[Solution]This case is adapted from Appendix B of the exposure draft leading up to the FASB’s

This case is adapted from Appendix B of the exposure draft leading up to the FASB’s standard on cash flow reporting. Prepare in good form…

This case is adapted
from Appendix B of the exposure draft leading up to the FASB’s 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
$750.
c. Company D purchased all the common stock
of Company ABC for $900 in cash. Company
D thereby acquired Company ABC’s working capital other than cash (a net current
liability of $100) and its property, plant and equipment valued at $3,000,
while assuming Company ABC’s 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 D’s 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.
i.
The following are the results of Company D’s operations for
the year.
Net income
$3,000
Depreciation and
amortization
$1,500
Deferred taxes
$150
Changes in
operating working capital items other than cash:
Increase in inventory
$4,000
Decrease in accounts receivable
$2,000
Increase in accounts payable
$1,150
Changes in interest
accruals:
Increase in interest earned but not
received
$350
Increase in interest accrued but not
paid
$100
Cash received from
customers for sales of goods
$10,000
Cash dividends received
$700
Cash paid to
suppliers, employees
$6,000
Cash paid for
interest, taxes
$1,750
j.
The
effect on cash and cash equivalents of changes in the exchange rate for the
year was $100.

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