Acct 229
Ch. 13 Cash Flows
Recommended Problems - Solutions
1. Selected information from Brook Corporation’s accounting records and financial statements for
2008 is as follows:
Cash Flow from Operating Activities $1,500,000
Bond Payable issued to acquire land and building 1,800,000 Non-cash (omit)
Proceeds from sale of equipment + 400,000 Investing
Cost of office equipment purchased (200,000) Investing
On the statement of cash flows for the year ended December 31, 2008, Brook should disclose a net
increase in cash in the amount of:
Cash Flow from Operations $1,500,000
Cash Flow from Investing 200,000
Cash Flow from Financing - 0 -
Change in Cash $1,700,000
2. In a statement of cash flows (indirect method), the amortization of a patent should be presented as
a (an):
Addition to net income - add back non-cash items to net income (i.e. those expenses that
originally reduced net income, but never cause a cash outflow.)
3. The Cash Flow from Operating Activities in Seat’s statement of cash flows for 2008 was
$8,000,000. For 2008, depreciation on fixed assets was $3,800,000, amortization of intangibles
was $100,000 and dividends on common stock were $2,000,000. Based on the preceding
information, Seat’s net income for 2008 was:
Net Income ??
+ Depr. Exp. $3,800,000
+ Amort Exp. 100,000
C. F. Operations $8,000,000
Working backwards, you can solve for Net Income, which must have been $4,100,000
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