Course pack Accounting 202
Chapter 13: Cash Flow Statement
Value Chapter
Included
Purpose of Cash Flow
Understand Operating, Investing, Financing activities
Prepare a Cash Flow Statement – indirect only
Analyze the Cash Flow
Supplemental – not in book: Understand Product Life Cycle
and relationship to Cash Flow
Accounting 202: Reading Questions: Chapter 13
Activities
13
7.
What are three examples of non cash items and why are they reported on the cash flow statement?
8.
What information/statements are necessary in order to prepare the cash flow statement?
9.
How are gains treated on the statement of cash flow? How are losses?
10.
What items are found in the activity of the Retained Earnings account and how are they treated on the
statement of cash flows?
1.
What is the Investing section of the cash flow statement used for? Give an example.
3.
What does the Operations section of the cash flow statement tell you?
2.
What is the Financing section of the cash flow statement used for? Give an example.
4.
Is it possible for a company to be profitable and STILL go out of business due to lack of cash? Explain.
5.
What is the purpose of the cash flow statement?
6.
In what section and how is deprecation treated on the cash flow statement? Why?
What are the Major Sections of the Cash Flow Report? What are their activities (list as many
examples as you can)
Joe's Repair COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED DEC. 31, 2000
Revenues
$
85,000
Operating Expenses(excluding depreciation)
$
40,000
40,000
Income from Operations
45,000
Less: Income Tax Expense
10,000
Net Income
$
35,000
ADDITIONAL INFORMATION:
During the year:
1) The company declared and paid a cash Dividend of $15,000
BALANCE SHEET
DEC. 31, 2000 & 1999 CHANGE ASSETS 2000 1999 INCREASE/DECREASE CASH $ 34,000 $ - $ 34,000 Increase AR 30,000 - 30,000 Increase PREPAID EXPENSES -LAND -BUILDING-ACCUM'D DEPRECIATION - BUILDING
-EQUIPMENT 10,000 - 10,000 Increase ACCUM'D DEPRECIATION - EQUIPMENT
-TOTAL $ 74,000 $
-LIABILITIES AND STOCKHOLDERS' EQUITY
ACCTS. PAYABLE $ 4,000 $ - 4,000 Increase BONDS PAYABLE - -
-COMMON STOCK 50,000 - 50,000 Increase RETAINED EARNINGS 20,000 - 20,000 Increase
TOTAL $ 74,000 $
-Conversion: Net Income to Net Cash Provided by Operating Activities
ADD TO DEDUCT
NET INCOME FR. NET INCOME
CURRENT ASSETS/LIABILITIES
ACCOUNTS RECEIVABLE Decrease Increase INVENTORY Decrease Increase PREPAID EXPENSES Decrease Increase ACCOUNTS PAYABLE Increase Decrease ACCRUED EXPENSES PAYABLE Increase Decrease
NONCASH CHARGES
Joe's Repair COMPANY
CASH FLOW STATEMENT
DEC. 31, 2001
CASH FLOW FROM OPERATING ACTIVITIES
Source Document
NET INCOME $ 35,000
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH:*
(Increase)/Decrease in Accounts Receivable (30,000)
Increase/(Decrease) in Accounts Payable 4,000 (26,000)
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,000
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Equipment (10,000)
NET CASH USED BY INVESTING ACTIVITIES (10,000)
CASH FLOW FROM FINANCING ACTIVITIES
Issuance of Common Stock 50,000 Payment of cash Dividends (15,000)
NET CASH USED BY FINANCING ACTIVITIES 35,000
NET INCREASE IN CASH 34,000
CASH AT THE BEGINNING OF THE PERIOD
-CASH AT THE END OF THE PERIOD $ 34,000
NONCASH INVESTING AND FINANCING ACTIVITIES
N/A
INCOME STATEMENT
FOR THE YEAR ENDED DEC. 31, 2011
Revenues
$
507,000
COGS
150,000
Operating Expenses(excluding depreciation)
$
111,000
Depreciation expense
9,000
Loss of sale of equipment
3,000
Interest expense
42,000
315,000
Income from Operations
192,000
Less: Income Tax Expense
47,000
Net Income
$
145,000
ADDITIONAL INFORMATION:
During the year:
1) The company declared and paid a cash Dividend of $29,000 2) The company obtained land through an issuance of $110,000 bond.
3) An office building costing $120,000 was purchased for cash; equipment costing $25,000 also purchased for cash
4) The company sold equipment with a Book Value of $7,000 (cost $8,000 less Accumulated Depreciation of $1,000) for $4,000 cash.
5) The company issued common stock for $20,000 cash.
6)Depreciation expense was $6,000 for building and $3,000 for equipment.
COMPUTER SERVICES COMPANY
BALANCE SHEET
DEC. 31, 2011 & 2010 CHANGE ASSETS 2011 2010 INCREASE/DECREASE Current Assets CASH $ 55,000 $ 33,000 $ 22,000 Increase Accounts Receivable 20,000 30,000 (10,000)Decrease Inventory 15,000 10,000 5,000 Increase Prepaid Expenses 5,000 1,000 4,000 Increase Property, Plant, EquipmentLand 130,000 20,000 110,000 Increase Building 160,000 40,000 120,000 Increase Accumulated depreciation - Building (11,000) (5,000) (6,000)Decrease Equipment 27,000 10,000 17,000 Increase Accumulated depreciation - Equipment (3,000) (1,000) (2,000)Decrease
TOTAL ASSETS $ 398,000 $ 138,000
LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities
Accounts Payable $ 28,000 $ 12,000 16,000 Increase Income Tax Payable 6,000 8,000 (2,000)Decrease Long-term Liabilities
Bonds Payable 130,000 20,000 110,000 Increase Stockholders' equity
COMMON STOCK 70,000 50,000 20,000 Increase RETAINED EARNINGS 164,000 48,000 116,000 Increase
TOTAL $ 398,000 $ 138,000
Conversion: Net Income to Net Cash Provided by Operating Activities
ADD TO DEDUCT
NET INCOME FR. NET INCOME
CURRENT ASSETS/LIABILITIES
ACCOUNTS RECEIVABLE Decrease Increase INVENTORY Decrease Increase PREPAID EXPENSES Decrease Increase ACCOUNTS PAYABLE Increase Decrease ACCRUED EXPENSES PAYABLE Increase Decrease
NONCASH CHARGES
DEPRECIATION EXPENSE ADD PATENT AMORTIZATION EXPENSE ADD LOSSES ON SALE OF ASSET ADD GAINS ON SALE OF ASSET SUBTRACT
CASH FLOW STATEMENT
For the period ending: _______________________________________________
