Each of the following items must be considered in preparing

Each of the following items must be considered in preparing a statement of cash flows (indirect method) for Bastille Inc., which uses ASPE, for the year ended December 31, 2011.

1. Plant assets that cost $40,000 six years before and were being depreciated on a straight-line basis over 10 years with no estimated residual value were sold for $5,300.

2. During the year, 10,000 common shares were issued for $41 cash per share.

3. Uncollectible accounts receivable in the amount of $27,000 were written off against the allowance for doubtful accounts.

4. The company sustained a net loss for the year of $10,000. Depreciation amounted to $22,000. A gain of $9,000 was reported on the sale of land for $39,000 cash.

5. A three-month Canadian treasury bill was purchased for $50,000 on November 13, 2011. The company uses a cash and cash-equivalent basis for its statement of cash flows.

6. Patent amortization for the year was $18,000.

7. The company exchanged common shares for a 40% interest in TransCo Corp. for $900,000.

8. The company accrued a holding loss on investments accounted for at FV-NI.

Instructions

Identify where each item is reported in the statement of cash flows, if at all.

1.	Plant assets (cost)	$40,000)
	Accumulated depreciation ([$40,000 ¸ 10] X 6)	24,000)
	Carrying amount at date of sale	16,000)
	Sale proceeds	(5,300)
	Loss on sale	$10,700)

  The loss on sale of plant assets is reported in the operating activities section of the statement of cash flows. It is added to net income to arrive at net cash provided by operating activities.

  The sale proceeds of $5,300 are reported in the investing section of the statement of cash flows as follows:

  Sale of plant assets                          $5,300

2.	Shown in the financing activities section of a statement of cash flows as follows:
	Sale of common shares	$410,000

3. The write off of the uncollectible accounts receivable of $27,000 is not reported on the statement of cash flows. The write off reduces the Allowance for Doubtful Accounts balance and the Accounts Receivable balance. It does not affect cash flows.

4. The net loss of $10,000 should be reported in the operating activities section of the statement of cash flows. Depreciation of $22,000 is added to income in the operating section of the statement of cash flows. The gain on sale of land is deducted from income (loss) in the operating activities section of the statement of cash flows. The proceeds from the sale of land of $39,000 are reported in the investing activities section of the statement of cash flows. These four items might be reported as follows:

Cash flows from operating activities
Net loss		$(10,000)
Adjustments to reconcile net income
to net cash used in operations*:
Depreciation	22,000
Gain on sale of land	(9,000)

*Either net cash used or provided depending upon other adjust­ments. Given only the adjustments, the “net cash used” should be employed.

Cash flows from investing activities
Sale of land	$39,000

5. The purchase of the Canadian Treasury bill is not reported in the statement of cash flows. This instrument is considered a cash equivalent and therefore cash and cash equivalents have not changed as a result of this transaction.

6. The patent amortization of $18,000 is reported in the operating activities section of the statement of cash flows. It is added to net income in arriving at net cash provided by operating activities.

7. The exchange of common shares for an investment in TransCo Corp. is reported as a “non-cash investing and financing activity”, most likely in the notes. It is shown as follows:

Non-cash investing and financing activities
Purchase of investment by issuance
of common shares	$900,000

8. The accrual of a holding loss does not involve cash and would have caused a reduction of net income. It is reported in the operating activities section of the statement of cash flows. It is added to net income in arriving at net cash provided by operating activities.