SMG AC 221 Lecture Notes - Lecture 15: Income Statement, Net Income, Cash Flow
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6 Dec 2016
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Extra credit essays: 3-5 pages, due dec 12th. Cash flow statements: reconcile cash at beginning of year to end. Cfo, cfi, cff = operating, investing, financing cash flows throughout a certain time period. Tra(cid:374)sa(cid:272)tio(cid:374)s (cid:449)here (cid:862)(cid:272)ash(cid:863) is o(cid:374)e of the a(cid:272)(cid:272)ou(cid:374)ts that (cid:272)ha(cid:374)ges. Must be used for investing and financing, can be used for operations. Use a separate line for each type of cash flow (inflow/outflow) Cash provided by/ used in investment total: ,800. Cash provided by/ used in financing total: sh. Cash provided by/ used in operations total: () Indirect presentation of cash flows (cid:272)ha(cid:374)ge (cid:374)et i(cid:374)(cid:272)o(cid:373)e (cid:271)ut do(cid:374)"t affe(cid:272)t (cid:862)(cid:272)ash(cid:863) at the ti(cid:373)e if transaction accrues rent or expense, we (cid:862)u(cid:374)do(cid:863) it. Net income ,380 (given) needs to get to (), which we know is the end cash for operational. T4 and t5 inventory (400) find from: -purchases = -cogs change in inv. Use 1,000 from t4 600 cogs. Cash provided by/used in operational activities = ()
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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 ____________
| Cash Flows from OperatingActivities | |
| Net loss | $ (2,240,578) |
| Adjustments to reconcile netloss to net cash used in operating activities: | |
| Depreciation andamortization | 1,636,003 |
| Stock-based compensation | 466,760 |
| Amortization of debt discountsand issuance costs | 91,037 |
| Inventory write-downs | 131,665 |
| Loss on disposals of fixedassets | 105,770 |
| Foreign currency transactionlosses (gains) | 52,309 |
| Loss (gain) related toSolarCity acquisition | 57,746 |
| Non-cash interest and otheroperating activities | 135,237 |
| Changes in operating assetsand liabilities, net of effect of business combinations: | |
| Accounts receivable | (24,635) |
| Inventories | (178,850) |
| Operating lease vehicles | (1,522,573) |
| Prepaid expenses and othercurrent assets | (72,084) |
| MyPower customer notesreceivable and other assets | (15,453) |
| Accounts payable and accruedliabilities | 388,206 |
| Deferred revenue | 468,902 |
| Customer deposits | 170,027 |
| Resale value guarantee | 208,718 |
| Other long-termliabilities | 81,139 |
| Net cash used in operatingactivities | (60,654) |
| Cash Flows from InvestingActivities | |
| Purchases of property andequipment excluding capital leases, net of sales | (3,414,814) |
| Maturities of short-termmarketable securities | |
| Purchases of solar energysystems, leased and to be leased | (666,540) |
| Increases in restrictedcash | (223,090) |
| Business combinations, net ofcash acquired | (114,523) |
| Net cash used in investingactivities | (4,418,967) |
| Cash Flows from FinancingActivities | |
| Proceeds from issuances ofcommon stock in public offerings | 400,175 |
| Proceeds from issuances ofconvertible and other debt | 7,138,055 |
| Repayments of convertible andother debt | (3,995,484) |
| Repayments of borrowings underSolar Bonds issued to related parties | (165,000) |
| Collateralized leaseborrowings | 511,321 |
| Proceeds from exercises ofstock options and other stock issuances | 259,116 |
| Principal payments on capitalleases | (103,304) |
| Common stock and debt issuancecosts | (63,111) |
| Purchases of convertible notehedges | (204,102) |
| Proceeds from settlements ofconvertible note hedges | 287,213 |
| Proceeds from issuances ofwarrants | 52,883 |
| Proceeds from issuance ofcommon stock in private placement | |
| Payments for settlements ofwarrants | (230,385) |
| Proceeds from investments bynoncontrolling interests in subsidiaries | 789,704 |
| Distributions paid tononcontrolling interests in subsidiaries | (261,844) |
| Payments for buy-outs ofnoncontrolling interests in subsidiaries | (373) |
| Net cash provided by financingactivities | 4,414,864 |
| Effect of exchange ratechanges on cash and cash equivalents | 39,455 |
| Net (decrease) increase incash and cash equivalents | (25,302) |
| Cash and cash equivalents,beginning of period | 3,393,216 |
| Cash and cash equivalents, endof period | 3,367,914 |
| Supplemental Non-CashInvesting and Financing Activities | |
| Shares issued in connectionwith business combinations and assumed vested awards | 10,528 |
| Acquisitions of property andequipment included in liabilities | 914,108 |
| Estimated fair value offacilities under build-to-suit leases | 313,483 |
| Supplemental Disclosures | |
| Cash paid during the periodfor interest, net of amounts capitalized | 182,571 |
| Cash paid during the periodfor taxes, net of refunds | $ 65,695 |
| Cash Flows for 2017: |
| Is the total cash flow positive ornegative? |
| Operating Activities: |
| Is the total cash flow positive ornegative? |
| What is the biggest source of cash? |
| What is the biggest use of cash? |
| Investing Activities: |
| Is the total cash flow positive ornegative? |
| What is the biggest source of cash? |
| What is the biggest use of cash? |
| Financing Activities: |
| Is the total cash flow positive ornegative? |
| What is the biggest source of cash? |
| What is the biggest use of cash? |
Please review the following real-world Hewlett Packard Statementof Cash flows and address the two questions below.
| Cash flow from operating activities | In millions | In millions |
| For the year ended 2012 | For the year ended 2011 | |
| Net (loss) earnings | $(12,650) | $7,074 |
| Depreciation and amortization | 5,095 | 4,984 |
| Impairment of goodwill and purchasedintangible assets | 18,035 | 885 |
| Stock-based compensation expense | 635 | 685 |
| Provision for doubtful accounts | 142 | 81 |
| Provision for inventory | 277 | 217 |
| Restructuring charges | 2,266 | 645 |
| Deferred taxes on earnings | (711) | 166 |
| Excess tax benefit from stock-basedcompetition | (12) | (163) |
| Other, net | 265 | (46) |
| Accounts and financing receivables | 1,269 | (227) |
| Inventory | 890 | (1,252) |
| Accounts payable | (1,414) | 275 |
| Taxes on earnings | (320) | 610 |
| Restructuring | (840) | (1,002) |
| Other assets and liabilities | (2,356) | (293) |
| Net cash provided by operatingactivities | 10,571 | 12,639 |
| Cash flows from investing activities: | ||
| Investment in property, plant, andequipment | (3,706) | (4,539) |
| Proceeds from sale of property, plant, andequipment | 617 | 999 |
| Purchases of available-for-sale securitiesand other investments | (972) | (96) |
| Maturities and sales of available-for-salesecurities and other investment | 662 | 68 |
| Payments in connection with businessacquisitions, net of cash acquired | (141) | (10,480) |
| Proceeds from business divestiture,net | 87 | 89 |
| Net cash used in investingactivities | (3,453) | (13,959) |
| Cash flow from financing activities: | ||
| (Payments) issuance of commercial paperand notes payable, net | (2,775) | (1,270) |
| Issuance of debt | 5,154 | 11,942 |
| Payment of debt | (4,333) | (2,336) |
| Issuance of common stock under employeestock plans | 716 | 896 |
| Repurchase of common stock | (1,619) | (10,117) |
| Excess tax benefit from stock-basedcompensation | 12 | 163 |
| Cash dividends paid | (1,015) | (844) |
| Net cash used in financingactivities | (3,860) | (1,566) |
| Increase (decrease) in cash and cashequivalents | 3,258 | (2,886) |
| Cash and cash equivalents at beginning ofperiod | 8,043 | 10,929 |
| Cash and cash equivalents at end ofperiod | $11,301 | $8,043 |
Required: : Please calculate the percentage increase or decreasein cash for the total line of the operating, investing, andfinancing sections bolded above and explain the major reasons forthe increase or decrease for each of these sections.
