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.

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.

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

1. 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.)
2. For each item, determine whether it will appear as a positive or negative in determining the net increase in cash and cash equivalents.

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:

1. 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?
2. 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?
3. 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.
4. Compute Daimler’s free cash flow for 2011. How did the company finance its investing activities?
5. 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?