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Cash Flow Analysis for Investors

The document provides the comparative balance sheet and income statement of Rolling Hills, Inc. for 2012 and 2011. It shows that in 2012, Rolling Hills purchased $23,600 of land by financing it entirely with long-term notes payable. No other significant transactions occurred. To prepare the statement of cash flows for 2012 using the indirect method, one would start with net income of $97,800 and make adjustments for non-cash items like depreciation and changes in balance sheet accounts to arrive at cash flow from operating activities. The cash flow statement would also include an entry for the purchase of the land under investing activities and the related financing with long-term notes under financing activities. Understanding a company's cash flows can help evaluate

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142 views3 pages

Cash Flow Analysis for Investors

The document provides the comparative balance sheet and income statement of Rolling Hills, Inc. for 2012 and 2011. It shows that in 2012, Rolling Hills purchased $23,600 of land by financing it entirely with long-term notes payable. No other significant transactions occurred. To prepare the statement of cash flows for 2012 using the indirect method, one would start with net income of $97,800 and make adjustments for non-cash items like depreciation and changes in balance sheet accounts to arrive at cash flow from operating activities. The cash flow statement would also include an entry for the purchase of the land under investing activities and the related financing with long-term notes under financing activities. Understanding a company's cash flows can help evaluate

Uploaded by

mohitgaba19
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Preparing the statement of cash flows—indirect method with noncash transactions The 2012 comparative balance sheet

ROLLING HILLS, INC.


Comparative Balance Sheet
December 31, 2012 and 2011

Current assets:
Cash and cash equivalents
Accounts receivable
Inventories
Plant assets:
Land
Equipment, net
Total assets
Current liabilities:
Accounts payable
Accrued liabilities
Long-term liabilities:
Notes payable
Stockholders’ equity:
Common stock
Retained earnings
Total liabilities and stockholders’ equity

ROLLING HILLS, INC.


Income Statement
Year Ended December 31, 2012
Revenues:
Sales revenue
Interest revenue
Total revenues
Expenses:
Cost of goods sold
Salary expense
Depreciation expense
Other operating expense
Interest expense
Income tax expense
Total expenses
Net income
Additionally, Rolling Hills purchased land of $23,600 by financing it 100% with long-term notes payable
during 2012. During the year, there were no sales of land or equipment, no additional issuances of
notes payable, no retirements of stock, and no treasury stock transactions.
Requirements
1. Prepare the 2012 statement of cash flows, formatting operating activities by the indirect method.
2. How will what you learned in this problem help you evaluate an investment?
comparative balance sheet and income statement of Rolling Hills, Inc., follow:

Land worth $ 23,600 was purchased by financing with long term notes
Cash flow from Operating Activities
2012 2011 Increase Net Income $ 97,800
(Decrease) add: Depreciation expense $ 14,400
less: Increase in Accounts Receivable $ 1,200
$ 26,400 $ 15,900 $ 10,500 add: Decrease in Inventories $ 11,900
26,700 25,500 1,200 add: Increase in Accounts Payable $ 4,900
79,800 91,700 -11,900 less: Decrease in Accrued Liabilities $ 2,100

34,600 11,000 23,600


103,900 89,700 14,200 Cash flow from Investing Activities
$ 271,400 $ 233,800 $ 37,600 Payment of long term notes $ -46,600

$ 35,500 $ 30,600 $ 4,900 Cash flow from Financing Activities


28,600 30,700 -2,100 Issue of Common Stock $ 23,900
Payment of Dividends $ -63,900
78,000 101,000 -23,000

88,800 64,900 23,900


40,500 6,600 33,900
$ 271,400 $ 233,800 $ 37,600 101000
78000 23600
46600 124600

$ 436,000
8,000 89700
444,000 103900 14400
200 104100
$ 202,200
78,400
14,400
10,200
21,900
19,100
346,200
$97,800 63900
cing with long term notes payable during 2012.

$ 125,700

$ -46,600

$ -40,000

$ 39,100
$ 10,500
$ 28,600

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