ACCTMIS 2200 Lecture Notes - Lecture 3: Cash Flow Statement, Cash Flow, Accrual
ACCTMIS 2200 Full Course Notes
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Statement of Cash Flows Using a Work SheetâIndirect Method (Appendix)
Peoria Corp. just completed another successful year, as indicated by the following income statement:
| For the Year Ended December 31, 2017 | |
| Sales revenue | $1,250,000 |
| Cost of goods sold | 700,000 |
| Gross profit | $550,000 |
| Operating expenses | 150,000 |
| Income before interest and taxes | $400,000 |
| Interest expense | 25,000 |
| Income before taxes | $375,000 |
| Income tax expense | 150,000 |
| Net income | $225,000 |
Presented here are comparative balance sheets:
| December 31 | |||
| 2017 | 2016 | ||
| Cash | $52,000 | $90,000 | |
| Accounts receivable | 180,000 | 130,000 | |
| Inventory | 230,000 | 200,000 | |
| Prepayments | 15,000 | 25,000 | |
| Total current assets | $477,000 | $445,000 | |
| Land | $750,000 | $600,000 | |
| Plant and equipment | 700,000 | 500,000 | |
| Accumulated depreciation | (250,000) | (200,000) | |
| Total long-term assets | $1,200,000 | $900,000 | |
| Total assets | $1,677,000 | $1,345,000 | |
| Accounts payable | $130,000 | $148,000 | |
| Other accrued liabilities | 68,000 | 63,000 | |
| Income taxes payable | 90,000 | 110,000 | |
| Total current liabilities | $288,000 | $321,000 | |
| Long-term bank loan payable | $350,000 | $300,000 | |
| Common stock | $550,000 | $400,000 | |
| Retained earnings | 489,000 | 324,000 | |
| Total stockholders' equity | $1,039,000 | $724,000 | |
| Total liabilities and stockholders' equity | $1,677,000 | $1,345,000 | |
Other information is as follows:
Dividends of $60,000 were declared and paid during the year.
Operating expenses include $50,000 of depreciation.
Land and plant and equipment were acquired for cash, and additional stock was issued for cash. Cash also was received from additional bank loans.
The president has asked you some questions about the year's results. She is very impressed with the profit margin of 18% (net income divided by sales revenue). She is bothered, however, by the decline in the company's cash balance during the year. One of the conditions of the existing bank loan is that the company maintain a minimum cash balance of $50,000.
Required:
1. Using the format in the chapter's appendix, prepare a statement of cash flows work sheet. If an amount box does not require an entry, leave it blank. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash.
| Balances | Cash Inflows (Outflows) | |||||
| Accounts | 12/31/17 | 12/31/16 | Changes | Operating | Investing | Financing |
| Cash | $ | $ | $ | $ | $ | $ |
| Accounts Receivable | ||||||
| Inventory | ||||||
| Prepayments | ||||||
| Land | ||||||
| Plant and Equipment | ||||||
| Accumulated Depreciation | ||||||
| Accounts Payable | ||||||
| Other Accrued Liabilities | ||||||
| Income Taxes Payable | ||||||
| Long-Term Bank Loan Payable | ||||||
| Common Stock | ||||||
| Retained Earnings | ||||||
| Net Income | ||||||
| Totals | $ | $ | $ | $ | $ | $ |
| Net increase (decrease) in cash | $ | |||||
2. Prepare a statement of cash flows for 2017 using the indirect method in the Operating Activities section. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash.
| Peoria Corp. | |
| Statement of Cash Flows | |
| For the Year Ended December 31, 2017 | |
| Cash Flows from Operating Activities | |
| $ | |
| Adjustments to reconcile net income to net cash provided by operating activities: | |
| $ | |
| Cash Flows from Investing Activities | |
| $ | |
| $ | |
| Cash Flows from Financing Activities | |
| $ | |
| $ | |
| $ | |
| Cash balance, December 31, 2016 | |
| Cash balance, December 31, 2017 | $ |
3. During the year Peoria experienced a decrease in cash at the end of the year due to
Could you please help me in the following questions. Could youplease take a screenshot of the final cash flow statement etc.Cheers
Regards
Adam
Statement of Cash Flows
You are provided the following financial information for TomHill Form Works, a company specialising in the production ofmoon-sized Imperial battle stations:
Tom HillForm Works
COMPARATIVE BALANCE SHEETS
AS AT 30th JUNE
2015 | 2014 | |||
$'000's | $â000's | |||
Current Assets | ||||
Cash on Hand | 35 | 12 | ||
Cash at Bank | 209 | 98 | ||
Accounts Receivable (net) | 58 | 54 | ||
Inventory | 310 | 330 | ||
Prepaid Expenses | 35 | 647 | 33 | 527 |
Non-Current Assets | ||||
Planet destroying Laser | 840 | 760 | ||
less Acc. Depreciation | 440 | 400 | 408 | 352 |
Buildings | 80 | 180 | ||
Total Assets | 1 127 | 1 059 | ||
Current Liabilities | ||||
Bank Overdraft | 20 | - | ||
Accounts Payable | 64 | 80 | ||
Accrued Stormtroopers wages | 63 | 89 | ||
Loan | 12 | 159 | - | 169 |
Non-Current Liabilities | ||||
Loan | 18 | - | ||
Total Liabilities | 177 | 169 | ||
Net Assets | 950 | 890 | ||
Equity | ||||
T.Hill, Capital | 950 | 890 | ||
Tom Hill Form Works
INCOME STATEMENT
FOR THE YEAR ENDED 30th JUNE2015
$'000's | |||||
Net Sales | 1 990 | ||||
COS | 1 300 | ||||
Less: Discount received | 5 | 1 295 | |||
Gross Profit: | 695 | ||||
Other Revenue: | |||||
Gain on sale of building | 60 | ||||
Interest received | 8 | ||||
763 | |||||
Expenses: | |||||
Selling & Admin Expense | 517 | ||||
Doubtful Debts Expense | 9 | ||||
Interest Expense | 12 | 538 | |||
Profit | 225 | ||||
Additional Information:
Selling & Admin Expense includes depreciation expense of$32,000.
The owner T.Hill, contributed $20,000 during the year
A new planet destroying laser was purchased by extending theloan, and paying the balance in cash
A building which had originally cost $100,000 was sold for$160,000 cash, making the business a gain of $60,000
REQUIRED:
Answer this question on the pro formaprovided
a. Using the template provided below, prepare a statement ofcash flows. Show all calculations on the proforma.
b. The owner of Tom Hill Form Works canât understand why the cash flowfrom operations is so different to the profit figure. As he has atendency to react quite badly to negativenews, carefully explain to Mr Hill at least two ofthe factors that may be causing thisdifference.
c. Explain what information is provided by a Statement of Cash Flowthat is not provided by the other General Purpose Financial Reportsyou have been introduced to in this unit (Income Statement,Statement of Changes in Equity & BalanceSheet)?
Tom Hill Form Works
Cash Flow Statement
FOR THE YEAR ENDED 30thJUNE 2015
$â000 | $â000 | ||
Cash Flows from Operating Activities | |||
Receipts from customers | |||
Payments to suppliers & employees | |||
Cash generated by operations | |||
Interest received | |||
Interest paid | |||
Cash Flows from Investing Activities | |||
Proceeds from sale of buildings | |||
Payment for Laser | |||
Cash Flows from Financing Activities | |||
Contribution by owner | |||
Drawings | |||
Net increase / decrease in cash held | |||
Cash at the beginning of the year | |||
Cash at the end of the year |
ALL WORKINGS MUST BE PRESENTED BELOW OR THE CASHFLOWSTATEMENT WILL RECEIVE NO MARKS
