ACCTG311 Lecture Notes - Lecture 15: Capital Account, Cash Flow, Accrual

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silvergoldfish529

5 Feb 2017

School

University of Alberta

Department

Accounting

Course

ACCTG311

Professor

Kirstin Veugelers

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Document Summary

Statement of cash flow is not prepared from an adjusted trail balance. It requires detailed information about the change in account balances that occurs over a period of time. Provide information about the company"s ability to generate cash, and what the company did with that cash. Investing and financing activities assets and liabilities liquidity and solvency. Cash and cash equivalents: short-term, highly liquid trading investment (debt) Operating activities: arise from the cash effects of transactions that create revenues and expenses. Receipts of investment revenue (interest and dividend), payment of interest to lenders: because these items are reported in the i/s where results of operations are shown. Investing activities: purchasing and disposing of long-loved assets and investment, lending money and collecting the loans. Financing activities: cash from issuing/repaying debt, cash from shareholders and paying dividends. Dividend paid reported on the statement of changes in equity (aspe)

Related Questions

1 )

The following events occurred last year at Dorder Corporation:

Purchase of plant and equipment	$26,000
Sale of long-term investment	$11,000
Dividends received on long-term investments	$7,000
Paid off bonds payable	$14,500
Depreciation expense	$13,000

Based on the above information, the cash provided (used) by investing activities for the year on the statement of cash flows would net to:

Last year Burch Corporation's cash account decreased by $33,000. Net cash provided by investing activities was $8,800. Net cash used in financing activities was $29,500. On the statement of cash flows, the net cash flow provided by (used in) operating activities was:

McCorey Corporation recorded the following events last year:

Repurchase by the company of its own common stock	$27,000
Sale of long-term investment	$46,000
Interest paid to lenders	$8,500
Dividends paid to the company's shareholders	$56,000
Collection by McCorey of a loan made to another company	$32,000
Payment of taxes to governmental bodies	$18,500

On the statement of cash flows, some of these events are classified as operating activities, some are classified as investing activities, and some are classified as financing activities.

Based solely on the information above, the net cash provided by (used in) investing activities on the statement of cash flows would be:

NFORMATION

NUWARE LIMITED

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019 R
Cash flows from operating activities	2 540 000
Profit before interest and tax	7 700 000
Non-cash flow adjustments	700 000
Add: Depreciation	700 000
Profit before working capital changes Working capital changes	8 400 000 690 000
Decrease in inventory Decrease in receivables Increase in payables	180 000 310 000 200 000
Cash generated from operations	9 090 000
Interest paid	(150 000)
Dividends paid	(4 900 000)
Company tax paid	(1 500 000)
Cash flow from investing activities	(4 200 000)
Land, buildings and equipment purchased	(4 200 000)
Cash flow from financing activities	1 100 000
Increase in long-term borrowings	1 100 000
Net decrease in cash and cash equivalents	?
Cash and cash equivalents at beginning of year	?
Cash and cash equivalents at end of year	?

Why was depreciation included in computing the cash flow from operating activities? (2 marks)

Calculate the cash balance on 31 December 2019 if there was a bank overdraft of R460 000 on 31 December 2020. (2 marks)

Based on the cash flow information above, how does the company appear to be performing? Explain by referring to at least five items in the cash flow statement. (10 marks)

Long term loans were increased during 2020. Was this the most appropriate way of financing the purchase of assets? (3 marks)

1.5 What cash receipts increase cash but not profits? (3 marks)

raspberrymuskrat810

Choose the correction answer

15. The statement of cash flowsprovides information to help investors and creditors assess thecash and noncash investing and financing transactions during theperiod.

T F

16. The net increase(decrease) in cash reported on the statement of cash flows shouldreconcile the beginning and ending cash balances reported in thecomparative balance sheets.

T F

17. Anobjective of the statement of cash flows is to

a. disclose changes during the period in all assetand all equity accounts.

b. disclose the change in working capital during theperiod.

c. provide information about the operating,investing, and financing activities of an entity during aperiod.

d. None of these answers are correct.

18. Theprimary purpose of the statement of cash flows is to provideinformation

a. about the operating, investing, and financingactivities of an entity during a period.

b. that is useful in assessing future cash flowprospects.

c. about the cash receipts and cash payments of anentity during a period.

d. about the entity's ability to meet itsobligations and to pay dividends.

19. Cash equivalents are

a. treasury bills, commercial paper, and moneymarket funds purchased with excess cash.

b. investments with original maturities of threemonths or less.

c. readily convertible into known amounts ofcash.

d. All of these answers are correct.

20. Xanthe Corporation had the following transactions occur in thecurrent year:

1. Cash sale of merchandise inventory.

2. Sale of delivery truck at book value.

3. Sale of Xanthe common stock for cash.

4. Issuance of a note payable to a bank forcash.

5. Sale of a security held as anavailable-for-sale investment.

6. Collection of loan receivable.

How many of the above items willappear as a cash inflow from investing activities on a statement ofcash flows for the current year?

a. Five items

b. Four items

c. Three items

d. Two items

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ACCTG311 Lecture Notes - Lecture 15: Capital Account, Cash Flow, Accrual

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