ACC 100 Chapter Notes - Chapter 12: Cash Flow Statement, Current Asset, Income Statement

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28 Jun 2018

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ACC Chapter 12

Read page 570 - 577 (top), 593 - 596 (top)

Statement of Cash Flows - the financial statement that summarized an entity’s cash

receipts and cash payments during the period from operation, investing and

financing activities

Changes in cash over a period of time and explains these changes

Complements the accrual-based income statement

On the statement

Cash provided (used) by operating activities

Cash provided (used) by investing activities

Cash provided (used) by financing activities

Net increase/decrease in cash

Cash balance at beginning of year

Cash balance at end of year

Purpose: to provide information about a company’s cash inflows and outflows

A cash equivalent is an investment that is readily convertible to a known amount of

cash and with a maturity to the investor of 3 months or less (combined with cash in

statement of cash flows)

Operating activities - acquiring and selling products and services

Cash flows from operating activities usually relate to an increase/decrease in

a current asset or liability

Investing activities - acquiring and disposing of long-term assets

Cash paid for these acquisitions is often called capital expenditures

Normally relate to long-term assets on the balance sheet

Financing activities - activities concerned with the raising and repayment of funds

in the form of debt and equity

Usually relate to long-term liabilities or shareholders equity

Cash from Operating Activities (CFO)

CFO is a key indicator as to whether the company’s normal operations have

generated sufficient cash flows to repay loans, maintain operating capability, make

new investments and provide distributions to the owners without having to rely on

external sources of financing

Negative CFO means that the operating activities are not producing enough cash to

cover the payments required by the process

The CFO section of a cash flow statement that uses the indirect method is especially

helpful in assessing the effects that changes in accruals and deferrals have on the

difference between accrual income and CFO

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Document Summary

Read page 570 - 577 (top), 593 - 596 (top) Statement of cash flows - the financial statement that summarized an entity"s cash receipts and cash payments during the period from operation, investing and financing activities. Changes in cash over a period of time and explains these changes. Purpose: to provide information about a company"s cash inflows and outflows. A cash equivalent is an investment that is readily convertible to a known amount of cash and with a maturity to the investor of 3 months or less (combined with cash in statement of cash flows) Operating activities - acquiring and selling products and services. Cash flows from operating activities usually relate to an increase/decrease in a current asset or liability. Investing activities - acquiring and disposing of long-term assets. Cash paid for these acquisitions is often called capital expenditures. Normally relate to long-term assets on the balance sheet.

Related Questions

The Blackbeard Company Ltd provided the following information in regard to its operations for the year ended 30 June 2014:

Cash Book Summary
Opening balance	$20,000	Accounts Payable	$40,000
Accounts receivable	100,000	Bills Payable (suppliers)	20,000
Bills Receivable (suppliers)	20,000	Interest paid	60,000
Debenture Issue	400,000	Operating expenses	180,000
Dividends received	20,000	Salaries & wages	200,000
Interest received	40,000	Current tax payable	80,000
Motor vehicles	60,000	Plant & machinery	100,000
Share capital	200,000	Dividend paid	120,000
		Balance c/d	60,000
	860,000		860,000
Balance b/d	60,000

Required:

(a) Net cash used in operating activities; (b) Net cash used in investing activities; (c) Net cash from financing activities;

(d) Net increase/(decrease) in cash and cash equivalents.

Please use the following format

*Statement of Cash Flows for Blackbeard Company*
*For the Financial Year Ended 30 June 2014*
( i ) Cash flows from Operating Activities	Inflows/	Inflows/
	(Outflows)	(Outflows)










Net cash used in operating activities

( ii ) Cash flows from Investing Activities


Net cash used in Investing Activities

( iii ) Cash flows from Financing Activities

violetcoyote644

Erroneous Statement of Cash Flows

Ryan Company's bookkeeper prepared the following 2016 statement of cash flows:

Flows of Cash Statement December 31, 2016
Sources (Inflows) of Cash
Net Source from Operations
Net income	$47,800
Add: Cash receipt from sale of land	6,500
Inflow from issuing 10% bonds payable	25,000
Depreciation expense	13,200
Reduction in inventory	1,900
Less: Outflow to buy equipment	(16,400)
Increase in prepaid expenses	(700)
Cash (principal) paid on long-term note	(9,500)
ordinary gain	(2,000)
Total source from operations		$65,800
Other Sources (Inflows) of Cash
Loss on sale of land	$2,300
Increase in accounts payable	1,000
Cash from issuing preferred stock	38,700
Patent amortization expense	2,100
Total other sources of cash		44,100
Sources (Financing) Not Affecting Cash
Issuance of common stock for patent		11,000
Total inflows of cash		$120,900
Uses (Outflows) of Cash
To purchase building	$(62,000)
Increase in accounts receivable	(7,800)
For acquiring marketable securities	(7,100)
Decrease in income taxes payable	(1,400)
Total uses of cash		(78,300)
Uses (Investing) Not Affecting Cash
Acquisition of patent by issuing common stock		(11,000)
Net inflow before dividends		$ 31,600
Less: Cash dividends		(24,000)
Net increase in cash		$7,600
Cash, January 1, 2016		15,300
Cash, December 31, 2016		$22,900

After a thorough investigation, you have determined that the amounts of the items listed on the statement are correct. However, you notice several items that are incorrectly classified and reported.

Required

Prepare a corrected 2016 statement of cash flows for the Ryan Company. Use the minus sign to indicate cash outflows, a decrease in cash or cash payments.

Operating Activities

________________ __________

Adjustment for non cash income items:

________________ __________

Adjustments for cash flow effects from working capital items:

________________ __________

Net cash provided by operating activities ____________

Investing Activities:

________________ __________

Net cash used for investing activities _________

Financing Activities:

________________ __________

Net cash provided by financing activies _________

Net increase in cash _________

Cash, january 1, 2016 _________

Cash, december 31, 2016 _________

Investing and Financing Activities not Affecting Cash

Investing Activities:

Acquistion of patent by issuing commons stock ______________

Financing Activities:

Issuance of common stock for patent ____________

ivorymallard438

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.

ACC 100 Chapter Notes - Chapter 12: Cash Flow Statement, Current Asset, Income Statement

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