Enter your answers in thousands (i.e., 5,000 should be entered as 5).Amounts to be deducted should be indicated with a minus sign.)

Comparative balance sheets for 2016 and 2015 and a statement of income for 2016 are given below for Metagrobolize Industries. Additional information from the accounting records of Metagrobolize also is provided.

METAGROBOLIZE INDUSTRIES

Comparative Balance Sheets

December 31, 2016 and 2015

($ in 000s)

2016

2015 Assets

  Cash$530  $265    Accounts receivable

610  

320    Inventory

760  

415    Land

600  

525    Building

700  

700       Less: Accumulated depreciation

(250) 

(220)   Equipment

3,150  

2,930       Less: Accumulated depreciation

(418) 

(380)   Patent

1,300  

1,600  

$6,982  $6,155  

  Liabilities

  Accounts payable$860  $710    Accrued expenses payable

280  

235    Lease liability—land

150  

0    Shareholders' Equity

  Common stock

3,650  

3,500    Paid-in capital—excess of par

550  

485    Retained earnings

1,492  

1,225  

$6,982  $6,155  

METAGROBOLIZE INDUSTRIES

Income Statement

For the Year Ended December 31, 2016

($ in 000s)  Revenues

     Sales revenue$3,101  

     Gain on sale of land

95  $3,196  

  Expenses

     Cost of goods sold$1,060  

     Depreciation expense—building

30  

     Depreciation expense—equipment

524  

     Loss on sale of equipment

20  

     Amortization of patent

300  

     Operating expenses$400  

2,334  

  Net income

$862  

Additional information from the accounting records:a.During 2016, equipment with a cost of $540,000 (90% depreciated) was sold.b.

The statement of shareholders’ equity reveals reductions of $215,000 and $380,000 for stock dividends and cash dividends, respectively.

Required:

Prepare the statement of cash flows for Metagrobolize Industries using the indirect method. (Enter your answers in thousands. (i.e., 10,000 should be entered as 10).) Amounts to be deducted should be indicated with a minus sign.)