Murdock carpet cleaners ended its first month of operations on june

Chapter 3

P3-42 Preparing Adjusting Entries, Financial Statements, and Closing Entries

Murdock Carpet Cleaners ended its first month of operations on June 30, 2014. Monthly financial statements will be prepaid. The unadjusted account balances are as follows.

	Murdock Carpet Cleaners Unadjusted Trial Balances June 30, 2014
		Debit	Credit
Cash		$1,180
Accounts Receivable		450
Prepaid Rent		3,100
Supplies		2,520
Equipment		4,440
Accounts Payable			$760
Common Stock			2,000
Retained Earings			5,300
Service Fee Earned			4,650
Wage Expense		1,020
		$12,710	$12,710

Chapter 4

M4-26. Calculating Net Cash Flow From Operating Activities (Indirect Method)

The following information was obtained from Galena Company’s comparative balance sheets. Assume that Galena company’s 2013 income statement showeddepreciation expense of $8,000. Gain on the sale of investments of $9,000, and a net income of $45,000. Calculate the net cash flow from operating activities using the indirect method.

	31-Dec-13	31-Dec-12
Cash	$19,000	$9,000
Accounts Receivable	44,000	35,000
Inventory	55,000	49,000
Prepaid Rent	6,000	8,000
Long-Term Investments	21,000	34,000
Plant assets	150,000	106,000
Accumulated depreciation	40,000	32,000
Accounts payable	24,000	20,000
Income tax payable	4,000	6,000
Common stock	121,000	92,000
Retained earnings	106,000	91,000

M4-29. Classifying Cash Flow Statement Components and Determining Their Effects

The following table presents selected items from a recent cash flow statement of Nordstroms, Inc

For each item, determine whether the amount would be disclosed in the cash flow statement under operating activities, investing activities, or financing activities. (Nordstrom uses the indirect method of reporting.)
For each item, determine whether it will appear as a positive or negative in determining the net increase in cash and cash equivalents.

1	Increase in accounts receivable
2	Capital expenditures
3	Proceeds from long-term borrowings
4	Increase in deferred income tax net liability
5	Principal payments on long-term borrowings
6	Increase in merchandise inventories
7	Decrease in prepaid expenses and other assets
8	Proceeds from issuances under stock compensation plans
9	Increase in accounts payable
#	Net earnings
#	Payments for repurchase of common stock
#	Increase in accrued salaries, wages, and retained benefits
#	Cash dividends paid
#	Depreciation and amortization expenses

E4-39. Analyzing Investing and Financing Cash Flows

During 2013, Paxon Corporation’s long-term investments account (at cost) increased $15,000, which was the net result of purchasing stocks costing $80,000 and selling stocks costing $65,000 at a $6,000 loss. Also, it bonds payable account decreased $10,000, the net result of issuing $130,000 of bonds and retiring bonds with a book value of $140,000 at a $9,000 gain. What items and amounts appear in the (a) cash flows from investing activities and (b) cash flows from financing activities sections of its 2013 statement of cash flows?

C4-59. Interpreting the Statement of Cash Flows

The statement of cash flows for Daimler AG follows:

Daimler AG Consolidated Statement of Cash Flows
(Millions of Euros)			Fiscal Year 2011
Profit before income taxes			8,449
Depreciation and amortization			3,575
Other non-cash expenses and income			-122
Gains (-)/ losses on disposals of assets			-102
Change in operating assets and liabilities
Inventories			-2,328
Trade Receivables			-620
Trade payables			1,762
Receivables from financial services			-4,526
Vehicles on operating leases			-2,874
other operating assets and liabilities			-1,093
Income tax paid			-2,817

Cash provided by/(used for) operating activities			-696
Additions to property, plant and equipment			-4,158
Additions to intangible assets			-1,718
Proceeds from disposals of property, plant and equipment and intangible assets			252
Investments in share property			-899
Proceeds from disposals of share property			203
Acquisitions of marketable debt securities			-5,478
Proceeds from sales of marketable debt securities			5,241
Other			20

Cash provided by/(used for) investing activities			-6,537
Change in short-term financing liabilities			2,589
Additions to long-term financing liabilities			26,037
Repayment of long-term financing liabilities			-20,560
Dividend paid to sharholders of Daimler AG			-1,971
Dividends paid to non-controlling interest			-278
Proceeds from issuance of share capital			71
Acquisitiion of treasury shares			-28
Acquisition of non-controlling interest in subsidiaries			-18

Cash provoded by/(used for) financing activities			5,842
Effect of foreign exchange rate changes on cash and cash equivalents			64

Net increase/(decrease) in cash and cash equivalents			-1,327
Cash and cash equivalents at the beginning of the period			10,903

Cash and cash equivalents at the end of the period			9,576

Daimler begins in cash flow statement with net income of € 8,449 million, then adds € 3,375 million for depreciation and amortization. Why is Daimler adding depreciation and amortization to net income in this computation?
Why does Daimler subtract €102 million of gains on disposals of assets in its indirect method cash flows from operating activities? If these gains are all created by disposals of property, plant and equipment and intangible assets, what was the book value of the assets Daimler disposed of during fiscal year 2011?
Daimler shows a negative €2,328 million for inventories in the statement of cash flows. Does this mean that Daimler paid €2,328 million for inventories in 2011? Explain.
Compute Daimler’s free cash flow for 2011. How did the company finance its investing activities?
Daimler reports a cash outflow from operating activities of €696 million, despite reporting net income of €8,449 million. What principal activities account for this difference? Does this raise concerns about the health of Daimler AG?

Murdock carpet cleaners ended its first month of operations on june

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