ACCTMIS 2200 Lecture Notes - Lecture 6: Cash Flow Statement, Income Statement

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24 Feb 2017

School

Ohio State University

Department

Accounting and Management Info

Course

ACCTMIS 2200

Professor

Marc Smith

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ACCTMIS 2200 Full Course Notes

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The statement of cash flows shows the changes in cash for the same period of time as that covered by the income statement. The cash flow statement shows all sources (ex. receipts) of cash and all the uses (ex. payments) of cash. It provides information about: cash receipts (inflows, cash payments (outflows) These cash inflows and outflows are categorized as either: operating activities, investing activities, financing activities. The cash flow statement reports cash receipts and cash payments from operating, financing, and investing activities: the cash flow statement helps users assess: Ability to pay dividends and meet obligations. Why net income is different from operating cash flows. From return on loans (interest received) and on equity securities (dividends received). The investing activities section of the statement of cash flows includes the cash inflows and outflows related to the purchase and sale of long-term assets and investments.

Related Questions

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

The statement of cash flows helps analysts evaluate all but which of the following?

a. Source of cash used to finance investing activities.

b. Source of cash used for debt repayments.

c. Differences between net income and net operating cash flow.

d. Ability of the company to generate profit.

e. Source of cash used for plant expansion.

carminewoodchuck215

urgent need it an hour wil rate

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

violetclam852

ACCTMIS 2200 Lecture Notes - Lecture 6: Cash Flow Statement, Income Statement

ACCTMIS 2200 Full Course Notes

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