ACCT 23020 Lecture Notes - Lecture 41: Cash Flow, Net Income, Regional Policy Of The European Union

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emmagennaro

3 Feb 2020

School

Kent State University

Department

Accounting

Course

ACCT 23020

Professor

Wendy M.Tietz

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Document Summary

Learning objective 1: identify the purposes of the statement of cash flows. Statement of cash flows purposes: predicts future cash flows, evaluates management decisions, determines a company"s ability to pay dividends and interest, shows the relationship of net income to cash flows. Cash and cash equivalents: cash equivalents are highly liquid short-term investments that can be converted into cash immediately, examples include money-market accounts and investments in u. s. government securities. Learning objective 2: distinguish among operating, investing, and financing activities. Three types of cash flow activities: operating create revenue, expenses, gains and losses net income, investing cash flows related to long-term assets, financing cash flows related to long-term liabilities and owners" equity. Two formats for operating activities: indirect reconciles from net income to net cash provided by operating activities, direct reports all cash receipts and cash payments from operating activities. Learning objective 3: prepare a statement of cash flows using the indirect method.

Related Questions

PROBLEM 14-9 Understanding a Statement of Cash Flows (L014-1, L014-2] Brock Company is a merchandiser that prepared the statement of cash flows and income statement provided below: Brock Company Statement of Cash Flows-Indirect Method $ 275 Operating Activities Net income ... Adjustments to convert net income to a cash basis: Depreciation ........ Increase in accounts receivable.... Decrease in inventory ........ Decrease in accounts payable .......... Decrease in accrued liabilities ........ Increase in income taxes payable ................ Gain on sale of equipment... Net cash provided by operating activities ........... boa Investing Activities Additions to property, plant, and equipment ......... Proceeds from sale of equipment .... Net cash used in investing activities .............. long & nô Financing Activities Issuance of bonds payable ..... Issuance of common stock ............ Cash dividends paid ......... Net cash provided by financing activities ........... Net increase in cash and cash equivalents .......... Beginning cash and cash equivalents ............ Ending cash and cash equivalents ............ 34 Brock Company Income Statement Net sales .......... Cost of goods sold ............. .............. Gross margin ................ ............ Selling and administrative expenses ............. Net operating income ........... Nonoperating items: Gain on sale of equipment .... Income before taxes ... Income taxes . . . . . . . . $5,200 2,980 2,220 1,801 419 423 Net income .......................... $ 275 Required: Assume that you have been asked to teach a workshop to the employees within Brock Compa- ny's Marketing Department. The purpose of your workshop is to explain how the statement of cash flows differs from the income statement. Your audience is expecting you to explain the logic underlying each number included in the statement of cash flows. Prepare a memo that explains the format of the statement of cash flows and the rationale for each number included in Brock's state- ment of cash flows.

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

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

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ACCT 23020 Lecture Notes - Lecture 41: Cash Flow, Net Income, Regional Policy Of The European Union

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