P7-1

WORKSHEET TO COMPUTE CASH FLOW FROM OPERATIONS (IN MILLIONS)

DIRECT (INFLOW-OUTFLOW) PRESENTATION
CAMPBELL SOUP — YEAR ENDED JULY 28, YEAR 11
Ref. Reported Adjust. Revised

Cash Receipts from Operations

Net Sales.......................................................... 13 $6,204.1 $7.5 $6,211.6
Other revenue and income............................. 19 26.0 C 26.0
(I) D in current receivables............................. 61 17.1 C 17.1
(I) D in noncurrent receivables......................
= CASH COLLECTIONS................................ $6,247.2 $7.5
$6,254.7

Cash Disbursements for Operations

Total expenses (include min. int. & taxes) a $5,831.0 $7.5 $5,838.5

Less: Expenses & losses not using cash:

- Depreciation and amortization..................... 57 (208.6) (208.6)
- Noncurrent deferred income taxes.............. 59 (35.5) (35.5)
- Other, net....................................................... 60 (63.2) (63.2)

Change in Current Assets and Liabilities

related to Operations
I (D) in inventories......................................... 62 $ (48.7) $ (48.7)
I (D) in prepaid expenses.............................. 35 (25.3) (25.3)
(I) D in accounts payable.............................. 41 42.8 42.8
(I) D in taxes payable.................................... 44 (21.3) (21.3)
(I) D in accruals, payrolls, etc. b................... 175 (26.8) (26.8)
I or D in noncurrent accounts c.................... 5.8 0.0 5.8
= CASH DISBURSEMENTS............................. $5,450.2 $7.5 $5,457.7

Dividends Received
Equity in income of
 unconsolidated affiliates.............................. 24 2.4 2.4
Distributions beyond equity
in income of affiliates c................................. 5.8 0.0 5.8
= Dividends from unconsol. affiliates............ 169A $ 8.2 $0.0 $ 8.2
CASH FLOW FROM OPERATIONS ............... $ 805.2 $0.0 $ 805.2

a
Total costs and expenses [22A] + Taxes on earnings [27] + Minority interests [25] +
Interest income [19] = $5,531.9 + $265.9 + $7.2 + $26.0 = $5,831
b
It is assumed that accruals, payrolls, etc., are part of item [175].
c
A reconciling amount to tie in with the $8.2 dividends from affiliates (item 169A)
versus equity in earnings of affiliates (item 24).
P7-3
a.

Zett Company
Statement of Cash Flows
For the Year Ended December 31, Year 2

Cash flows from operating activities

Net Income................................................................... $7,000
Add (deduct) items to convert to cash basis
Depreciation............................................................. 5,000
Loss on sale of fixed assets................................... 1,000
Gain on sale of investment..................................... (3,000)
Decrease in inventory............................................. 2,000
Increase in receivables........................................... (5,000)
Decrease in accounts payables.............................. (7,000)
Net cash provided from operating activities 0

Cash flows from investing activities

Sale of fixed assets...................................................... 6,000
Sale of investments..................................................... 9,000
Purchase of fixed assets............................................. (4,000)
Net cash provided from investing activities 11,000

Cash flows from financing activities

Sale of unissued common stock................................ 1,000
Purchase of treasury stock......................................... (11,500)
Net cash used by financing activities........................ (10,500)
Net Increase in cash.................................................... 500

Supplemental disclosure of Cash Flow information

Cash paid during the year for:

Interest........................................................................................... 4,000
Income taxes...................................................................... 6,000

Schedule of noncash investing and financing activities:

Acquisition of fixed assets by issue of bonds........................................ 30,000

Conversion of bonds into common stock.............................................. 10,000
P7-5

Niagara Company
Statement of Cash Flows
For Year Ended December 31, Year 9

Cash flows from operating activities

Cash receipts from operations
Sales [a]........................................................................... $980
Cash payments for operations
Purchases of inventory [b]............................................. (645)
Selling and general expenses ....................................... (100)

Interest expense [c].................................................................... (40)

Income tax expense [d].................................................. (30)
Cash flows from operations................................................. $165

Cash flows from investing activities

Purchase of fixed assets......................................... (150)

Cash flows from financing activities

Repayment of notes payable................................... (25)

Issuance of long-term debt...................................... 50
Cash dividends paid................................................. (30)
Cash flows used in financing.............................................. (5)
Net increase in cash............................................................. $ 10
Beginning cash balance....................................................... 50
Ending cash balance............................................................ $ 60

Notes:
[a] Sales................................................................................ $1,000
Less increase in receivables......................................... (20)
Cash collections............................................................ $980
[b] Cost of goods sold......................................................... $ (650)
Add increase in inventories........................................... (20)
Less increase in payables............................................. 25
(645)
[c] Interest expense............................................................. $ (50)
Less increase in interest payable.................................. 10
(40)
[d] Income tax expense........................................................ $ (40)
Less increase in deferred income tax.......................... 10
 (30)
Note: Purchase of fixed assets is computed from depreciation expense plus change in
fixed assets ($100+$50). Dividends paid is computed from net income and change in
retained earnings ($60-$30).

Supporting schedule for CFO:

Net income.................................................................................................................... $ 60
Add depreciation........................................................................................... 100

Increase in deferred tax................................................................................ 10

Increase in receivables................................................................................. (20)

Increase in inventory.................................................................................... (20)

Increase in accounts payable...................................................................... 25

Increase in interest payable......................................................................... 10

Cash flows from operations......................................................................... $165

P7-7

Part I.

Effects Analytical Entries (Optional)

a. [DL, 100,000] Current Portion of L-T Debt............... 100,000

[-C, 100,000] Cash.............................................. 100,000

b. [+C, 4,000] Cash..................................................... 4,000

[AD, 4,000] Loss..................................................... 1,000
[YA, 1,000] Equipment.................................... 5,000
[-Y, 1,000]

c. [-Y, 75,000] Loss..................................................... 75,000

[CC, 75,000] Inventory....................................... 75,000

d. [+C, 28,000] Cash..................................................... 28,000

[DE, 28,000] Paid-In Capital..................................... 2,000
Treasury stock............................. 30,000

e. [NAA, 300,000] Plant Assets........................................ 300,000

[NDE, 300,000] Mortgage Payable........................ 250,000
Mortgage Payable—Current........ 50,000

f. [+C, 6,000] Investment........................................... 30,000

[+Y, 30,000] Equity in NI of Subsidiary............ 30,000
[YS, 24,000] Cash..................................................... 6,000
Investment
6,000

g. [+C, 10,000] Cash..................................................... 10,000

 [+Y, 40,000] Accounts Receivable, current........... 10,000
[DC, 10,000] Accounts Receivable, noncurrent..... 20,000
[NC, 20,000] Sales............................................. 40,000

h. [DC, 9,000] Inventory............................................. 9,000

[+Y, 9,000] Cost of Goods Sold...................... 9,000

i. [DC, 260,000] Current Assets.................................... 260,000

[CC, 160,000] Plant and Equipment.......................... 670,000
[DE, 410,000] Current Liabilities......................... 160,000
[-C, 360,000] Long-Term Debt........................... 410,000
Cash ($400-$40)............................ 360,000

j. [-Y, 60,000] Expense............................................... 60,000

[CC, 60,000] Allowance for doubtful accounts 60,000

Part II.

Effects Analytical Entries (Optional)

a. [AA, 120,000] Investment........................................... 120,000

[-C, 120,000] Cash.............................................. 120,000

b. [YS, 7,500] Investment........................................... 7,500

[+Y, 7,500] Equity in Earnings........................ 7,500

c. [+C, 3,000] Investment........................................... 9,000

[+Y, 9,000] Equity in Earnings…………….. 9,000
[YS, 6,000] Cash..................................................... 3,000
Investment.................................... 3,000

d. [+C, 4,000] Cash..................................................... 4,000

 [AD, 4,000] Equipment (net)............................ 3,000
[YS, 1,000] Gain on Sale ................................ 1,000
[+Y, 1,000]

e. [+C, 60,000] Cash..................................................... 60,000

[IL, 60,000] Note Payable (current)................. 60,000

f. [NDR, 9,000] Bonds Payable.................................... 9,000

[NDE, 9,000] Common stock............................. 2,000
Paid-In Capital.............................. 7,000

g. [+C, 6,000] Cash..................................................... 6,000

[DE, 6,000] Treasury stock............................. 4,000
Paid-In Capital.............................. 2,000

h1. [AA, 200,000] Investment........................................... 200,000

[DE, 100,000] Common stock............................. 100,000
[-C, 100,000] Cash.............................................. 100,000
h2. [DC, 80,000] Current Assets ($120-$40).................. 80,000
[AA, 180,000] Plant and Equipment.......................... 180,000
[DE, 140,000] Current Liabilities........................ 60,000
[-C, 60,000] Long-Term Debt........................... 40,000
Common stock............................. 100,000
Cash ($100-$40)............................ 60,000

i. [-Y, 4,000] Minority Interest Expense.................. 4,000

[YA, 4,000] Minority Interest........................... 4,000

j. [-Y, 50,000] Inventory Loss.................................... 50,000

[CC, 50,000] Inventory....................................... 50,000

k. None Allow. for doubtful accounts..................................... 1,200

 Accounts receivable 1,200

l. [NAA, 120,000] Leased Equipment.............................. 120,000

[NDE, 120,000] Long-Term debt............................ 120,000

m. None Retained Earnings..................................................... 180,000

Common stock ............................ 120,000
Paid-in Capital............................. 60,000

n. [-Y, 27,000] Bad Debts Expense............................ 27,000

[CC, 27,000] Allow for Doubtful Accounts....... 27,000