ACCTG 102 Lecture Notes - Lecture 23: Cash Flow Statement, Accrual, Net Income

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21 Aug 2020

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Preparing the statement of cash flows: cash flow statement is prepared differently than 3 other statements. Information comes from 3 sources: comparative balance sheet, current income statement, additional information. 3 steps in preparing cash flow statement: illustration 13-3. Step 1: determine net cash provided/used by operating activities. Step 2: analyze changes in noncurrent asset and liability accounts and record as investing. Step 3: compare the net change in cash on the statement of cash flows with the change in the cash account reported on the b/s to make sure they agree and financing activities or disclose as non-cash transactions. Indirect and direct methods: the operating section can be prepared using the direct or indirect. Both methods arrive at the same total amount for net cash provided by operating activities. 1) it is easier and less costly 2) it focuses on differences between net income and net cash flow from operating activities.

Related Questions

EXERCISE 14-3 Calculating Free Cash Flow (L014-3] Apex Company prepared the statement of cash flows for the current year that is shown below: i $ 40,000 (6,000 34,000 Apex Company Statement of Cash Flows-Indirect Method Operating activities: Net income ................................ Adjustments to convert net income to cash basis: Depreciation ...... $ 22,000 Increase in accounts receivable .......... (60,000) Increase in inventory .... (25,000) Decrease in prepaid expenses .......... 9,000 Increase in accounts payable ............... 55,000 Decrease in accrued liabilities .......... (12,000) Increase in income taxes payable ......... 5,000 Net cash provided by operating activities ......... Investing activities: Proceeds from the sale of equipment ............. 14,000 Loan to Thomas Company ........ (40,000) Additions to plant and equipment ................ (110,000 Net cash used for investing activities ......... Financing activities: Increase in bonds payable .. 90,000 Increase in common stock ........... 40,000 Cash dividends (30,000) Net cash provided by financing activities. Net decrease in cash ..... Beginning cash balance........... Ending cash balance ...................... (136,000) 100,000 (2,000) 27,000 $ 25,000 Required: Compute Apex Company's free cash flow for the current year.

Statement of Cash FlowsâIndirect Method

The comparative balance sheet of Mavenir Technologies Inc. for December 31, 2014 and 2013, is shown as follows:

		Dec. 31, 2014	Dec. 31, 2013
Assets
Cash		$246,880	$232,300
Accounts receivable (net)		89,440	83,430
Inventories		252,460	247,030
Investments		0	95,700
Land		129,500	0
Equipment		278,560	218,400
Accumulated depreciation-equipment		(65,210)	(58,890)
	Total	$931,630	$817,970

Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$168,630	$161,140
Accrued expenses payable (operating expenses)		16,770	21,270
Dividends payable		9,320	7,360
Common stock, $10 par		50,310	40,080
Paid-in capital in excess of par-common stock		189,120	111,240
Retained earnings		497,480	476,880
	Total	$931,630	$817,970

The following additional information was taken from the records:

The investments were sold for $111,970 cash.

Equipment and land were acquired for cash.

There were no disposals of equipment during the year.

The common stock was issued for cash.

There was a $59,040 credit to Retained Earnings for net income.

There was a $38,440 debit to Retained Earnings for cash dividends declared.

Required:

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Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash and for any adjustments, if required.

Mavenir Technologies Inc.

Statement of Cash Flows

For the Year Ended December 31, 2014

Cash flows from operating activities:

Adjustments to reconcile net income to net cash flow from operating activities:

Changes in current operating assets and liabilities:

Net cash flow from operating activities

Cash flows from investing activities:

Net cash flow used for investing activities

Cash flows from financing activities:

Net cash flow provided by financing activities

Cash at beginning of the year

Cash at end of the year

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The comparative balance sheets of Posner Company, for Years 1 and 2 ended December 31, appear below in condensed form.

1		Year 2	Year 1
2	Cash	$53,000.00	$50,000.00
3	Accounts Receivable (net)	37,000.00	48,000.00
4	Inventories	108,500.00	100,000.00
5	Investments		70,000.00
6	Equipment	573,200.00	450,000.00
7	Accumulated Depreciation-Equipment	(142,000.00)	(176,000.00)
8		$629,700.00	$542,000.00
9	Accounts Payable	$62,500.00	$43,800.00
10	Bonds Payable, Due Year 2		100,000.00
11	Common Stock, $10 par	325,000.00	285,000.00
12	Paid-In Capital in Excess of ParâCommon Stock	80,000.00	55,000.00
13	Retained Earnings	162,200.00	58,200.00
14		$629,700.00	$542,000.00

The income statement for the current year is as follows:

1	Sales		$625,700.00
2	Cost of merchandise sold		340,000.00
3	Gross profit		$285,700.00
4	Operating expenses:
5	Depreciation expense	$26,000.00
6	Other operating expenses	68,000.00	94,000.00
7	Income from operations		$191,700.00
8	Other revenue and expense:
9	Gain on sale of investment	$4,000.00
10	Interest expense	(6,000.00)	(2,000.00)
11	Income before income tax		$189,700.00
12	Income tax		60,700.00
13	Net income		$129,000.00

Additional data for the current year are as follows:

(a)	Fully depreciated equipment costing $60,000 was scrapped, no salvage, and new equipment was purchased for $183,200.
(b)	Bonds payable for $100,000 were retired by payment at their face amount.
(c)	5,000 shares of common stock were issued at $13 for cash.
(d)	Cash dividends declared and paid, $25,000.

Required:

Prepare a statement of cash flows using the indirect method of reporting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

Labels and Amount Descriptions

Labels
For the Year Ended December 31, Year 2
Amount Descriptions
Cash from sale of common stock
Cash from sale of investments
Cash paid for dividends
Cash paid for purchase of equipment
Cash paid to retire bonds payable
Decrease in accounts payable
Decrease in accounts receivable
Decrease in cash
Decrease in inventories
Depreciation
Gain on sale of investment
Increase in accounts payable
Increase in accounts receivable
Increase in cash
Increase in inventories
Loss on sale of investment
Net cash flow from financing activities
Net cash flow from investing activities
Net cash flow from operating activities
Net cash flow used for financing activities
Net cash flow used for investing activities
Net cash flow used for operating activities
Net income
Net loss

Statement of Cash Flows

Posner Company

Statement of Cash Flows

1	Cash flows from operating activities:
2
3	Adjustments to reconcile net income to net cash flow from operating activities:
4
5
6	Changes in current operating assets and liabilities:
7
8
9
10
11	Cash flows from investing activities:
12
13
14
15	Cash flows from financing activities:
16
17
18
19
20
21	Cash at the beginning of the year
22	Cash at the end of the year

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ACCTG 102 Lecture Notes - Lecture 23: Cash Flow Statement, Accrual, Net Income

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