This case is adapted
from Appendix B of the exposure draft leading up to the FASBâs standard on cash
flow reporting. Prepare in good form an
Statement of Cash Flow. Use the direct format. The following information is about the
activities of Company D, a diversified multinational corporation with interests
in manufacturing and financial services, for the year ending December 31, 20XX:
a. Company D purchased new property, plant and
equipment for $4,000. The company also
sold some of its equipment with a book value of $1,900 for $2,500.
b. Company D entered into capital lease
transactions for the use of new equipment, and the related lease obligation was
c. Company D purchased all the common stock
of Company ABC for $900 in cash. Company
D thereby acquired Company ABCâs working capital other than cash (a net current
liability of $100) and its property, plant and equipment valued at $3,000,
while assuming Company ABCâs long term debt of $2,000.
d. Cash borrowed by Company D for the year
consisted of short-term debt of $75 and long term debt of $1,250.
e. Company D paid $300 on its short-term
debt and $125 on capital lease obligations during the year.
f. Company D issued $750 in common stock
during the year, $250 of which was issued to settle long-term debt and $500 of
which was issued for cash.
g. Company D paid $450 as dividends to its
stockholders during the year.
h. Company Dâs financial services
activities during the year included purchases and sales of investment
securities amounting to $4,700 and $5,000, respectively. Lending activities produced new loans of
$7,500 and collections of loans of $5,800.
Customer deposits in its banking subsidiary increased by $1,100.
The following are the results of Company Dâs operations for
operating working capital items other than cash:
Increase in inventory
Decrease in accounts receivable
Increase in accounts payable
Changes in interest
Increase in interest earned but not
Increase in interest accrued but not
Cash received from
customers for sales of goods
Cash dividends received
Cash paid to
Cash paid for
effect on cash and cash equivalents of changes in the exchange rate for the
year was $100.
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