Posted: April 18th, 2016

Use the following legend to indicate how each transaction would be reported on the statement of cash flows??

EXERCISE 12-20: Classification of Activities

Use the following legend to indicate how each transaction would be reported on the statement of cash flows. (Assume that the stocks and bonds of other companies are classified as long-term investments.)
II = Inflow from investing activities
OI = Outflow from investing activities
IF = Inflow from financing activities
OF = Outflow from financing activities
CE = Classified as a cash equivalent and included with cash for purposes of preparing the statement of cash flows

1. Purchased a six-month certificate of deposit
2. Purchased a 60-day Treasury bill
3. Issued 1,000 shares of common stock
4. Purchased 1,000 shares of stock in another company
5. Purchased 1,000 shares of its own stock to be held in the treasury
6. Invested $1,000 in a money market fund
7. Sold 500 shares of stock to another company
8. Purchased 20-year bonds of another company
9. Issued 30-year bonds
10. Repaid a six-month bank loan

PROBLEM 13-6: Liquidity Analyses for Coca-Cola and Pepsi

The following information was summarized from the balance sheets of the Coca-Cola Company and Subsidiaries at December 31, 2010, and PepsiCo Inc. and Subsidiaries at December 25, 2010:
(in millions) Coca-Cola PepsiCo
Cash and cash equivalents $8,517 $5,943
Short-term investments 2,682 426
Marketable securities 138 –
Accounts and notes receivables, net* 4,430 6,323
Inventories 2,650 3,372
Prepaid expenses and other current assets 3,162 1,505
Total current assets $21,579 $17,569
Current liabilities $18,508 $15,892
*Described as “trade accounts receivable, less allowances” by Coca-Cola.

1. Using the information provided, compute the following for each company at the end of 2010:
Current ratio:
Quick ratio:

2. Coca-Cola reported cash flow from operations of $9,532 million during 2010. PepsiCo reported cash flow from operations of $8,448 million. Current liabilities reported by Coca-Cola at December 31, 2009, and PepsiCo at December 26, 2009, were $13,721 million and $8,756 million, respectively. Compute the cash flow from operations to current liabilities ratio for each company for 2010.
3. Comment briefly on the liquidity of each of these two companies. Which appears to be more liquid?
4. What other ratios would help you more fully assess the liquidity of these companies?

EXERCISE 13-8 Solvency Analyses for IBM

The following information was obtained from the comparative financial statements included in IBM’s 2010 annual report. (All amounts are in millions of dollars).

12/31/2010 12/31/2009
Total liabilities $90,279 $86,267
Total stockholders’ equity 23,172 22,755

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