ACCT 2220 Lecture Notes - Lecture 13: Cash Cash, Current Liability, Current Asset

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graytoad906

28 Feb 2016

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Provides information that enables users to assess a company"s ability to generate cash and to assess what the company did with that cash. Cash flow information about historical events is also useful in assessing a company"s ability to generate future cash flows. Required financial statement for both publicly traded and private corporations. Investing activities include the acquisition and disposal of non-current. Not all significant investing and financing activities involve cash. Significant investing and financing activities that do not involve cash are not reported in the body of the statement of cash flows, but details about them are disclosed in notes to the financial statement. Types of noncash investing and financing activities: issue of debt to purchase assets, issue of shares to purchase assets, conversion of debt into equity, exchange of property, plant and equipment. Cash receipts and payments are reported in three separate sections: operating, investing and financing (operating usually appears first, then investing and then financing)

Related Questions

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

erinchimpanzee626

36. The best measure of a company's ability to generate sufficientcash to continue as a going concern is net cash provided by
A) financing activities.
B) investing activities.
C) operating activities.
D) processing activities.

37. Using the indirect method, if equipment is sold at a gain,the
A) sale proceeds received are deducted in the operating activitiessection.
B) sale proceeds received are added in the operating activitiessection.
C) amount of the gain is added in the operating activitiessection.
D) amount of the gain is deducted in the operating activitiessection.

38. The statement of cash flows
A) is prepared instead of an income statement under generallyaccepted accounting principles.
B) is used to assess an entity's ability to pay dividends and meetobligations.
C) is prepared from comparative income statements.
D) reflects earnings per share figures on a cash basis and on anaccrual basis in the body of the statement.

39. In the bottom portion of the statement of cash flowsworksheet,
A) inflows of cash are debits in the reconciling columns.
B) outflows of cash are debits in the reconciling columns.
C) information pertaining to investing and financing activitiesonly is entered.
D) only significant noncash transactions are entered.

40. Which of the following characteristics does not apply to cashequivalents?
A) Short-term
B) Highly-liquid
C) Readily convertible into cash
D) Sensitive to interest rate changes

ceruleanoyster399

LuluCo reported the following on its 2014 income statement. Using the income statement and the balance sheet given below, prepare the statement of cash flows using the indirect method. Ignore required disclosures for cash flows associated with interest paid and received, dividends paid and received and income taxes as well as any non-cash disclosures that may have occurred in the current year.

Analysis of accounts:

1) Retired bonds, paid $11,500

2) Sold HTM investment in Lala Consulting common shares for $11,500

3) Purchased equipment $57,000 cash

4) Sold furniture, and settled in cash.

5) Purchased HFT investments $3,000 cash. This companyâs HFT investments are not readily convertible to a known amount of cash but will be traded within 12 months.

6) Paid cash dividends

7) Issued common shares, 2,300 shares at $5 per share.

8) Changes in other balance sheet accounts resulted from usual transactions and events

LuluCo
Income Statement
For the year ended December 31, 2014
Sales		$515,000
Operating expenses
Cost of goods sold	257,500
Depreciation expense	10,000
Interest expense	4,725
Amortization expense	19,000
Other operating expenses	97,600	388,825
Other revenues and expenses
Loss on sale of HTM investments		-1,000
Net income		$125,175


LuluCo
Balance Sheet
As of December 31, 2014	2014	2013
Cash	$16,000	$31,500
Investments (held for trading	61,000	58,000
Accounts receivable, net	72,500	89,000
Inventory	69,500	82,000
HTM investments	43,000	55,500
Property, plant, equipment, net	117,000	120,000
Patent, net	34,000	53,000
Total assets	$413,000	$489,000
Accounts payable	$68,500	$78,000
Salaries payable	53,500	43,000
Short-term notes payable	122,000	139,500
Bonds payable	83,000	94,500
Common shares	39,000	27,500
Retained earnings	47,000	106,500
Total liabilities and shareholders' equity	$413,000	$489,000

crimsonporpoise854

ACCT 2220 Lecture Notes - Lecture 13: Cash Cash, Current Liability, Current Asset

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