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ACCT 2220 Lecture Notes - Lecture 13: Cash Flow Statement, Cash Cash, Accrual

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School
University of Guelph
Department
Accounting
Course
ACCT 2220
Professor
Louise Hayes

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Document Summary

What the company did with the cash. Company"s ability to generate future cash flows. Investing and financing transactions during the period, and effect upon capital structure. Short-term, highly liquid trading investments that are readily converted to cash within a short period of time (usually within three months) Cash receipts and payments are classified into three categories: Cash effects of transactions that create revenues and expenses that enter into determination of profit. Includes relevant noncash current assets and current liabilities on the statement of financial position where the related account is an income statement account. Generally includes non-current asset items (long-lived investments, property, plant and equipment) on the statement of financial position. Obtaining cash from issuing debt and repaying the amounts borrowed. Obtaining cash from selling common and preferred shares and paying dividends. Generally includes non-current liabilities, and shareholders" equity items. If it does not affect cash, do not report it in the statement of cash flows.

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Related Questions

Charlotte Company's net income last year was $80,000. Changes inthe company's balance sheet accounts for the year appear below:


Increases
(Decreases)
Asset andContra-Asset Accounts:
Cash $ 21,500
Accountsreceivable $ 18,000
Inventory $ (25,000)
Prepaidexpenses $ 8,000
Long-term investments $ 36,000
Property, plant and equipment $ 66,000
Accumulated depreciation $ 42,000
Liability and EquityAccounts:
Accountspayable $ (25,000)
Accruedliabilities $ 15,000
Incometaxes payable $ 45,000
Bondspayable $ (56,000)
Commonstock $ 26,000
Retainedearnings $ 68,500


The company did not dispose of any property, plant, andequipment, sell any long-term investments, issue any bonds payable,or repurchase any of its own common stock during the year. Thecompany declared and paid a cash dividend $11,500.


Required:

a.

Prepare the operating activities section of the company'sstatement of cash flows for the year. (Use the indirect method.)(Amounts to be deducted should be indicated with a minussign. Omit the "$" sign in your response.)


Statement of Cash Flows
Operatingactivities:
$
Adjustments to convert netincome to cash basis:
$
Netcash
operating activities $


b.

Prepare the investing activities section of the company'sstatement of cash flows for the year. (Amounts to bededucted should be indicated with a minus sign. Omit the "$" signin your response.)


Statement of Cash Flows
Investingactivities:

$

Netcash
investing activities $


c.

Prepare the financing activities section of the company'sstatement of cash flows for the year. (Amounts to bededucted should be indicated with a minus sign. Omit the "$" signin your response.)


Statement of Cash Flows
Financingactivities:
$
Netcash
financing activities $

PROBLEM 14-9 Understanding a Statement of Cash Flows (L014-1, L014-2] Brock Company is a merchandiser that prepared the statement of cash flows and income statement provided below: Brock Company Statement of Cash Flows-Indirect Method $ 275 Operating Activities Net income ... Adjustments to convert net income to a cash basis: Depreciation ........ Increase in accounts receivable.... Decrease in inventory ........ Decrease in accounts payable .......... Decrease in accrued liabilities ........ Increase in income taxes payable ................ Gain on sale of equipment... Net cash provided by operating activities ........... boa Investing Activities Additions to property, plant, and equipment ......... Proceeds from sale of equipment .... Net cash used in investing activities .............. long & nô Financing Activities Issuance of bonds payable ..... Issuance of common stock ............ Cash dividends paid ......... Net cash provided by financing activities ........... Net increase in cash and cash equivalents .......... Beginning cash and cash equivalents ............ Ending cash and cash equivalents ............ 34 Brock Company Income Statement Net sales .......... Cost of goods sold ............. .............. Gross margin ................ ............ Selling and administrative expenses ............. Net operating income ........... Nonoperating items: Gain on sale of equipment .... Income before taxes ... Income taxes . . . . . . . . $5,200 2,980 2,220 1,801 419 423 Net income .......................... $ 275 Required: Assume that you have been asked to teach a workshop to the employees within Brock Compa- ny's Marketing Department. The purpose of your workshop is to explain how the statement of cash flows differs from the income statement. Your audience is expecting you to explain the logic underlying each number included in the statement of cash flows. Prepare a memo that explains the format of the statement of cash flows and the rationale for each number included in Brock's state- ment of cash flows.

Burns Corporation's net income last year was $94,600. Changes in the company's balance sheet accounts for the year appear below: Increases (Decreases) Asset and Contra-Asset Accounts: Cash and cash equivalents $ 24,200 Accounts receivable $ 13,700 Inventory $ (17,300 ) Prepaid expenses $ 4,300 Long-term investments $ 10,600 Property, plant, and equipment $ 71,400 Accumulated depreciation $ 32,600 Liability and Equity Accounts: Accounts payable $ (19,600 ) Accrued liabilities $ 17,400 Income taxes payable $ 4,400 Bonds payable $ (62,400 ) Common stock $ 44,000 Retained earnings $ 90,500 The company did not dispose of any property, plant, and equipment, sell any long-term investments, issue any bonds payable, or repurchase any of its own common stock during the year. The company declared and paid a cash dividend of $4,100. Required: a. Prepare the operating activities section of the company's statement of cash flows for the year. (Use the indirect method.) b. Prepare the investing activities section of the company's statement of cash flows for the year. c. Prepare the financing activities section of the company's statement of cash flows for the year.