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A8_Check Assignment #8 Check Numbers Problem #1 Net cash flows from financing: -$36 Problems #2 and #3 Net cash flows from operations: $2,000 Problem #4 Follow the notes for the different classifications. ACCTG472_A8_sol Page 1 THE PENNSYLVANIA STATE UNIVERSITY Accounting 472 Intermediate Financial Accounting II – Spring 2021 Assignment #8 GENERAL INSTRUCTIONS: This assignment is due on Thursday, April 29tj at 5:00 p.m. Please submit your solution on Canvas using Excel by 5:00 p.m. on the due date. Note that late assignments will not be accepted. Problem #1 Investing and Financing Cash Flows Century Airlines had the following transactions during the year ended 2021: Transaction (Amount in $ million) Reacquired 10,000 shares of common stock 52 Sale of land proceeds 42 Purchase of an office building 210 Issued 5,000 shares of common stock 24 Cash dividend declared during 2021 14 Gain on sale of land 19 Cash dividend distributed during 2021 8 Cash received on a note receivable ($15 represents interest) 45 Purchase of trading securities (classified as a cash equivalent) 32 Property dividend distributed 7 REQUIRED: 1. Calculate the net investing cash inflow or outflow for Century Airlines during 2021. 2. Calculate the net financing cash inflow or outflow for Century Airlines during 2021. Page 2 Problem #2 Statement of Cash Flow, Direct Method The Nettle Clothing Company prepared the following comparative balance sheet for 2021 and 2020 and income statement for 2021: Nettle Clothing Company Comparative Balance Sheet (in 000’s) December 31, 2021 and December 31, 2020 Dec. 31, 2021 Dec. 31, 2020 Cash $125,000.00 $80,000.00 Accounts Receivable $30,000.00 $40,000.00 Inventory $70,000.00 $80,000.00 Patent $70,000.00 $75,000.00 Property, Plant and Equipment $650,000.00 $700,000.00 Accumulated Depreciation -$469,000.00 -$424,000.00 Total Assets $476,000.00 $551,000.00 Accounts Payable $27,000.00 $22,000.00 Wages Payable $18,000.00 $12,000.00 Income Tax Payable $12,000.00 $23,000.00 Notes Payable $27,000.00 $17,000.00 Common Stock, $10 par $102,000.00 $100,000.00 Paid-in Capital--Excess of Par $224,000.00 $210,000.00 Retained Earnings $66,000.00 $167,000.00 Total Liabilities and Owners' Equity $476,000.00 $551,000.00 Nettle Clothing Company Income Statement (in 000’s) For the Year Ended December 31, 2021 Income Statement (in 000s) Sales Revenue $690,000.00 Cost of Goods Sold -$633,000.00 Patent Amortization -$5,000.00 Depreciation Expense -$55,000.00 Wage Expense -$40,000.00 Loss on Sale of Equipment -$15,000.00 Gain on Sale of Land $4,000.00 Income Tax Expense -$35,000.00 Net Income -$89,000.00 Page 3 During 2021, Nettle Clothing had the following other transactions: 1. Sold land of $79,000 to another company. 2. Issued 200,000 shares of common stock for $80 per share. Total proceeds of $16,000. 3. Sold equipment of $36,000 with accumulated depreciation of $10,000. 4. Issued debt of $10,000. 5. Bought new equipment for $65,000. 6. Declared and paid a cash dividend during the year of $12,000. REQUIRED: Prepare Nettle Clothing’s statement of cash flows using the direct method. Problem #3 Statement of Cash Flows, Indirect Method Use the same information for Nettle Clothing Company for 2021 and 2020. REQUIRED: Prepare Nettle Clothing’s statement of cash flows using the indirect method. Problem #4 Operating and Finance/Sales Type Leases and the Statement of Cash Flows On January 2, 2021, Benchmark Company leased equipment for a period of three years. The economic life of the asset is five years. On January 2, the first lease payment of $435,000 was paid. On December 31, the second lease payment of $435,000 was paid. For the second payment, $145,000 represented interest expense; the remaining $290,000 represented a reduction in principal. REQUIRED: 1. If the lease is an operating lease for Benchmark Company, how do the lease payments affect their statement of cash flow at the end of 2021? If the lessor also classifies the lease as an operating lease, how do the lease payments affect their statement of cash flow at the end of 2021? 2. Alternatively, if the lease is a finance lease for Benchmark Company, how do the lease payments affect their statement of cash flow at the end of 2021? If the lessor also classifies the lease as a sales-type lease, how do the lease payments affect their statement of cash flow at the end of 2021?