ACCT 001 Lecture Notes - Lecture 21: Cash Flow Statement, Financial Statement, Retained Earnings

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taupesardine275

17 Sep 2020

School

College of The Sequoias

Department

Accounting (ACCT)

Course

ACCT 001

Professor

skaff

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Document Summary

Elements of an accounting system: the statement of cash flows. The statement of cash flows explains the changes in cash occurring over the financial statement period. It reports the cash balance at the beginning of the period, sources and uses of cash during the period, and the cash balance at the end of the period. The ending cash balance reported on the cash flow statement will equal the balance reported for cash on the balance sheet at that date. The statement of cash flows presents cash flows organized by type of activity so that cash flows generated by core business activities can be distinguished from those related to investing and financing activities. The exhibit illustrates capital company"s statement of cash flows for the year ended december 31, 20xx. Note that cash at the end of the year equals the cash reported on the capital company"s balance sheet on the previous slide.

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The balance sheet for Plasma Screens Corporation, along with additional information, are provided below:

PLASMA SCREENS CORPORATION Balance Sheets December 31, 2018 and 2017
	2018		2017
Assets:
Current assets:
Cash	$	142,950	$	154,000
Accounts receivable		76,800		90,500
Inventory		92,000		77,300
Prepaid rent		3,400		1,700
Long-term assets:
Land		465,000		465,000
Equipment		762,000		655,000
Accumulated depreciation		(421,000)		(262,000)

Total assets	$	1,121,150	$	1,181,500

Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable	$	96,000	$	82,300
Interest payable		6,750		13,500
Income tax payable		7,400		4,700
Long-term liabilities:
Notes payable		112,500		225,000
Stockholders' equity:
Common stock		685,000		685,000
Retained earnings		213,500		171,000

Total liabilities and stockholders' equity	$	1,121,150	$	1,181,500

Additional Information for 2018:

1. Net income is $66,000.

2. The company purchases $107,000 in equipment.

3. Depreciation expense is $159,000.

4. The company repays $112,500 in notes payable.

5 .The company declares and pays a cash dividend of $23,500.

Required:

Prepare the statement of cash flows using the indirect method.

PLASMA SCREENS CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash Flows from Operating Activities

Adjustments to reconcile net income to net cash flows from operating activities









Net cash flows from operating activities
Cash Flows from Investing Activities




Net cash flows from investing activities
Cash Flows from Financing Activities




Net cash flows from financing activities

Cash at the beginning of the period
Cash at the end of the period

peachbee375

The balance sheet for Plasma Screens Corporation along with additional information, are provided below:

PLASMA SCREENS CORPORATION Balance Sheets December 31, 2018 and 2017
	2018		2017
Assets:
Current assets:
Cash	$	82,000	$	120,000
Accounts receivable		72,000		96,000
Inventory		65,000		80,000
Prepaid rent		5,000		4,000
Long-term assets:
Land		500,000		500,000
Equipment		800,000		600,000
Accumulated depreciation		(380,000)		(300,000)

Total assets	$	1,144,000	$	1,100,000

Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable	$	78,000	$	82,000
Interest payable		5,000		9,000
Income tax payable		9,000		7,000
Long-term liabilities:
Notes payable		75,000		150,000
Stockholders' equity:
Common stock		600,000		600,000
Retained earnings		377,000		252,000

Total liabilities and stockholders' equity	$	1,144,000	$	1,100,000

Additional Information for 2018:

1. Net income is $160,000.

2. The company purchases $200,000 in equipment.

3. Depreciation expense is $80,000.

4. The company repays $75,000 in notes payable.

5. The company declares and pays a cash dividend of $35,000.

Prepare the statement of cash flows using the indirect method.

PLASMA SCREENS CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash flows from operating activities:









Net cash flows from operating activities
Cash Flows from Investing Activities




Net cash flows from investing activities
Cash Flows from Financing Activities




Net cash flows from financing activities

Cash at the beginning of the period
Cash at the end of the period

coraldeer142

QS 12-19 Indirect: Preparing statement of cash flows LO P1, P2, P3

MONTGOMERY INC. Comparative Balance Sheets December 31, 2018 and 2017
		2018			2017
Assets
Cash	$	33,200		$	33,400
Accounts receivable, net		12,100			14,700
Inventory		108,500			84,900
Total current assets		153,800			133,000
Equipment		60,100			50,200
Accum. depreciationâEquipment		(27,100	)		(18,500	)
Total assets	$	186,800		$	164,700
Liabilities and Equity
Accounts payable	$	28,800		$	30,700
Salaries payable		600			700
Total current liabilities		29,400			31,400
Equity
Common stock, no par value		130,000			118,100
Retained earnings		27,400			15,200
Total liabilities and equity	$	186,800		$	164,700

MONTGOMERY INC. Income Statement For Year Ended December 31, 2018
Sales			$	53,500
Cost of goods sold				(22,200	)
Gross profit				31,300
Operating expenses
Depreciation expense	$	8,600
Other expenses		6,600
Total operating expense				15,200
Income before taxes				16,100
Income tax expense				3,900
Net income			$	12,200

Additional Information

No dividends are declared or paid in 2018.

Issued additional stock for $11,900 cash in 2018.

Purchased equipment for cash in 2018; no equipment was sold in 2018.

1. Use the above financial statements and additional information to prepare a statement of cash flows for the year ended December 31, 2018, using the indirect method. (Amounts to be deducted should be indicated by a minus sign.)

MONTGOMERY, INC.
Statement of Cash Flows (Indirect Method)
For Year Ended December 31, 2018
Cash flows from operating activities

Adjustments to reconcile net income to net cash provided by operations:
Changes in current operating assets and liabilities






		$0
Cash flows from investing activities


		0
Cash flows from financing activities


		0
		$0
Cash balance at beginning of year
Cash balance at end of year		$0

ACCT 001 Lecture Notes - Lecture 21: Cash Flow Statement, Financial Statement, Retained Earnings

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