A summary of major business developments affecting Cookie Creations' accounting books.

• An evaluation of Cookie Creations' statement of cash flows for the year, ending October 31, 2012 (indirect method). This requires that CCC12 be complete. You may work with your CLC team on completing the requirements for CCC12 in preparation for your presentation. Include in your evaluation the following key figures from the statement of cash flows:

• Net income
• Net cash provided by operating activities
• Net cash used by investing activities
• Net cash used by financing activities
• Net increase in cash
• Cash as of October 31
• An analysis of Cookie Creations overall financial      health. You must include the calculations for at least three ratios.

Continuing Cookie Chronicle

Continuing Cookie Chronicle

(Note: This is a continuation of the Cookie Chronicle from Chapters 1 through 11.)

CCC12

Natalie has prepared the balance sheet and income statement of Cookie & Coffee

Creations Inc. and would like you to prepare the cash flow statement. The comparative

balance sheet of Cookie & Coffee Creations Inc. at October 31, 2014 for the years 2014 and

2013 and the income statement for the year ended October 31, 2014, are presented on the

next page.

Additional information:

1. All of the computer equipment was disposed of at the beginning of the year for $500

cash. New computer equipment was then bought for $4,000 cash.

2. Additional kitchen equipment was bought for $14,000 on November 1, 2013. A $12,000

note payable was signed. The terms provide for equal semi-annual installment payments

of $2,000 on May 1 and November 1 of each year, plus interest of 5% on the

outstanding principal balance.

3. Additional furniture was bought for $13,000 cash.

4. Dividends were declared on the preferred and common stock on October 15, 2014, to

be paid on November 15, 2014.

5. Accounts payable relate only to merchandise creditors.

6. Prepaid expenses relate only to other operating expenses.

Instructions

(a) Prepare a statement of cash flows for Cookie & Coffee Creations Inc. for the year

ended October 31, 2014, using the indirect method.

*(b) Prepare a statement of cash flows for Cookie & Coffee Creations Inc. for the year

ended October 31, 2014, using the direct method.

COOKIE & COFFEE CREATIONS INC.

Balance Sheet

October 31, 2014

Assets 2014 2013

Cash $ 22,324 $5,550

Accounts receivable 3,250 2,710

Inventory 7,897 7,450

Prepaid expenses 5,800 6,050

Furniture and fixtures 18,000 5,000

Accumulated depreciation—furniture

and fixtures (2,000) (1,000)

Computer equipment 4,000 4,500

Accumulated depreciation—computer

equipment (600) (1,500)

Kitchen equipment 80,000 66,000

Accumulated depreciation—kitchen

equipment (22,600) (6,600)

Total assets $116,071 $88,160

(continues on next page)

chapter 12

Statement of Cash Flows

COOKIE & COFFEE CREATIONS INC.

Balance Sheet

October 31, 2014

COOKIE & COFFEE CREATIONS INC.

Income Statement

Year Ended October 31, 2014

Sales $485,625

Cost of goods sold 222,694

Gross profit 262,931

Operating expenses

Salaries and wages expense $147,979

Depreciation expense 17,600

Other operating expenses 48,186 213,765

Income from operations 49,166

Other expenses

Interest expense $ 413

Loss on sale of computer

equipment 2,500 2,913

Income before income tax 46,253

Income tax expense 9,251

Net income $ 37,002

Liabilities and Stockholders’ Equity

Accounts payable $ 1,150 $ 2,450

Income taxes payable 9,251 7,200

Dividends payable 27,000 27,000

Salaries payable 7,250 1,280

Interest payable 188 0

Note payable 10,000 0

Preferred stock, no par, $6 cumulative,

3,000 and 2,800 shares issued,

respectively 15,000 14,000

Common stock, $1 par—25,180 shares

issued and outstanding 25,180 25,180

Additional paid-in capital—treasury stock 250 250

Retained earnings 20,802 10,80

Total liabilities and stockholders’ equity $116,071 $88,160